The dollar extended losses against the other major currencies on Wednesday after data showing that U.S. service sector activity slowed again in January and concerns rose that weakness in manufacturing may be spreading to other sectors. The drop in the dollar came after the Institute for Supply Management said its non-manufacturing index declined to 53.5 from December's 55.3. It was the lowest reading since February 2014 and was worse than expectations for a drop to 55.1.
The report came after a separate survey by Markit also showing that U.S. service sector activity grew more slowly in January, indicating that the economy may be losing momentum. The report offset the impact of better-than-expected data on U.S. private sector hiring. Payrolls processor ADP reported that the U.S. private sector added 205,000 jobs last month, beating economists' forecasts for an increase of 195,000. Markets use the ADP data as a guide for the Labor Department’s employment report, which will be released Friday and covers both government and private sector jobs growth.
Concerns over slowing U.S. growth and how much the Federal Reserve can raise rates this year pressured the dollar lower. Today the ECB President Mario Draghi is to speak at an event in Frankfurt.
In addition, the Bank of England is to announce its interest rate decision and publish the minutes of its monetary policy meeting. The bank is also to publish its quarterly inflation report. BoE Governor Mark Carney is to hold a press conference to discuss the report. In the U.S. front, data on initial jobless claims and factory orders are due later in the day.
The euro posted its strongest one-day rise against the dollar in two months, reaching its highest level since late-October, as the dollar continued to retreat from last week's Bank of Japan-driven rise, amid signals of slowing economic growth arising from weakness in the U.S. service sector and in U.S. manufacturing activity. The weak data comes ahead of the release of a highly-anticipated January U.S. jobs reports on Friday. A poor reading could compel the Federal Reserve to slow its pace of tightening, as it weighs whether to raise short-term interest rates in March. On Wednesday, the currency pair traded in a broad range between 1.0904 and 1.1145 before settling almost 1.64% higher for the session. Today the ECB President Mario Draghi is to speak at an event in Frankfurt while In the U.S. front, data on initial jobless claims and factory orders are due later in the day.
Pivot: 1.1Support: 1.115 1.12 1.13Resistance: 1.1 1.094 1.09Scenario 1: long positions above 1.1 with targets @ 1.115 & 1.12 in extension.Scenario 2: below 1.1 look for further downside with 1.094 & 1.09 as targets.Comment: technically the RSI is above its neutrality area at 50.
Gold
Gold surged to a fresh three month high on Wednesday reaching its highest level since October 30th as the dollar continued to retreat from last week's Bank of Japan-driven rally, amid signals of slowing economic growth arising from weakness in the U.S.
service sector and in U.S. manufacturing activity. Gold has closed higher by at least $10 an ounce in three of its last seven sessions. Weakness in oil prices, subdued inflationary pressures and the fact that the major U.S. indices are coming off their worst start of a year since the Financial Crisis could convince the Fed to delay its next interest rate hike beyond the first quarter. For today, gold traders will be focusing on initial jobless claims and factory orders data due later in the day.
Pivot: 1085Support: 1085 1046 1000Resistance: 1157 1191 1225Scenario 1: long positions above 1085 with targets @ 1157 & 1191 in extension.Scenario 2: below 1085 look for further downside with 1046 & 1000 as targets.Comment: the RSI is supported by a bullish trend line.
WTI Oil
U.S. crude oil prices surged by more than 8% on Wednesday, amid a severely weakening dollar, as energy traders ignored a considerable build in U.S. crude inventories in favor of growing support for an emergency OPEC meeting aimed at addressing longstanding concerns related to excessive supply. WTI crude for March delivery traded in a broad range between $29.41 and $32.34 a barrel, before settling 8.03% higher. On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. commercial crude oil inventories increased by 7.8 million barrels last week when analysts expected a 4.8 million rise. At the same time, market-moving comments from Ecuador president Rafael Correa appeared to have a greater impact on Wednesday's price. After speaking exclusively with the Wall Street Journal, Correa said an emergency OPEC meeting could be held as early as this month in order to prepare a strategy that will reduce supply in global markets.
Pivot: 31.29Support: 31.29 30.6 29.94Resistance: 33.37 33.9 34.43Scenario 1: long positions above 31.29 with targets @ 33.37 & 33.9 in extension.Scenario 2: below 31.29 look for further downside with 30.6 & 29.94 as targets.Comment: the RSI is mixed with a bullish bias.
S&P 500
U.S. stocks staged a late rally on Wednesday to finish with a mixed session, as an 8% surge in crude prices and further indications from the Federal Reserve of a delayed interest rate hike helped the major indices rebound from its worst day in two weeks. In Wednesday's session, U.S. crude futures soared nearly $2.50 a barrel amid renewed hopes for an emergency OPEC meeting which could result in global production cuts of as much as 5%. The Dow Jones Industrials Average added 1.13% while the NASDAQ fell by 0.28% pressured by Yahoo! Inc (O:YHOO), Alphabet Inc and Amazon (O:AMZN) losses. The S&P 500 index gained 0.50% as seven of 10 sectors closed in the green. Stocks in Basic Materials and Energy sectors led, each gaining more than 3% on the session while stocks in the Technology, Consumer Services and Consumer Goods industries lagged. For the week, investors will be focusing on data from the U.S. and especially on Friday’s employment report for further indications on whether the Fed will move forward with another rate hike this quarter.
Pivot: 1950 Support: 1821 1738 1650 Resistance: 1950 2010 2080 Scenario 1: short positions below 1950 with targets @ 1821 & 1738 in extension. Scenario 2: above 1950 look for further upside with 2010 & 2080 as targets. Comment: the RSI has just struck against its neutrality area at 50% and is reversing down.