The dollar returned from session highs against a basket of global currencies on Wednesday, as geopolitical tensions between the U.S. and North Korea strengthened, raising investor demand for safe havens like gold and the Japanese yen.
The dollar eased also from two-week highs, because market participants fled risky assets due to the U.S. President Donald Trump’s warning to North Korea on Tuesday that the they would be facing "fire and fury" should they make more threats to the United States This threat of possible armed retaliation drove investors out of stocks and other risky assets on Wednesday and into safe havens like gold and Treasuries.
The Swiss franc was on track for its biggest daily gain against the euro since the Swiss National Bank removed its cap on the currency in January 2015. It was last up 1 percent at 1.133 per euro The Japanese yen improved 0.24 percent versus the U.S. dollar at 110.04. Japan is the world's biggest creditor country and there is an assumption investors there could repatriate funds in a crisis.
The VIX which indicates investor’s speculation on S&P 500 volatility, rose further on Wednesday, as far as 12.63, its highest in more than a month.
Oil prices remained higher after a report showed U.S. refineries processed record amounts of crude in the latest week, cutting into inventories, although a surprise jump in gasoline stockpiles limited gains.
Investors will take special care watching the jobless claim data in the US today and inflation data releases from the US and some European countries on Friday.
The dollar remained mostly unchanged against the euro [i] and held onto modest gains against the other major currencies in calm trading on Wednesday, as optimism over the U.S. job market continued to support, although global geopolitical tensions still dominated investors’ attention.
The price inflation figures on Friday from the US and Germany, France and Italy will give further insight how central banks will handle the current situation. A U.S. central banker recently mentioned, that low inflation would not stop the Federal Reserve from beginning to reduce its $4.5 trillion balance sheet next month, but will likely force it to delay further interest-rate hikes until December or even beyond.
Pivot: 1.1775
Support: 1.1705 1.1665 1.161
Resistance: 1.1775 1.18 1.1825
Scenario 1: short positions below 1.1775 with targets at 1.1705 & 1.1665 in extension.
Scenario 2: above 1.1775 look for further upside with 1.1800 & 1.1825 as targets.
Comment: the RSI is mixed to bearish.
Gold
Gold [i] prices rose sharply on Wednesday, as investors ran into safe haven assets amid intensifying tensions between the U.S. and North Korea, with Pyongyang saying it is considering plans to attack Guam.
The rising tensions prompted investors to dump assets seen as riskier, such as stocks and high yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.
Gold has been well-supported in recent weeks as fading expectations for a third Fed rate hike this year combined with deepening political instability in the White House boosted the appeal of the precious metal.
With no major economic reports on Wednesday, market players are looking ahead to monthly inflation indicators due later in the week for fresh clues on the timing of the next Fed rate hike.
Pivot: 1270
Support: 1270 1266 1261
Resistance: 1279.5 1283.5 1288.5
Scenario 1: long positions above 1270.00 with targets at 1279.50 & 1283.50 in extension.
Scenario 2: below 1270.00 look for further downside with 1266.00 & 1261.00 as targets.
Comment: the RSI is bullish and calls for further upside.
WTI Oil
Crude [i] futures settled higher on Wednesday, as investors were relieved about data showing a sharp decline in supplies of U.S. crude but gains were capped by a surprise uptick in gasoline stockpiles.
Crude broke a two-day losing streak, after a report from the Energy Information Administration (EIA) showed crude stockpiles fell by more than expected last week, pointing to an uptick in refinery activity.
With the OPEC meeting over and EIA data released, the markets will be looking at price index figures on Friday which may impact the overall economic sentiment and for oil the Baker Hughes rig count.
Pivot: 49.1
Support: 49.1 48.9 18.55
Resistance: 49.73 49.95 50.15
Scenario 1: long positions above 49.10 with targets at 49.73 & 49.95 in extension.
Scenario 2: below 49.10 look for further downside with 48.90 & 48.55 as targets.
Comment: the RSI is supported by a bullish trend line.
US 500
After the S&P [i] had been down 0.52 percent North Korea-related geopolitical tension that weighed on equities for most of the session, it recovered and closed 0.26 % higher, while still missing Wednesday’s temporary high.
U.S. productivity grew more than expected in the second quarter as hours worked rose at their fastest pace in 1.5 years, leading to a modest increase in labor costs that could keep inflation low in the near term boosting the equities towards the end of the trading session
Shares of Disney sank more than 4% after the entertainment giant reported a 9% drop in profit and announced that it would stop providing new movies to Netflix (NASDAQ:NFLX) in a bet to provide its own subscription service that met skepticism over costs and capability from investors.
Pivot: 2473
Support: 2460 2457 2452
Resistance: 2473 2478 2482
Scenario 1: short positions below 2473.00 with targets at 2460.00 & 2457.00 in extension.
Scenario 2: above 2473.00 look for further upside with 2478.00 & 2482.00 as targets.
Comment: the RSI is mixed to bearish.