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iFOREX Daily Analysis : February 06,2018

Published 02/06/2018, 03:27 AM
Updated 09/16/2019, 09:25 AM

On Monday the sell-off especially in US equity markets continued with an even sharper decline than in the previous week, erasing all profits in key indices year to date. The VIX – Volatility Index, where trader bet on the implied volatility of options on the S&P 500, raced from just around 12 in the previous week to over 33 in Monday’s trading. The VIX is also referred to as the ‘fear index’ and reached such a high level the last time in 2011 amidst the European sovereign debt crisis.

Exchange rates exhibited only slightly heightened volatility with the Dollar strengthening against the Euro and Pound but trading weaker against the strong Japanese Yen.

Gold traded higher in Monday’s trading as the US 10Y Treasury yield sharply retraced from its recent high. Oil was under pressure before API inventory figures will give oil traders late on Tuesday insight what the most recent effects of the feared US production increase will actually look like.

Cryptocurrencies, which, have been falling for about 1.5 months now, saw another day of double-digit percentage losses as Bitcoin fell below the $7,000 level. Cryptocurrencies are under pressure as regulatory pressure increases. On Sunday it was reported that China will increase regulation even further, by trying to restrict access from China to crytpocurrency trading platforms.

On Tuesday German will release Manufacturers' Orders statistics. The US releases the Trade Balance deficit level as well as Redbook Store Sales data. Canada will publish its Merchandise Trade level.

EUR/USD

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The EUR/USD settled lower on Monday, while volatility was relatively restrained in comparison to the significant move seen in the equity markets. The Dollar was also stronger against the Pound, which fell under the 1.40 level as UK service sector data was below expectations and no concise deal is yet made for the Brexit split with the European Union. The Japanese Yen however was seen stronger against the Dollar and thus significantly increased against weaker currencies such as EUR and GBP.

On Tuesday Germany releases Manufacturers’ Orders data. In the US the figures of the current Trade Balance deficit will be published.

EUR/USD Chart
Pivot:1.2475Support:1.23851.2351.2335Resistance:1.24751.2521.255Scenario 1:short positions below 1.2475 with targets at 1.2385 & 1.2350 in extension.Scenario 2:above 1.2475 look for further upside with 1.2520 & 1.2550 as targets.Comment:the RSI shows downside momentum.

Gold

Gold and most other precious metals with the exception of palladium traded higher on Monday. The US 10 year Treasury yield retraced from its high at over 2.87% to around 2.70% and could have helped gold to recover. While lower bond yields pushed gold higher as it is competing against interest bearing safe-haven bonds, upward momentum might have been impeded by a stronger Dollar.

This week is set to bring less fundamental data publications than the previous, with the US Trade Balance scheduled for Tuesday and Jobless New Claims on Wednesday. Gold traders will continue monitoring the movements in other markets, such as equities and fixed income.

Gold Chart
Pivot:1333.25Support:1333.251328.751325.25Resistance:134613511355.75Scenario 1:long positions above 1333.25 with targets at 1346.00 & 1351.00 in extension.Scenario 2:below 1333.25 look for further downside with 1328.75 & 1325.25 as targets.Comment:the RSI is bullish and calls for further advance.

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WTI Oil

Oil and most other energy commodities traded lower on Monday as the strong Dollar and expectations of higher US production weighted on crude oil prices. This downturn does not correspond to the future traders’ positions in crude oil as of Friday, before this recent downturn as CFTC Crude Oil speculative net positions were reportedly higher than in the previous week and reaching an all-time high.

On Tuesday the American Petroleum Institute (API) will release oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday.

WTI Oil Chart
Pivot:64.65Support:63.262.9562.5Resistance:64.6565.1565.5Scenario 1:short positions below 64.65 with targets at 63.20 & 62.95 in extension.Scenario 2:above 64.65 look for further upside with 65.15 & 65.50 as targets.Comment:the RSI advocates for further decline. Prices broke below a symmetrical triangle pattern.

US 500

Equities continued their decline with an incredible pace as S&P 500 (US 500) and Dow Jones Industrial Average (US 30) futures declined on Monday by more than 5%. This is the biggest fall in equity markets since 2011. Some analysts point out that the dramatic fall within few minutes could be attributed to computer programmed routines to react in this way.

Snapchat (1.17%) was one of the few US stocks closing higher in Monday’s turbulent trading as the company announced ahead of its quarterly financial report due on Tuesday, that they were introducing additional features to their communication platform. Also on Tuesday General Motors (NYSE:GM) and BP (LON:BP) are due to release their financial data.

US 500 Chart
Pivot: 2731 Support: 2651 2635 2607 Resistance: 2731 2763 2791 Scenario 1: short positions below 2731.00 with targets at 2651.00 & 2635.00 in extension. Scenario 2: above 2731.00 look for further upside with 2763.00 & 2791.00 as targets. Comment: the RSI shows downside momentum.

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