The dollar pushed slightly higher against the other major currencies in quiet trade on Monday, still supported by Friday’s strong U.S. employment report, while concerns over turmoil in China persisted. The yen weakened after China’s central bank moved to support the yuan, but another sharp drop in Chinese shares added to fears over the outlook for the world’s second largest economy. Earlier on Monday, the People’s Bank of China set the daily midpoint rate for the yuan higher against the dollar. It was the second day the bank guided the yuan stronger, following eight days of weaker guidance. The move eased concerns over weakness in China’s currency, but shares in China fell 5% overnight after the latest inflation figures added to concerns over its economy. Today in Japan, current account data for November came in at ¥1.42 trillion, less than the adjusted surplus of ¥1.52 trillion expected providing some support to the yen. For today, the U.K. is to release data on industrial and manufacturing production while in the U.S., Federal Reserve vice-chairman Stanley Fischer is to speak at an event in Paris.
The euro fell considerably against the dollar on Monday, as currency traders are concerned regarding China’s economic problems. The currency pair traded in a broad range between 1.0850 and 1.0970 before settling approximately 0.70% for the session. The euro is almost unchanged against the dollar over the first few days of the new year after opening 2016 at 1.0860. EUR/USD is coming off a year where it fell by approximately 10% due to a sharp divergence in monetary policy between the Federal Reserve and the European Central Bank. Last week, Fed vice chairman Stanley Fischer said in an exclusive interview with CNBC that economic conditions could be appropriate to necessitate four interest rate hikes from the U.S. central bank over the course of this year. On Tuesday, Fischer is scheduled to deliver a speech on monetary policy at the Banque de France conference in Paris.
Pivot: 1105Support: 1091 1086 1082Resistance: 1105 1114 1121Scenario 1: short positions below 1105 with targets @ 1091 & 1086 in extension.Scenario 2: above 1105 look for further upside with 1114 & 1121 as targets.Comment: even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.
Gold
Gold prices fell on Monday and continue to drop on Tuesday in the Asian trading session, as investors are taking profits after the recent gains brought to the precious metal by geopolitical worries and concerns about China's economy. Gold received pressure on Monday by a moderately stronger dollar, as investors remained focus on economic and political turmoil in China and the Middle East. Further pressure on gold prices came on Monday, after the People's Bank of China (PBOC) attempted to soothe markets by setting the daily fix for the yuan against the dollar dramatically higher in comparison with its level at last week's close. While the Chinese currency surged against the dollar, Chinese equities continued to plunge extending their losses from the opening week of the year. Investors await the release of China trade data on Wednesday for further indications on the strength of the Chinese economy.
Pivot: 1105Support: 1091 1086 1082Resistance: 1105 1114 1121Scenario 1: short positions below 1105 with targets @ 1091 & 1086 in extension.Scenario 2: above 1105 look for further upside with 1114 & 1121 as targets.Comment: even though a continuation of the technical rebound cannot be ruled out, its extent should be limited.
WTI Oil
Crude oil prices continued to tumble on Tuesday, falling almost 20 percent since the beginning of the year as analysts cut their 2016 oil price forecasts causing traders to get out of their buying positions. Overnight, U.S. crude oil prices fell sharply by more than 5% on Monday, as widespread concerns related to the weakening Chinese economy pulled prices down to fresh 12-year lows. U.S. West Texas Intermediate was trading about 20 percent lower than at the beginning of the year and it reached $30.60, the lowest since December 2003. Analysts also adjusted to the early price movement in the year, with Barclays (L:BARC), Macquarie, Bank of America Merrill Lynch (N:BAC), Standard Chartered (L:STAN) and Societe Generale (PA:SOGN) all cutting their 2016 oil price forecasts on Monday. Ahead, the American Petroleum Institute will release its estimates of crude oil and refined product inventories in the U.S. at the end of last week. This will be followed on Wednesday with more closely-watched figures from the U.S. Department of Energy.
Pivot: 38.5Support: 30 28 25Resistance: 38.5 43.5 48.5Scenario 1: short positions below 38.5 with targets @ 30 & 28 in extension.Scenario 2: above 38.5 look for further upside with 43.5 & 48.5 as targets.Comment: the RSI is capped by a bearish trend line.
U.S. stocks were mixed on Monday amid a last-minute rally by the Dow Jones Industrial Average, even as crude oil prices fell to fresh 12-year lows pulling down energy stocks on the major indices.
U.S. crude futures tumbled more than 5% in Monday's session, at one point dipping below $31 a barrel, as longstanding concerns related to slowing economic growth in China continue. The sharp one-day drop in crude prices was followed by an investor note by Morgan Stanley (N:MS), which warned that crude prices could stumble even further if the yuan continues to be devalued. The Dow Jones Industrial Average gained 0.32% and the NASDAQ Composite index fell 0.12%, due in part to severe losses among biotech stocks. The S&P 500 Composite index, meanwhile, added 0.09%, as six of 10 sectors closed in the green. Stocks in the Consumer Goods, Telecommunications and Utilities sectors led, each gaining more than 0.50% on the session. The top performer on the S&P 500 was Macy`s Inc, which surged by 8.16%.
Pivot: 2082 Support: 1900 1885 1867 Resistance: 2082 2130 2180 Scenario 1: short positions below 2082 with targets @ 1900 & 1885 in extension. Scenario 2: above 2082 look for further upside with 2130 & 2180 as targets. Comment: the RSI is bearish and calls for further decline.