The dollar extended losses against other major currencies on Wednesday, as disappointing U.S. economic reports weighed and as concerns over declining oil prices continued to support the safe-haven yen and Swiss franc. The U.S. Commerce Department said that consumer prices fell 0.1% in December, compared to expectations for a flat reading. Year-over-year, consumer prices were 0.7% higher. Core CPI, which excludes food and energy costs, increased by 0.1%, missing forecasts for a gain of 0.2%. Separately, the U.S. Commerce Department said that housing starts fell 2.5% to hit 1.149 million units last month from November’s total of 1.179 million units. Analysts had expected a rise 1.6% to 1.200 million. Meanwhile, the number of building permits issued declined 3.9% to 1.232 million units from November’s total of 1.289 million. Economists had forecast a drop of 6.4% to 1.200 million units. The safe-haven yen remained supported as oil prices dropped to the lowest level since 2003 on Wednesday, falling below $28 per barrel after the International Energy Agency said in a report that the supply glut in markets looks set to last until at least late 2016. For today the ECB is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The U.S. is to release data on manufacturing activity in the Philadelphia region and the weekly report on initial jobless claims.
The euro fell against the dollar on Wednesday despite weak inflation data and lower than anticipated housing data in the U.S. which supported sentiments for a delayed interest rate hike by the Federal Reserve beyond the first quarter. The currency pair traded in a broad range between 1.0877 and 1.0976, before settling 0.20% on the session. Volatility remained low, as EUR/USD posted a change lower than 0.70% for the ninth straight trading day. Since ending 2015 around 1.085, the euro is relatively flat against its American counterpart, up 0.28% on the new year. Investors await a closely-watched meeting by the European Central Bank on Thursday for further signals of easing mechanisms that could be deployed by its Governing Council over the next few months to stave off deflation. The ECB, however, is largely expected to leave rates unchanged amid long-term concerns related to slowing growth in China and the impact of crashing oil prices on the global economy. The U.S. is to release data on manufacturing activity in the Philadelphia region and the weekly report on initial jobless claims.
Pivot: 1.0935 Support: 1.0855 1.0835 1.08 Resistance: 1.0935 1.0975 1.101 Scenario 1: short positions below 1.0935 with targets @ 1.0855 & 1.0835 in extension. Scenario 2: above 1.0935 look for further upside with 1.0975 & 1.101 as targets. Comment: as long as 1.0935 is resistance, look for choppy price action with a bearish bias.
Gold
Gold surged by more than 1.5% on Wednesday rising above $1,100 an ounce, as soft inflation data in the U.S. increased the possibility that the Federal Reserve could delay its next rate beyond the first quarter. On Wednesday morning, the U.S. Department of Labor said that its Consumer Price Index (CPI) for all items declined 0.1% in December on a seasonally adjusted basis, slightly below forecasts for a flat reading. The CPI for December also rose by 0.7% on a yearly basis, before seasonal adjustments, extending 0.5% gains from a month earlier. The CME Group (O:CME) also expects a 25.2% chance of a rate hike by the FOMC in March, considerably below forecasts which hovered around 50% in late-December. For today gold traders focus will be on the ECB which is due to announce its benchmark interest rate and publish its rate statement, outlining economic conditions and the factors affecting its monetary policy decision. The U.S. is to release data on manufacturing activity in the Philadelphia region and the weekly report on initial jobless claims.
Pivot: 1095 Support: 1095 1090.5 1086 Resistance: 1106 1110 1113 Scenario 1: long positions above 1095 with targets @ 1106 & 1110 in extension. Scenario 2: below 1095 look for further downside with 1090.5 & 1086 as targets. Comment: technically the RSI is above its neutrality area at 50.
WTI Oil
U.S. oil prices traded close to $27 dollars a barrel on Wednesday for the first time since 2003, as investors worried that a huge oversupply in crude oil prices was coinciding with an economic slowdown in China and as investors continued to digest bearish comments from the International Energy Agency. The IEA warned that oil prices worldwide "could drown in oversupply" if current conditions persist. In its monthly oil report released on Tuesday, the IEA said global markets could face an estimated supply excess of 1.5 million barrels per day if demand continues at its current pace. Thursday's government report from the Energy Department could show that U.S. crude stockpiles increased by 3.0 million barrels for the week ending on Jan. 15. The report is being released one day later than usual this week due to Monday's Martin Luther King Day holiday.
Pivot: 29.2 Support: 27.5 26.8 26.1 Resistance: 29.2 29.75 30.5 Scenario 1: short positions below 29.2 with targets @ 27.5 & 26.8 in extension. Scenario 2: above 29.2 look for further upside with 29.75 & 30.5 as targets. Comment: as long as 29.2 is resistance, likely decline to 27.5.
Crude closed at its lowest settlement since May 2003 on Wednesday and the shock of another selloff was more than enough to rattle the main stock indices again. It was a day of reversals in the stock market, with the major averages changing direction throughout the day. The Dow Jones Industrial Average plunged and then recovered in the final hour to a loss of less than 130, only to fall back again and close down 250 points. The Nasdaq tumbled, then turned positive in the last hour, then closed down about 0.12%. The S&P 500 Composite index, meanwhile, fell by 1.17% to 1,859.33, as stocks in nine of 10 sectors closed in the red. Stocks in the Energy and Utilities industries lagged, each falling more than 2% on the session. Stocks in the Health Care sector led. At one point, the S&P 500 slid to its lowest level since February, 2014. Not surprisingly, the Volatility Index, otherwise known as the 'fear index,' jumped by almost 6.1%. For today, traders will focus on the ECB which is due to announce its benchmark interest rate and publish its rate statement, outlining economic conditions and the factors affecting its monetary policy decision. The U.S. is to release data on manufacturing activity in the Philadelphia region and the weekly report on initial jobless claims.
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 is bearish and calls for further downside.