Currencies
EUR/USD – dropped below the 1.12 level during the day, as concerns are back again on the strength of the Eurozone, mainly due to issues with large German companies (more below). However, we can see that we were able to close above the support, although we are moving down this morning again to test this once more.
USD/JPY – moved only a little up, even though US data was better than expected, but this was not able to lift the USD too much. Stanley Fischer said yesterday that while he does agree that the interest rate should move up, he also said that the pace should be slow.
GBP/USD – has moved further up as we can see that levels below the 1.30 levels is bringing in new buyers. Former French President Sarkozy who is running again to be president, has said that if elected, he would try to reverse the Brexit. The GBP was the outperformer yesterday, as the USD gained against most other pairs.
USD/CAD – moved close to the resistance again yesterday as oil dropped and also the USD gained in strength after good data out of the US. Today we can assume some more moves, as we expect volatility in oil as well due to the OPEC meeting and the inventories.
Indices
DAX 30 – dropped sharply in the morning, not only due to Deutsche Bank (DE:DBKGn) as explained yesterday, but also because of Volkswagen (DE:VOWG_p) which dropped 2.58%. This comes after the US Department of Justice is looking into fining the German carmaker for the emission scandal. Both Deutsche Bank and Volkswagen closed higher than the lows reached during the day, so this helped the DAX correct some of its losses, also boosted by a change in direction in the US.
S&P 500 – after moving up in the morning due to the debate, it dropped to find intraday support around the 2133 level, as oil pulled the S&P down. However, more optimistic market sentiment won the day, also boosted by strong data out of the US with consumer confidence the highest in years. We have to be careful though, as renewed drops in oil could certainly drag us down.
Commodities
Gold – with the USD strengthening again, we saw a firm break of the support around the 1332 level to see the largest move in a week, a drop of nearly $15. The good data out of the US is an indication that the rate could definitely go up this year, although the NFP of next week will give us some more clues. In addition, physical demand of gold was on the decline as China imported less gold last month.
Oil – moving up and down over the last few days between the support around the 44.40 level and the resistance around the 45.80 level as we are waiting for the results of the OPEC meeting. Yesterday most countries said that an agreement is unlikely (not surprising) and that the meeting is only for consultation. Nevertheless, there are enough countries that are pushing for an agreement to be reached as they do not want to see oil prices this low (mainly Venezuela and Algeria) so they will try to bridge the gaps. The main problem is, as it was also earlier this year, between Saudi Arabia and Iran. Saudi Arabia has indicated that is it willing to cut production, but only if Iran will freeze production, something that it is not willing to do until production is back at pre-sanction levels of 4 mbpd. They might agree to push any decision to the next OPEC meeting in November.
In the meantime, API data showed that the crude inventories showed yet another drop, and we will see the difference with the EIA report today and also if oil production in the US keeps increasing.