The dollar continued to rise against the other major currencies in quiet trade on Tuesday, as trading volumes were expected to remain thin with no major U.S. data to be released and as the greenback remained supported after comments by some Federal Reserve officials overnight indicated that a U.S. rate hike is still on the cards this year.
Investors are now looking ahead to today speech by ECB President Mario Draghi and Thursday speech by Fed Chair Janet Yellen for additional indications on monetary policy.
Traders are also preparing for the release of a wave of economic indicators, later this week, which could provide further signals on the direction of the global economy: German business climate report from the Ifo Institute; U.S. durable goods orders, initial jobless claims, new home sales, revised data on second quarter economic growth and a revised report on consumer sentiment.
The euro fell sharply on Tuesday posting its fourth straight losing session, ahead of appearances by Mario Draghi and Janet Yellen later this week, which could provide further indications of a divergence in monetary policy between two of the world's largest central banks.
Expectations for the Federal Reserve to raise interest rates before the end of the year continued to support demand for the greenback, infact, both St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart indicated in separate remarks that the U.S. central bank is still likely to raise short-term interest rates in December.
Elsewhere, Greek Prime Minister Alexis Tsipras, who was re-elected in a snap election on Sunday, promised to revive the struggling local economy, adding that obtaining debt relief from Greece's creditors was his first "big battle".
Early on Wednesday the euro was steady near two-and-a-half week lows against the U.S. dollar, while investors remained cautious ahead of a string of economic reports due out of the euro zone today.
Today investors’ focus will also be on European Central Bank President Mario Draghi’ speech on monetary policy, before the European Parliament's Economic and Monetary Committee in Brussels.
Pivot:1.118
Support:1.1081.1021.097
Resistance:1.1181.12551.132
Scenario 1:Short positions below 1.118 with targets @ 1.108 & 1.102 in extension.
Scenario 2:Above 1.118 look for further upside with 1.1255 & 1.132 as targets.
Comment:As long as the resistance at 1.118 is not surpassed, the risk of the break below 1.108 remains high.
Gold
Gold futures struggled for direction in subdued trade on Tuesday, as expectations for a Federal Reserve rate hike later this year weighed. Most market experts believe the Fed will begin raising rates in December after keeping policy steady last week.
Gold prices eased in Asia on Wednesday, as investors eyed a key China maufacturing survey that came in weaker than expected and signaled possible weak demand for the precious metal. The Caixin Manufacturing index for September fell to 47, from the August level of 47.3, putting it at a 78-month low. Furthermore, on Tuesday, the Asian Development Bank lowered its 2015 economic growth projections for China from 7.2% and 6.8%.
Investors are now looking ahead to tomorrow speech by Fed Chair Janet Yellen for additional clarity on the strength of the US economy.
Pivot:1136
Support:111611091103
Resistance:113611421148
Scenario 1:Short positions below 1136 with targets @ 1116 & 1109 in extension.
Scenario 2:Above 1136 look for further upside with 1142 & 1148 as targets.
Comment:The RSI is capped by a bearish trend line.
WTI Oil
West Texas Intermediate oil futures fell sharply on Tuesday, before API data release; while after the data the prices rose again, supported by the American Petroleum Institute which said crude stocks fell a whopping 3.7 million barrels last week, compared to an estimate of a 700,000 barrels drop.
Volatility has picked up this week, as the outlook for crude has been muddied by data pointing to the market possibly having stabilized after losing more than half its value in a year.
There is evidence that U.S. shale production is starting to feel the pinch of oil prices near six-year lows, which has prompted the International Energy Agency to issue more bullish forecasts for the market balance next year.
But crude oil prices reversed early gains in Asia on Wednesday, as weak China manufacturing estimates trumped U.S. industry data that showed a much larger than expected draw in U.S. stockpiles last week.
Today investors will focus on the U.S. weekly government report on crude oil inventories.
Pivot:46.7
Support:45.374544.6
Resistance:46.747.0347.35
Scenario 1:Short positions below 46.7 with targets @ 45.37 & 45 in extension.
Scenario 2:Above 46.7 look for further upside with 47.03 & 47.35 as targets.
Comment:As long as 46.7 is resistance, likely decline to 45.37.
Dow Jones
Wall Street fell more than 1.5% on Tuesday morning, amid a decline in commodity prices and continuing uncertainty about when the Federal Reserve will raise interest rates.
The selloff was broad-based. All 30 Dow components declined. All 10 major S&P sectors were lower, led by a 2.4% drop in the materials index and a 1.9% fall in technology stocks. Also the Nasdaq composite was down 87 points, or 1.8%.
"Investors are nervous because there is a sense that the Fed knows more than it is letting on regarding the health of the global economy," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
U.S. stocks dropped on Tuesday also because a selloff in commodities dragged down materials companies, while Volkswagen (XETRA:VOWG) suppliers' shares dropped following the German carmaker's emissions scandal.
Now, investors once again will peruse statement from Fed officials, and especially from Janet Yellen, for further clarity on the reason behind their decision and when rates will be increased.
Pivot: 17570
Support: 15370 14765 14200
Resistance: 17570 18350 18650
Scenario 1: Short positions below 17570 with targets @ 15370 & 14765 in extension.
Scenario 2: Above 17570 look for further upside with 18350 & 18650 as targets.
Comment: The RSI is capped by a declining trend line.