The dollar moved higher on Wednesday, against most major currencies, despite the release of disappointing economic reports from the U.S., as concerns over China's economic outlook began to ease. In the U.S., Payroll processing firm ADP said non-farm private employment rose by 190,000 last month, below expectations for an increase of 201,000. In addition, the 185,000 created in July were downwardly revised to 177,000. Data also showed that U.S. factory orders increased by 0.4% in July, below forecasts for a gain of 0.9%. The dollar was steady against the pound, with GBP/USD at 1.5305 and extended gains against the Swiss franc, with USD/CHF rallying 1.16% to 0.9693. The Australian dollar was steady while NZD/USD gained 0.49% to 0.6358. The Australian Bureau of Statistics reported on Wednesday that the country's gross domestic product rose 0.2% in the three months to June, compared to expectations for a 0.4% growth rate. On a yearly basis, Australia's GDP increased by 2.0% in the second quarter, disappointing expectations for a 2.2% gain. The main U.S. stock indices posted a recovery together with crude oil prices after a sharp drop posted on Tuesday, after reports of strong growth in the Federal Reserve's "Beige Book". For today, the U.K. is to report on service sector activity, the euro zone is to release data on retail sales. The European Central Bank is to announce its monetary policy decision and the rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi. In the U.S. front data on trade balance, jobless claims and the ISM report on service sector growth are due later in the day.
The EUR/USD pair fell sharply on Wednesday after three days of consecutive gains, despite weak employment and factory order data and ahead of a critical meeting of European monetary policy officials on Thursday that could provide signals on the long-term direction of inflation in the eurozone. The pair fluctuated between 1.1210 and 1.13 on Wednesday and finally ended the day 0.80% lower. In today’s meeting investors will be looking for signals from ECB head Mario Draghi on the extend of the bank's €60 billion a month quantitative easing program, which was launched in March. For today, market attention will be shifted towards the European Central Bank monetary policy decision and the rate announcement which will be followed by a post-policy meeting press conference with President Mario Draghi. In the U.S. front data on trade balance, the jobless claims report and the ISM service sector growth are due later in the day.
Pivot: 1.126 Support: 1.12 1.1155 1.1105 Resistance: 1.126 1.129 1.132 Scenario 1: Short positions below 1.126 with targets @ 1.12 & 1.1155 in extension. Scenario 2: Above 1.126 look for further upside with 1.129 & 1.132 as targets. Comment: The pair has broken below a rising trend line and remains on the downside.
Oil
West Texas Intermediate crude bounced back from an earlier drop, closing up 1.9% to $46.25 a barrel. Crude oil has been under heavy selling pressures after U.S. inventories added 4.7 million barrels last week, above expectations for a rise of 700 thousand and after a drop of 5.5 million the week earlier. However, the first monthly decline in OPEC supply since February managed to support prices, as the global supply-demand imbalance remains in focus. Crude had dropped more than 7% on Tuesday, ending a three-day rally which was its best in 25 years. Prices still remain under pressure due the increasing prospect of a stronger dollar and a possible Federal Reserve rate hike this year as well as continued global oversupply. In the week ahead, Friday’s employment data as well as Baker Hughes (NYSE:BHI) oil rig count report will be in focus.
Pivot: 47 Support: 43.2 41.75 39.8 Resistance: 47 48.7 49.4 Scenario 1: Short positions below 47 with targets @ 43.2 & 41.75 in extension. Scenario 2: Above 47 look for further upside with 48.7 & 49.4 as targets. Comment: As long as 47 is resistance, likely decline to 43.2.
Dow Jones
The main U.S. stocks indices posted a sharp rise on Wednesday, following Tuesday's slump. The S&P 500 closed 1.8% higher, and the Nasdaq gained 2.5%. The Dow added 1.8%, led by gains in Apple, Microsoft (NASDAQ:MSFT), and Intel (NASDAQ:INTC). The best performers of the Dow were Apple Inc (NASDAQ:AAPL) which rose 4.29% Microsoft which added 3.68% and Home Depot (NYSE:HD) Inc which gained 3.02%. Reports of strong growth in the Federal Reserve's "Beige Book" helped to support the U.S. economic economy, but also fueled volatility as traders feared it supports up a September hike. U.S. economic activity continued to expand from July to August, according to the report. Most of the districts reported "modest to moderate" labor demand, while five districts said that a stronger dollar has had a "weakening influence" on manufacturing. However, the energy sector added the biggest pressure on growth. Expectations rose recently that the Fed will increase rates in September given the strength of the U.S. economy even as the global economy falters. For today in the U.S., data on trade balance, the jobless claims report and the ISM service sector growth are due later in the day.
Pivot: 16465 Support: 15955 15790 15580 Resistance: 16465 16725 17135 Scenario 1: Short positions below 16465 with targets @ 15955 & 15790 in extension. Scenario 2: Above 16465 look for further upside with 16725 & 17135 as targets. Comment: The RSI is bearish and calls for further downside.