The dollar moved lower against the other major currencies on Thursday, after data showed that U.S. jobless claims fell less than expected last week, and as fears over the outlook for China’s economy continued to support demand for the safe-haven yen and Swiss franc.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 1 decreased by 10,000 to 277,000 from the previous week’s total of 287,000, which was the highest since mid-July. Analysts expected jobless claims to fall by 12,000 to 275,000 last week.
The greenback had slightly weakened also after the minutes of the Federal Reserve’s December meeting showed on Wednesday evening that some officials expressed concerns that inflation could remain at stubbornly low levels, even as they decided to hike interest rates.
Meanwhile, demand for the safe-haven yen strengthened after the People's Bank of China set its official yuan midpoint rate lower compared with Wednesday's fix. It was the largest daily drop in the midpoint rate since last August, when an unexpected almost 2% devaluation of the currency sparked a broad based selloff in markets. The rapid pace of the depreciation has fueled fears that the world’s number two economy is weaker than believed.
Adding to risk aversion, trading on China’s stock markets was suspended for the second time this week, after a plunge of more than 7% after the open.
Today the U.K. is to report on the trade balance; Canada is to publish its monthly employment report along with data on building permits; and the U.S. is to round up the week with the closely watched Nonfarm Payrolls report.
The euro soared more than 1% on Thursday, as a massive sell-off in China exacerbated fears of a global economic slowdown, bolstering dovish arguments for a delayed interest rate hike by the Federal Reserve, as it embarks on its first tightening cycle in a decade.
The single currency posted its strongest its one-day move against the dollar since December 3, when the European Central Bank roiled global foreign exchange markets by only approving limited easing measures, with its comprehensive quantitative easing program at a closely-watched meeting in Frankfurt.
The euro was supported also by data showing that the unemployment rate in the region fell to its lowest level in over four years, dropping to 10.5% from 10.6% in October, and registering its third straight monthly decline; while economic sentiment unexpectedly improved last month, ticking up to 106.8 from November’s 106.1.
Furthermore on Thursday, data showed that German factory orders rose 1.5% in November, beating expectations for a 0.1% uptick. But a separate report showed that German retail sales rose 0.2% in November, disappointing expectations for a gain of 0.5%.
The largely upbeat data indicated that the uneven recovery in the euro zone is continuing.
Today investors will be looking ahead to the U.S. jobs report for December, to gain more information on the strength of the greenback.
Pivot: 1.0825Support: 1.0825 1.077 1.071Resistance: 1.0945 1.099 1.1035Scenario 1: long positions above 1.0825 with targets @ 1.0945 & 1.099 in extension.Scenario 2: below 1.0825 look for further downside with 1.077 & 1.071 as targets.Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Gold
Gold prices jumped to a nine week high on Thursday, as investors sought refuge in the precious metal amid a China led global stock market meltdown.
Trading on China’s stock markets was suspended for the second time this week after just 30 minutes on Thursday, as a plunge of more than 7% after the open triggered circuit breakers.
Market sentiment was hit after the People's Bank of China set its official yuan midpoint rate lower compared with Wednesday's fix. It was the largest daily drop in the midpoint rate since last August.
Some market players see the tactic as an attempt by China to shore up growth, while others are concerned over a currency war that could destabilize the global economy.
The yellow metal is up almost 4% so far this week on safe-haven demand amid a global stock market rout, worries over the Chinese economy and heightened geopolitical tensions.
Pivot: 1191Support: 1000 900 800Resistance: 1191 1300 1390Scenario 1: short positions below 1191 with targets @ 1000 & 900 in extension.Scenario 2: above 1191 look for further upside with 1300 & 1390 as targets.Comment: Gold is still capped by a declining trend line (since May 2013), which maintains a downside bias. The descending 20-week and 50-week moving averages maintain the downside bias. The RSI indicator is capped by a bearish trend line (since 2012) and is below
WTI Oil
Crude oil fell below $33 a barrel on Thursday, for the first time since April 2004, as a slide in Chinese shares rattled investors, already concerned by near record production and massive stockpiles of unwanted crude and refined products.
WTI prices have fallen by about 70% since mid-2014, hurting oil companies and governments that rely on crude revenue.
Prices trimmed early losses, with violence in the Middle East and North Africa offering a measure of support for the market. A military training center in the Libyan town of Zliten was hit by a truck bomb on Thursday, causing dozens of casualties, while dozens of air strikes hit the Yemeni capital Sanaa, making relations between Iran and Saudi Arabia deteriorating even further.
However, crude oil's rapid fall has made a prediction that Goldman Sachs (N:GS) made last year that crude could fall as low as $20 a barrel seem less outlandish than it then seemed.
Pivot: 32.1Support: 32.1 31 30Resistance: 34.3 35.15 36.1Scenario 1: long positions above 32.1 with targets @ 34.3 & 35.15 in extension.Scenario 2: below 32.1 look for further downside with 31 & 30 as targets.Comment: the RSI broke above a declining trend line.
U.S. stocks sold off further on Thursday, giving the Dow and S&P 500 their worst four day starts to a year ever, dragged down by another drop in Chinese equities and oil prices at 12 year lows.
China allowed the biggest fall in the yuan in five months, and Shanghai stocks were halted for the second time this week, after another brutal selloff tripped a new circuit breaker.
Global stocks, however, trimmed losses after the Shanghai and Shenzhen stock exchanges said China would suspend the circuit breaker as of Friday.
For the day the Dow Jones industrial average closed down 2.32%, the S&P 500 had lost 2.37% and the Nasdaq Composite had dropped 3.03%.
Billionaire investor George Soros, speaking at an economic forum in Sri Lanka, drew similarities between the present environment and the financial crash of 2008.
The World Bank also cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anemic showings from developed countries such as the United States.
Investors are now focusing on today U.S. government jobs report, which could show how well-insulated the U.S. economy is from international stresses.
Pivot: 2082 Support: 1900 1885 1821 Resistance: 2082 2130 2180 Scenario 1: short positions below 2082 with targets @ 1900 & 1885 in extension. Scenario 2: above 2082 look for further upside with 2130 & 2180 as targets. Comment: the RSI is bearish and calls for further decline.