Market Brief
In the wake of the release of disappointing July US retail sales figures, the Japanese yen appreciated sharply against the greenback on Friday, with USD/JPY returning to around 101.20, down roughly 1%. Advanced retail sales came in well below the 0.4% m/m expected expansion and printed flat, compared to an upwardly revised figure of 0.8%m/m in the previous month. The gauge, excluding auto and gas, contracted 0.1%m/m in July versus +0.3% expected and +0.8% in June. Overall, this was a very disappointing report as the trend in core retail sales growth is rather weak with the 6-month moving average currently at 0.4%m/m, suggesting that the US economy is definitely not out of the woods just yet. Consequently, the market turned more dovish and is not expecting a rate hike before next year. The probability of a rate hike in September eased to 16%, compared to 26% before the release.
The dollar index rebounded from the 95.29 support - implied by the 50% Fibonacci level - and is now currently trading at around 95.70. After hitting 100.83 on Friday, USD/JPY recovered slightly as it returned above the 101 threshold after disappointing GDP figures from Japan. Second quarter GDP printed flat compared to the March quarter.
Crude oil prices continued to recover with the West Texas Intermediate heading towards the $45 a barrel, while the Brent crude is taking a breather at around $47.30. Both gauges are currently testing a resistance and will likely need a fresh boost to return to around $50 a barrel. The informal OPEC talks at a conference in Algiers next month, which could result in an output freeze, may be of little help.
Precious metals are also on the rise this morning with gold rising 0.30%, while silver bounced 0.60% to $19.85. It was a very volatile trading session on Friday with the yellow metal bouncing 1.30% to $1,356.29 before reversing gains completely, returning to around $1,337 an ounce. From a technical standpoint, gold is currently facing a key resistance area at around 1,380-1,400 (Fibonacci 38.2% 2011-2016 debasement, top of the multi-year declining trend line and previous highs). Given the high level of uncertainty, we believe it is a just matter of time before gold finally breaks that resistance area to the upside.
After a break on Friday, equity markets across the globe are ready for another rally. In Asia, equity gains were uneven with Chinese shares taking the lion’s share. The Shenzhen and Shanghai Composite were up 2.56% and 2.60% respectively, while offshore, the Taiex edged down 0.02% and the Hang Seng rose 0.77%. In Japan, the Nikkei slid 0.30%, while the broader Topix index fell 0.50%. Finally, in Europe, equity futures are trading slightly higher.
Currency Tech
EUR/USD
R 2: 1.1428
R 1: 1.1234
CURRENT: 1.1174
S 1: 1.0913
S 2: 1.0822
GBP/USD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.2941
S 1: 1.2851
S 2: 1.2798
USD/JPY
R 2: 107.90
R 1: 102.83
CURRENT: 101.09
S 1: 100.00
S 2: 99.02
USD/CHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9747
S 1: 0.9634
S 2: 0.9522