The dollar rose against the other major currencies on Friday after Federal Reserve Chair Janet Yellen indicated that she still expects interest rates to rise later this year and as U.S. second quarter growth was revised higher.
The greenback received an additional boost after data showed that the U.S. economy grew at a faster rate than previously estimated in the three months to June.
The Commerce Department said gross domestic product expanded at an annual rate of 3.9% in the second quarter, up from an initial estimate of 3.7%, and consumer spending, which comprises more than two-thirds of U.S. economic activity, was revised up to 3.6% from the 3.1% reported in August.
This week investors will be looking ahead to Friday’s jobs report for September; a strong reading would bolster expectations for a Fed lift-off before the end of the year.
Market participants will also be watching Wednesday’s euro zone inflation report, amid concerns that the ECB could ramp up its monetary stimulus program.
The euro fell mildly on Friday, as currency traders reacted to relatively hawkish comments from Federal Reserve chair Janet Yellen hours earlier, providing a strong likelihood that the U.S. central bank will raise short-term interest rates over the next three months.
The euro has now closed lower against the American dollar in five of the last seven sessions. For the week, the euro lost nearly 1% in value against its American counterpart.
Today’s focus will be on New York Federal Reserve President William Dudley and Chicago Fed President Charles Evans speeches; plus the U.S. is to release data on personal income and spending, as well as a report on pending home sales.
While for the week, investors await the release of euro zone inflation and U.S. employment data, for further indications on the strength of the global economy.
Pivot:1.1215
Support:1.11551.11051.107
Resistance:1.12151.1261.1295
Scenario 1:Short positions below 1.1215 with targets @ 1.1155 & 1.1105 in extension.
Scenario 2:Above 1.1215 look for further upside with 1.126 & 1.1295 as targets.
Comment:As long as the resistance at 1.1215 is not surpassed, the risk of the break below 1.1155 remains high.
Gold
Despite Friday's losses, gold prices rose $8.40, or 0.69%, on the week, the second straight weekly gain, as market players continued to speculate over the timing of a Federal Reserve rate hike.
Gold prices have been well-supported since the Fed decided to leave short-term interest rates unchanged last week, amid concerns over soft inflation and the effects of recent market volatility on the U.S. economy.
But in Asia on Monday gold held mostly flat, with investors looking ahead to remarks on monetary policies in Japan and in the U.S. for direction.
Later on today other events will be closely watched: New York Federal Reserve President William Dudley and Chicago Fed President Charles Evans speeches, plus U.S. data on personal income and spending, as well as a report on pending home sales.
Pivot:1142
Support:114211361129
Resistance:115111571162
Scenario 1:Long positions above 1142 with targets @ 1151 & 1157 in extension.
Scenario 2:Below 1142 look for further downside with 1136 & 1129 as targets.
Comment:A support base at 1142 has formed and has allowed for a temporary stabilisation.
WTI Oil
Friday West Texas Intermediate oil futures rose sharply, amid indications U.S. oil drillers are cutting back on production following a collapse in prices over the summer.
Industry research group Baker Hughes (NYSE:BHI) said late Friday that the number of rigs drilling for oil in the U.S. decreased by four last week to 640, the fourth straight weekly decline. A lower U.S. rig count is usually a bullish sign for oil, as it signals potentially lower production in the future.
But crude oil prices dropped in Asian trading hours on Monday, despite a fall in U.S. drilling activity for the fourth straight week, with analysts pointing to a poor economic growth outlook as the main reason for low crude prices and as investors took advantage of U.S. gains last week.
In the week ahead investors’ focus will be on Tuesday American Petroleum Institute weekly report on oil supplies and on Wednesday weekly government report on crude oil inventories.
Pivot:44.95
Support:44.9544.3543.85
Resistance:4646.447.15
Scenario 1:Long positions above 44.95 with targets @ 46 & 46.4 in extension.
Scenario 2:Below 44.95 look for further downside with 44.35 & 43.85 as targets.
Comment:Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Wall Street is bracing for a grim earnings season, with little improvement expected anytime soon.
Analysts have been cutting projections for the third quarter, which ends on Wednesday, and beyond.
Forecasts for third-quarter S&P 500 earnings now call for a 3.9% decline from a year ago, based on Thomson Reuters data, with half of the S&P sectors estimated to post lower profits thanks to falling oil prices, a strong U.S. dollar and weak global demand. Expectations for future quarters are falling as well.
The S&P 500 is down about 9% from its May 21 closing high, dragged down by concern over the effect of slower Chinese growth on global demand and the uncertain interest rate outlook. The low earnings outlook adds another burden.
Pivot: 1926
Support: 1926 1907 1895
Resistance: 1961 1968 1982
Scenario 1: Long positions above 1926 with targets @ 1961 & 1968 in extension.
Scenario 2: Below 1926 look for further downside with 1907 & 1895 as targets.
Comment: A support base at 1926 has formed and has allowed for a temporary stabilisation.