The dollar extended losses against most major currencies on Monday, after data showed that manufacturing activity in the U.S. contracted again in January, holding near levels not seen since July 2009. The Institute for Supply Management said its index of purchasing managers went up to 48.2 last month from a reading of 48.0 in December. Analysts had expected the manufacturing PMI to rise to 48.1 in January. The report came after the Commerce Department said that personal spending was flat last month, missing forecasts for a gain of 0.1%. Personal spending for November was revised up to 0.5% from a previously reported rise of 0.3%. Personal income, meanwhile, rose by 0.3%, above forecasts for a 0.2% gain and after rising 0.3% a month earlier. In Australia, the Reserve Bank left interest rates unchanged at 2% as expected signalling that it will proceed in the future to easier policies only if data supports it. Separately, official data on Monday showed that manufacturing activity in China contracted for a sixth straight month in January. The Chinese manufacturing PMI slid to 49.4 from 49.7 in December, falling further below the 50 level. A separate report showed that China’s Caixin factory PMI ticked up to 48.4 from 48.2 in December, indicating that the world’s second largest economy is showing a weak start in 2016. For today, the euro zone is to release data on the unemployment rate and the U.K. is to publish survey data on construction activity.
The euro rose considerably against the dollar on Monday, after weak manufacturing data from the U.S. and continues to be supported on Tuesday following the weak data from China. After a modest, two-day losing streak, the euro has now closed higher against the dollar in five of the last seven sessions remaining 0.26% higher for the new year. Investors also continued to react to Friday's unexpected move from the Bank of Japan to lower interest rates into negative territory in an unprecedented action from the Japanese central bank. Today, the euro zone is to release data on the unemployment rate, however, the focus remains on the NFP release later this week for further indications on whether the Federal Reserve will continue to raise interest rates gradually during its first tightening cycle in nearly a decade.
Pivot: 1.087Support: 1.087 1.0835 1.081Resistance: 1.0925 1.094 1.0965Scenario 1: long positions above 1.087 with targets @ 1.0925 & 1.094 in extension.Scenario 2: below 1.087 look for further downside with 1.0835 & 1.081 as targets.Comment: the RSI lacks downward momentum.
Gold
Gold prices surged on Monday to fresh three-month highs, following the weak manufacturing data in China and the U.S. which raised expectations for a delayed second interest rate hike from the Federal Reserve. In overnight trading, China announced that factory activity in January tumbled to a three-year low, exacerbating fears of slowing growth in the world's second-largest economy. China's Purchasing Manager's Index (PMI) fell by 0.3 to 49.4, dropping to its lowest level since 2012 and its sixth consecutive month in contraction. Separately, the Institute for Supply Management said Monday that its manufacturing composite index inched up 0.2 from a downwardly revised 48.0 to 48.2, slightly below consensus forecasts for a 48.3 reading. This week, the focus remains on the NFP release due on Friday for further indications on whether the Federal Reserve will continue to raise interest rates gradually during its first tightening cycle in nearly a decade.
Pivot: 1118Support: 1118 1111 1104.5Resistance: 1133 1138.5 1144Scenario 1: long positions above 1118 with targets @ 1133 & 1138.5 in extension.Scenario 2: below 1118 look for further downside with 1111 & 1104.5 as targets.Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
WTI Oil
U.S. crude oil prices crashed by more than 5% on Monday, erasing most of their gains from last week's rise, as optimism for supply cuts from OPEC faded and weak manufacturing activity in China raised fears of weakening demand in the world’s second largest economy. Last week's surge was inspired by comments from Russia energy minister Alexander Novak that the major oil producer could meet with Saudi Arabia to discuss a strategy to reduce a massive supply glut that persists on global energy markets. The kingdom, though, is reluctant to reduce its daily production below 10 million barrels per day unless the supply cuts are met with proportional declines from its top rivals. Separately, investors reacted to reports of soft manufacturing data in China dropping to its lowest level since 2012 and posting its sixth consecutive month in contraction. On Tuesday, industry group the American Petroleum Institute will release its estimates of U.S. crude oil inventories for last week. The U.S. Department of Energy will release more closely-watched figures of inventories on Wednesday.
Pivot: 32.66Support: 30.7 30.12 29.26Resistance: 32.66 33.38 34.4Scenario 1: short positions below 32.66 with targets @ 30.7 & 30.12 in extension.Scenario 2: above 32.66 look for further upside with 33.38 & 34.4 as targets.Comment: as long as the resistance at 32.66 is not surpassed, the risk of the break below 30.7 remains high.
In Monday's session, crude oil and China continued to add pressure on major indices, as the Dow Jones Industrial Average and the S&P 500 Composite index fell as much as 165 and 20 points respectively, before rallying late in the session. Prices were supported by comments from Federal Reserve governor Stanley Fischer, who said on Monday that the U.S. central bank's monetary policy will remain accommodative in the near-term future, while the Fed raises rates gradually. S&P stocks in the Energy, Financials and Industrials sectors lagged, while stocks in the Utilities, Telecommunications and Consumer Services industries led. Strong gains in Facebook (O:FB) and Alphabet helped Wall Street cut losses and stage a late-day rally. Alphabet stock jumped 9 percent and the company became the most valuable in the United States, surpassing the market cap of Apple (O:AAPL). Fourth-quarter S&P 500 earnings are expected to have fallen 4.1 percent from a year ago. This week, the focus remains on the NFP release due on Friday for further indications on whether the Federal Reserve will continue to raise interest rates gradually during its first tightening cycle in nearly a decade.
Pivot: 1950 Support: 1821 1738 1650 Resistance: 1950 2010 2080 Scenario 1: 1950 Scenario 2: 2010 Comment: 2080