Daily Market Report

[FOREX.com]

AUD/USD firms post RBA, ASX 200 eyes on China for sentiment. Feb 7th 2024​

By : Matt Simpson, Market Analyst

Market Summary:​

The RBA held their cash rate at 4.35% for a third meeting but decided not to remove their slight tightening bias from the statement, warning that “a further increase in interest rates cannot be ruled out”. And whilst the RBA acknowledged lower inflation, it still remains “too high” for their liking.

However, the RBA lowered their CPI forecast to return to within the 2-3% range by December 2025 (and trimmed mean CPI by June 2025). The cash rate is expected to be lowered to 3.2% by December 2025, or 3.9% by December 2024 which implies less than two rate cuts this year.

• AUD/USD was the strongest FX major on Tuesday as traders digested the RBA meeting and tracked APAC equities higher during a risk-on session for Asia
• China’s equities rebounded for a second day, the Hang Seng enjoyed its best day since July following a Bloomberg report that top regulators are to discuss market conditions with Xi Jinping
• Crude oil rose around 1% in line with my bullish bias as its countertrend move seemingly gets underway. $74 and the weekly/monthly pivot points around $74.50 – $74.80 are now in focus for bulls, where I’d then reassess it potential to extend gains or mark a swing high
• The US dollar retraced from its 11-week high after posting two-strong days if gains
• Fed’s Mester said she still leans towards three rate cuts this year (which is consistent with the median forecast for cuts in 2024) but didn’t want to put a timing on them and wants to see more data
• BOC governor said that the central bank is not working to a time table regarding rate cuts., and the path back to 2% inflation is likely to be slow. With central banks seemingly on the same page in not announcing any cuts soon, it may leave some disappointment for the market participants who expect four BOC rate cuts this year
• Gold formed a bullish inside day after finding support above $2020, which seems to be trading in the choppy range due to bears lacking appetite to drive it below $2000 whilst futures traders trim long exposure
• Wall Street was mixed with the S&P 500 and Dow Jones forming small bullish inside days just beneath their record high and the Nasdaq forming small bearish outside day just below its ATH

Events in focus (AEDT):​

• 09:00 – Australian
• 10:50 – Japan’s foreign reserves
• 11:30 – RBA chart pack
• 14:35 – Japan’s 30-year JGB auction
• 16:00 – Leading and coincident indices
• 18:00 – German industrial production
• 19:00 – China FX reserves
• 21:00 – BOE Breeden speaks
• 23:15 – BOE deputy governor speaks
• 03:30 – Fed Collings speaks

ASX 200 at a glance:​

• The ASX 200 closed lower for a second day after the RBA’s meeting was less dovish than hoped
• 10 of its 11 sectors declined, led by info tech and materials
• Yet SPI 200 futures recouped all of the prior day’s losses which points to a strong open for the ASX 200 cash index today
• Take note that RSI 2 and 14 are oversold for SPI futures, which met resistance around Monday’s overnight high – hence the bias for a pullback today
• If China’s markets can extend their rally today, it could bode well for the ASX and AUD/USD

AUD/USD technical analysis (daily chart):​

I outlined a bullish bias heading into the RBA meeting, although as I was expecting it to be slightly more dovish this now needs revising. A bullish engulfing candle formed on AUD/USD Tuesday after RSI (2) tapped oversold on Monday. Prices have paused around the pivotal S/R around 0.6525, and there is a risk it could extend yesterday’s rally if sentiment for APAC markets remains buoyant today. Take note that China’s equities markets were quite excited about the prospects of Xi Jinping meeting with regulators, so AUD/USD may get another tailwind from its developments. Also note that a bullish RSI divergence has formed which signals a potential pullback.



However, the bear-flag breakout which projects a target around 64c remains in play. Form here, traders can monitor prices around the current S/R level to see if prices break higher or form a swing high. Should prices continue higher, I’d prefer to see evidence of a swing higher below 0.6560 before reconsidering a short in line with the bear flag pattern.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

S&P 500 hits record high, futures hint at break above 5,000. Feb 8th 2024​

The S&P 500 reached a fresh record high and stopped just 5 points short of the 5,000 milestone thanks to strong earnings. But futures charts and market positioning suggest the S&P cash market could break higher.

By : Matt Simpson, Market Analyst

S&P 500 hits record high, futures hint at break above 5,000​

The S&P 500 reached a fresh record high and stopped just 5 points short of the 5,000 milestone thanks to strong earnings. Whilst the S&P 500 cash market stopped just shy of the 5k milestone, S&P futures managed to close just above it. And asset managers have backed this rally all of the way looking at futures positioning.


Last week, net-long exposure to S&P 500 futures rose to its most bullish level since February 2020 last week (yes, the pre-pandemic high…). This may seem ominous given this marked the market top as the global pandemic took hold, but it is also up for debate as to whether net-long exposure has risen to a sentiment extreme.


Sure, at +969.5k contracts net long it is well above its long-term average of 669.7k and above +1 standard deviation from its mean. But it has spent several months above +1 SD in the past. Furthermore, gross-long exposure is not at a sentiment extreme – although it is worth noting that gross-short exposure has fallen to its lowest level since September 2008 (pre-GFC era)


But until we see bears stepping into the ring or a prominent reversal pattern form, we could assume the trend is set to resume. Especially if headlines of ‘S&P 5k’ spur another round of buying from late newcomers. And perhaps that will be the phase ahead of a decent pullback.

S&P 500 futures technical analysis (30-minute chart):​

The 30-minute chart shows that S&P 500 futures are trading within a tight consolidation just off its record high. Volumes will be much lower during Asia, and perhaps that will allow the market to drift lower towards 5008 or 5000 support. I would be suspicious of any ruins to new highs during Asia, and would prefer to wait to see if prices reverted back beneath the record high before considering a counter-trend short.


But given the strength of the rally into these highs, the core bias is to seek evidence of swing lows around support levels for a long. Take note that the weekly R1 pivot sits around 4030 which makes it a viable target for bulls.

Market Summary:​

• Performance was mixed across the FX majors on Wednesday with the US dollar and euro in the middle of the pack regarding strength, whilst CHF was the weakest forex major, GBO and CAD were the strongest
• The US dollar index retraced for a second day as EUR/USD tapped a 3-day high, but as outlined in yesterday’s FX major report I suspect EUR/USD will eventually break beneath 1.07 given the strength of the fall into the December lows compared with the 2-day ‘rally’ from it.
• A small shooting star candle formed on AUD/USD to warn that its rebound back above 65c is already running low on fuel, however the 30-min chart show potential support around 0.6515 so perhaps it can produce a swing higher in today’s Asian session
• Crude oil prices rose for a second day in line with Monday’s bullish bias. As noted yesterday. the 30-minute chart remains choppy to suggest the move higher is corrective, but for now buyers are stepping in around swing lows and the target to the $74.50-80 area remains intact. \
• Gold remains choppy as predicted, with Tuesday’s bullish inside day being followed by a small inverted hammer candle (flat close with a tall upper wick).

Click the website link below to get our exclusive Guide to index trading in 2024.

https://www.forex.com/en-us/market-outlook/

Events in focus (AEDT):​

• 09:00 – Australian
• 10:50 – Japan’s
• 11:30 – Australian building approvals
• 12:30 – China CPI, PPI
• 13:00 – New Zealand inflation expectations
• 00:30 – US jobless claims
• 01:00 – BOE MPC member Dhingra speaks
• 01:15 – ECB member Elderson speaks
• 02:00 – VOE MPC member Mann speaks
• 02:30 – ECB lane speaks
• 04:05 – FOMC member Barkin speaks

ASX 200 at a glance:​

• The ASX 200 snapped a 2-day losing streak after it fell from its record high ~7700
• Support was found above the 2023 high at 7567.7, and it remains a key level of support today (along with yesterday’s low of 7581.6
• SPI futures recovered their overnight losses after US markets opened, but it seems as though thhey didn’t have the appetite to track the S&P 500 higher as it reached a record high
• Note that SPI futures remained beneath the VWAP overnight, so perhaps prices will pull back today.
• But as long as they hold above the 7544 low, the bias is for another leg higher

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

S&P 500 taps 5k record, ASX futures to extend bull-flag breakout? Feb 9th 2024​

The S&P 500 tapped 5k for the first time ever. But do traders have the appetite to extend its trend heading into the weekend? For now, our focus is on a bull flag pattern on the ASX 1-hour chart.

By : Matt Simpson, Market Analyst

The S&P 500 posted its smallest daily range of the year, and second smallest since Dec 28th. That particular day marked an interim top. And whilst the S&P 500 tapped the magical 5k level, it was by just a smidgen.



We also saw a similarly small-ranged day on Jan 30th which was followed by a 1-day pullback, so I am left wondering if we'll see a retracement on Friday as traders may opt to lighten their load ahead of the weekend. But as mentioned in yesterday’s analysis, futures positioning and pricing suggests a break above 5,000 for the S&P 500 cash index. I mean, did it really come this far to not go further – retracement incoming or not?

Market Summary:​

• Fed member Barkin was the latest member to push back on imminent rate cuts, saying “I think it is smart for us to take our time”.
• The yen was the weakest FX major on Thursday and the US dollar broke its 2-day pullback, allowing USD/JPY to reach a YTD high and hone in on my $150 target
• The weaker yen along with Wall Street playing with record highs has keeping the 40 to 47-day AUD/JPY cycle in play, which currently estimates its next trough to land between the end of March / beginning of April
• Gold continues to trade in a choppy range with the past two days effectively closing flat, with an upper wick on Wednesday and lower wick on Thursday.
• However, gold played very well with two swing-trade ideas on Thursday, but rising into the weekly and monthly pivots before reversing lower and reaching the 2040 target.
• Oil prices soared higher on headlines that Israel rejected the Gaza ceasefire proposal, fanning fears of a broadening conflict in the Middle East.
• WTI rude oil rose nearly 3.5% during its best day of the year and stropped just shy of my $77 target – but it shows the potential to continue higher should concerns over a full Middle East conflict continue to rise
• AUD/USD turned lower and closed back beneath 65c, to keep the downside target of 64c alive.

Click the website link below to get our exclusive Guide to index trading in 2024.

https://www.forex.com/en-us/market-outlook/

Events in focus (AEDT):​

RBA governor Bullock speaks shortly to the Houser of Representatives. I doubt we’ll glean much more from her than already conveyed at this week’s meeting and press conference; inflation remain too high, a hawkish bias remains and it will take some time for CPI to return to their target. That said, any awkward questions can result in slip-ups, and they can move markets. And any hint of dovishness could send AUD/USD lower and the ASX higher.

• 09:30 – RBA governor Bullock speaks before the House of Representatives
• 14:00 – New Zealand inflation expectations
• 18:00 – German CPI
• 00:30 – Canadian employment report
• 02:30 – BOC Loan Officer Survey

ASX 200 at a glance:​

• The ASX 200 cash market rose for a second day, although its two-day range is roughly one half of the prior two-day bearish selloff
• SPI 200 futures were effectively flat overnight, although gains on Wall Street allowed it to recoup earlier losses and close flat (and leave a potential bullish pinbar on the daily chart)
• Today’s bias for the ASX is bullish and for it to have another crack the January high
• A bull flag has formed on the 1-hour SPI 200 futures contract which projects a target near 7640 and the Feb 2nd overnight VPOC (most trading volume of the session)
• Resistance includes 7600, yesterday’s high around 7612 and the 7640 target
• Bullish can seek dips towards 7588 (overnight VPOC)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD weekly outlook: US inflation, AU jobs figures to drive AUD. Feb 12th 2024​

AUD/USD traders will keep a close eye on US inflation data to decipher Fed policy, Australia's employment report to see if another month of strong job losses ensues.

By : Matt Simpson, Market Analyst

Key points:​

• US inflation expectations and CPI report could be a key driver for the US dollar’s direction next week
• Australia’s employment figures for January will be monitored to see if December’s full-time job culling was a one off, or a new trend (and potentially reshape the RBA’s policy expectations)
• The RBA’s chief economist is likely to stick to the RBA’s script and not reveal a dovish surprise

Potential market drivers for AUD/USD, AUD/JPY, ASX 200​

• Remarks by Marion Kohler, Head of Economic Analysis, at the Australian Business Economists Annual Forecasting Conference, Sydney (Tuesday Feb 13m 08:55 AEDT / 21:55 GMT Monday)
• NAB business confidence (Tuesday Feb 13m 08:55 AEDT / 21:55 GMT Monday)
• US CPI (Wednesday 00:00 AEDT / 13:30 GMT Tuesday)
• Labour force report, Thursday (Thursday, 11:30 AEDT / 00:30 GMT)

Click the website link below to get our exclusive Guide to AUD/USD trading in 2024.

https://www.forex.com/en-us/market-outlook/

Remarks by Marion Kohler​

The RBA are in no rush to cut rates if we’re to believe their statement and press conference from their last meeting. And that is likely to be the message sent from the RBA’s head of economic analysis next week at the annual ABE forecasting conference (Australian Business Economists). The RBA released their quarterly Statement on Monetary Policy (SOMP) at their last meeting, and whilst it shows slightly lower CPI expectations, their statement retained a hawkish bias as inflation remains “too high”. I therefore see little chance of a dovish surprise from their chief economist next week.

NAB business confidence​

Business confidence fell for a third month in December, and business conditions slipped to a 23-month low according to the National Australian Bank (NAB) survey, led by a decline in manufacturing and construction. Perhaps more importantly, input costs had eased with lower labour and purchase costs. The basic takeaway from NAB was that “economic growth had eased considerably by the end of 2023” despite a stronger-than-expected start to the year. And if we’re to see business confidence and conditions continue to soften, it points to weaker growth and an increased likelihood of RBA cutting interest rates from 4.35%.

US inflation​

Arguably the biggest event of next week, all traders and central bank watchers will be keeping an eye on the US inflation report. The Fed have continued to push back on multiple rate cuts, with Jerome Powell effectively ruling out a March hike and Bostic sticking to his ‘third quarter’ estimate for a first cut. Market pricing has been revised down from five or more cuts to just one or two, which has helped to push the US dollar higher and keep AUD/USD under pressure. And that downwards pressure could persist on AUD/USD unless US inflation falls at a faster rate, because there is a long way to go before CPI or core CPI reach the Fed’s 2% target.

Australian labour force report​

The RBA kept rates at 4.35% for a third meeting, retained their slight hawkish bias in their statement but slightly lowered their inflation forecast. Their cash rate estimate allows for at least one cut this year, and just less than two. Traders were expecting a bit more of a dovish tone given the general weakening of the economy and broadly softer inflation figures for Q4.


Australia’s relatively strong employment data has been a key reason for the RBA retaining a hawkish bias, although December’s figures revealed some cracks. Over 100k full-time jobs were culled, making it the worst month on record outside of recessionary time (it was only beaten by the pandemic). If full-time jobs are to be severed for a second month, recessionary alarm bells would surely ring. And they’d only ring louder if this is accompanied with a strong uptick of unemployment and a lower participation rate. In turn, traders could drive AUD/USD lower in anticipation of two or more RBA cuts to arrive this year and earlier than expected.

AUD/USD technical analysis​

AUD/USD has just snapped a 5-week losing streak. It produced a spinning top candle for the week to show bears are losing enthusiasm and closed above 65c. Personally, I am wary of being ‘caught short’ around these levels. Even though I suspect it will eventually fall to 64c. My bias is to expect a bounce, and then to seek opportunities to fade (short) into the fake move higher.

On a fundamental level, we have the Fed with a higher base rate and lack of enthusiasm to signal easing, compared with an RBA with a lower cash rate pretending they might raise, with a lower cash rate and slowing economy. The RBA have to keep a ‘hawkish’ narrative to keep the Australian dollar elevated, as to avoid importing inflation, which is why they’re unlikely to drop the hawkish narrative even though there is little chance of them hiking again. In simple terms, fade the rallies.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

EUR/USD falters at 1.08 on CPI-eve, USD/JPY remains buoyant: Asian Open Feb 13th 2024​

EUR/USD snapped a 4-day winning Streak around a key resistance zone, and USD/JPY traded less than 50-pips from 150 ahead of a key YS CPI report.

By : Matt Simpson, Market Analyst

Market Summary:​

US 1-year inflation expectations remained at 3% according to the NY Fed. The 3-year dropped to 2.4%.

Whilst CPI expectations are trending lower, they remain elevated and above the Fed's 2% target up to 3 years out... Even the 1-year CPI expectations from University of Michigan is at 2.9%.

Now, I'm not sure the Fed use absolute numbers of consumer's forecasting abilities to shape their policy, but it does at least provide a gauge on sentiment; consumers expect prices to remain higher for longer.

Fed fund futures are now not pricing in a single rate cut this year with a probability of 50% or higher.

• Wall Street extended its rise and tagged fresh record highs, although the S&P 500 and Nasdaq 100 handed back earlier gains to print small bearish candles at their highs (shooting stars)
• Volatility for forex majors was on the low side on Monday on the eve of a key US inflation report, with trading volumes also dropping due to Chinese New year (China’s markets are to remain closed for the remainder of the week)
• EUR/USD tagged 1.08 before swiftly reversing to form a bearish outside day (and long-legged doji) to snap a 4-day winning streak around resistance, hinting at a potential swing high
• Australian retailer JB Hi-Fi trimmed its shareholder payout after reporting a drop in profits due to challenging retail conditions

Events in focus (AEDT):​

• 10:30 – Australian consumer sentiment (Westpac)
• 10:50 – Japan’s producer prices
• 11:30 – Australian business confidence, conditions (NAB)
• 17:00 – Japan’s machine tool orders
• 18:00 – UK average earnings, claimant count, unemployment

Click the website link below to get our exclusive Guide to EUR/USD trading in 2024.

https://www.forex.com/en-us/market-outlook/

ASX 200 at a glance:​

• The ASX 200 cash index closed at a 3-day low on Monday, yet remained supported above 7600
• Short volume on the ASX rose to its highest level this year according to data from Finra, although we’re yet to see such flows make a noteworthy bearish dent to prices
• With Wall Street higher and a pending US inflation report, price action could remain choppy and confined to ranges
• The SPI 200 futures chart shows that prices have repeatedly failed to hold above 7600 since Friday, which makes it an area to consider fading into should prices rally at the open
• An intraday support zone of interest is between 7569 (200-hour EMA) and 7565 (overnight volume point of control)
• Should US CPI come in hot it could dent sentiment for equity traders, which brings the 7540 are into focus around the 20-day EMA and overnight VPOC from Feb 6th

EUR/USD technical analysis (daily chart):​

The daily chart shows that EUR/USD broke its 4-day winning streak. Regular readers will know that I have assumed the move higher to be corrective, which then also assumes a retest and break beneath the December low. A hot US inflation report could be the ticket. And that leaves the obvious upside risk of a hot inflation report, which could send EUR/USD comfortably above 1.08 on renewed bets of multiple Fed cuts this year.

Technically, I like how a bearish outside side / spinning top / long-legged doji formed around 1.08, near the 200-day EMA. Hence the bearish bias.

USD/JPY technical analysis (30-minute chart):​

Given the lighter volumes during the Asian session this week (China’s lunar new year) then we could be in for some choppy trade on pairs such as USD/JPY. However, the 30-minute chart shows a strong rally from the 148.31 low, and prices are now within a consolidation period. It may be best to try and look past the initial moves at the Tokyo open as I suspect it will be a false move. Ideally, I would like to see prices eventually pull back towards the 100-bar EMA and look for evidence of a swing low, to rejoin its bullish trend in anticipation of a move to (and potentially above) 149.60 en route to 150.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

USD/JPY breaks 150 as bulls eye 152, AUD/USD seems on track for 64c. Feb 14th 2024​

US inflation data was broadly higher than expected, which triggered well defined moves in favour of the US dollar and to the detriment of all else. Whilst USD/JPY and AUD/USD could retrace from their overextended moves seen on Tuesday, 152 and 64c seem like viable targets for them respectively.

By : Matt Simpson, Market Analyst

Market Summary:​

US inflation data was broadly higher than expected, which triggered well defined moves in favour of the US dollar and to the detriment of all else. Fed fund futures now favour a hold in May.

Gold broke below $2000 and posted its worst day of the year, Wall Street gapped lower which saw the Nasdaq suffer its most bearish day since October and worst CPI day in 20 months. Bond yields surged with the US 2 and 10-year reaching a YTD high.

As for inflation itself, the consensus was hoping for too much. The annual rates are effectively moving sideways, but one thing to keep an eye on is the trend higher on the monthly CPI and core CPI gauges. At 0.4% m/m, core CPI reached a 9-month high and well above its long-term average of 0.3%.

Nobody wants to discuss hikes (yet), and I don't expect the Fed to come out with a knee-jerk reaction and tout them considering how slow they were to begin hiking last time (who remembers 'transitory inflation?!). But if CPI continues to rise then a hike is not impossible, even if it’s not the base case right now.

​

• The US dollar was king of the mountain and broadly higher against all FX majors, however resistance looms around 105 – at least over the near term
• The Swiss franc was the weakest following softer inflation figures and bets that the SNB could begin easing before the ECB
• USD/CAD closed at a 3-month high and confirmed an inverted head and shoulders pattern on the daily chart, which projects an upside target around 1.375
• EUR/USD closed beneath the December low after a textbook low-volatility retracement higher from it (almost with a dead-cat bounce quality)
• AUD/USD and NZD/USD were a close join second place at the bottom of the board due to the risk-off tone and lower inflation expectations from an RBNZ survey on Tuesday (which trimmed bets that the RBNZ could hike twice more, as ANZ now estimate)

Events in focus (AEDT):​

• 08:45 – New Zealand electronic card retail sales, food price index
• 18:00 – UK CPI
• 21:00 – EU employment, GDP
• 01:30 – Fed Goolsbee speaks
• 02:00 – BOE governor Bailey speaks

ASX 200 at a glance:​

• The ASX 200 cash index turned lower for a second day ahead of the US CPI report, and we can rest assured it will gap lower today looking at overnight pricing
• The SPI 200 futures market fell -1.2% although it recouped some of those losses heading into the New York close
• Note the bullish engulfing candle on the last hour’s of trade on SPI futures whilst RSI (14) was oversold. The daily low also found support at the January VAL (value area low), so perhaps a bounce is due
• If we see a retracement higher, I’d prefer to look for swing highs around resistance in anticipation of of its next move to 7360 support.

​

USD/JPY technical analysis (daily chart):​

On this occasion, spot forex prices have been leading yield differentials. USD/JPY reached its highest level since November after the CPI report and the US-JP 2-year spread broke out of its basing pattern and is now trying to close its large gap with spot prices. Given the BOJ’s ultra-dovish stance and strong economic data from the US, a move to and break above the 2023 high seems plausible.

However, keep a close eye on how the US dollar index reacts around its 105 resistance cluster as it could prompt a consolidation around these highs, if not a pullback. But with 150 nearby on 150 to provide potential support, bulls have an area of interest to reload ahead of the anticipated move to the infamous BOJ intervention highs. And they key to markets successfully breaking above 152 are to perhaps not be seen to be weakening the yen too quickly for the BOJ or MOFs liking, as to avoid another intervention.

AUD/USD technical analysis (1-hour chart):​

It seems that the bear-flag within the bear-flag I noted in the AUD outlook report is playing out nicely. The larger bear flag projects an approximate target around 63c, and the smaller one at 64c. Yet caution could be warranted around the cycle lows, given it is trying to form a base around the Q4 open, monthly S1 and weekly S2 pivots. Moreover, RSI 2 and 14 are oversold (not shown as to not clutter the chart).

From here, I would prefer to seek bearish setups at higher prices should evidence of a swing high form, using Tuesday’s low as an initial downside target – and running on the assumption of an eventual break beneath for a move to the smaller 64c bear-flag target.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

USD/JPY forms bull flag above 150, Nasdaq ‘rebound’ tied to yields. Feb 15th 2024​

The Nasdaq may have risen on Wednesday, but it appears driven by a pullback in yields. And if yields rally from a key level of support, it could propel USD/JPY higher and weigh on the Nasdaq.

By : Matt Simpson, Market Analyst

Analyst estimates were overly optimistic with their lower CPI forecasts, and the upside surprises should serve as a reminder that the Fed do not expect the path back to inflation to be easy. It hasn’t been during previous cycles, so why should this one be so different? Markets are always in such a rush to price the future in now that they forget that the Fed moves at the Fed’s pace. This means that they overact to every fluctuation in economic data as they extrapolate expectations out from single data points. When in reality, the Fed are taking a long-view approach and their ‘path’ back to 2% allows for mishaps along the way. And comments from Goolsbee and Powell after the hot inflation report attest to this.

Besides, the Fed’s preferred CPI gauge is the less-volatile core PCE, and if that comes in softer then markets will no doubt forget this week’s hot inflation report from the BLS. And it looks like they’re already trying to with Wall Street recouping around half of Tuesday’s losses and the VIX retracing lower. But this could just be a sympathy bounce thanks to a pullback in yields.

Nasdaq 100, Dow Jones, S&P 500, US-year yield daily chart:​

The US 2-year has retraced back to its 100 and 200-day EMAs, and whether it rebounds from this pivotal level or hands back the remainder of Tuesday’s gains could be the difference between Wall Street falling further or retesting its highs. Yes, US indices rose on Wednesday, yet they only recouped around half of Tuesday’s gap lower. If yields rally from here, US indices could struggle to fill those gaps and take another leg lower. Yields are in the driving seat.

US dollar index daily chart:​

The US dollar index predictably stalled just below 105, near a resistance cluster which includes trend resistance from the 2022 high. And that allowed AUD/USD and NZD/USD to lead the pack on an apparent relief rally as they tracked Wall Street indices higher. What makes me suspect that we could be in for a choppy few days is that we’ve likely seen the most volatile day of the week, and markets are now looking for their next cue whilst traders decide whether yields will rebound and take the US dollar above 105. And if they do, that could see USD/JPY head for the BOJ intervention highs, just below 152.

Events in focus (AEDT):​

The focus now shifts to Australia’s employment report, where I’m keen to see if it reveals another mass culling of full-time jobs. The -106k full-time jobs lost in December was its third worst print on record, or worst in a non-recessionary period. And if further cracks appear in the jobs market, it could bring forward expectations of a dovish pivot by the RBA and see AUD/USD re-shift its focus on my 64c target.

• 08:45 – New Zealand electronic card retail sales, food price index
• 10:50 – Japan’s GDP
• 11:00 – Australian inflation expectations (Melbourne Institute)
• 11:30 – Australian employment report
• 15:30 – Japan’s industrial production
• 18:00 – UK GDP, industrial production, manufacturing production, trade balance, index of services
• 23:00 – ECB Lane speaks

View a preview for Australia’s employment report: AUD/USD, ASX 200 forward testing: Australian employment report

USD/JPY technical analysis (4-hour chart):​

USD/JPY remains in a strong uptrend on the 4-hour chart. Prices are holding above 150 and forming a potential bull flag, which projects an upside target around the BOJ intervention highs. As I expect 150 to hold as support (but allow some wriggle room) then retracements towards this level could be appealing to dip buyers.

Of course, there are risks that the BOJ become more verbal the closer it gets to the 152 handle – a level it has faltered at due to BOJ intervention of market-driven fears of one coming. And if the yen weakens too quickly, the odds of verbal intervention rise. But until then, the uptrend remain in force and the bias for a bull-flag breakout are favoured.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD, ASX 200 rapid rebound gathers pace despite warning from rates markets. Feb 16th 2024​

Despite lacklustre corporate earnings and rebound in US bond yields, the spectacular rally in AUD/USD and Australia’s ASX 200 only gathered pace in the second half of Thursday’s trading session, leaving both markets eyeing off potential topside breaks.

By : David Scutt, Market Analyst

• AUD/USD and ASX 200 futures have either returned to or broken above the levels they were trading prior to the US inflation report on Tuesday
• US 2-year yields remain higher, with Fed rate cut probability lower ahead of key US producer price inflation numbers later today
• Riskier asset classes appear to be taking their cues from US equity markets right now

Despite lacklustre corporate earnings and rebound in US bond yields, the spectacular rally in AUD/USD and Australia’s ASX 200 only gathered pace in the second half of Thursday’s trading session, leaving both markets eyeing off potential topside breaks.

Risk rebound goes into overdrive​

While these markets are not alone in exhibiting unusually elevated levels of investors euphoria right now – just look at what other equity and riskier asset classes have done over the past two sessions post the US inflation report plunge – beyond momentum and euphoria, what else is underpinning the move?

The headline writers suggest the move reflects growing Fed rate cut bets, but while the expected amount of easing has grown a little over the past two days, were still only talking about four cuts over 2024, less than what was seen before the US inflation report and well below the more than seven cuts that were priced in just a month ago.

But rates markets are signalling caution​

US two-year yields – an indicator many traders regard as being one of if not the most influential on broader markets – remain above the levels where they traded prior to the US inflation report on Tuesday. Of note, following the release of weak US retail sales and industrial production reports on Thursday, yields dipped to the top of the former range they traded in earlier in the year but couldn’t sustain the move, rebounding sharply to finish the session roughly where they started.

Source: Refinitiv

That warns of potential further upside for shorter-dated US yields in the near-term, delivering the type of scenario that could drag longer-dated yields higher along for the ride. With the US producer price inflation report out later Friday, I get the sense rates have begun discounting the risk it too may show some signs of reemerging inflationary pressures.

But that risk is not resonating with broader markets. Focus seems to be on US equities, especially riskier constituents which continue to ramp often late in the North American session.

AUD/USD disconnects from rate differentials​

AUD/USD (red line below) appears to be paying close attention to stocks, rallying right back to where it was trading prior to the US inflation report, just like the S&P 500. The recovery has come despite the US yield advantage over Australia for two-year yields (black line, inverted on the chart below) blowing out to the highest level since October on Thursday as another soft Australian employment report added to RBA rate cut bets. When the yield spread was last this wide, AUD/USD was trading nearly two cents lower than where is does today.

Source: Refinitiv

AUD/USD resembles a slingshot​

However, while I’m unconvinced by the fundamentals underpinning the rebound, I’m not going to fight the tape when the bulls want to charge. As a result of the late rally on Thursday, AUD/USD has broken through the downtrend it’s been stuck in since late December, leaving only resistance from .6530 standing in the way of a push to higher ground.

The rebound from Tuesday’s lows has been simply relentless, with only one down candle logged on the four-hourly chart since, separating the 12 up candles either side. Unsurprisingly, whether you’re talking RSI or MACD, momentum is breaking and swinging to the topside.

Should AUD/USD clear the last of the wicks from failed attempts above .6530 earlier this month, there’s not a lot of visible resistance to speak of until .6620, perhaps a bit around .6560. The pair looks primed for a break, resembling a slingshot.

Should AUD/USD break and hold above .6530, those considering longs targeting a push towards .6620 could place a stop below for protection. Alternatively, if the pair can’t break .6530 with the momentum it is carrying, it will also provide a decent level to get short targeting a push back to .6450. A stop above .6530 would provide protection.

Momentum has ASX 200 futures eyeing record highs​

Like AUD/USD, ASX 200 futures have been motoring over recent sessions, surging close to 3%, setting the underlying index on course for another potential record high. That’s despite expensive valuations across several key sectors such as financials and healthcare and a largely underwhelming reporting season report card so far. Yes, there has been some takeover activity in what’s left of Australia’s increasingly limited listed technology sector, but beyond momentum, the fundamentals hardly cream buy at these levels.

While some may want to chase the market to record highs, I’d prefer to see how the near-term price action plays out. Yes, momentum is totally to the upside but that makes it vulnerable to an abrupt rug pull should the focus return to what rates and fundamentals are suggesting.

Resistance is located at .7665 with support located around 7600 and again at 7520.



-- Written by David Scutt

Follow David on Twitter @scutty

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

NZD, AUD take the lead in quiet trade but USD may not be done yet. Feb 20th 2024​

NZD/USD and AUD/USD were the strongest pairs on Monday during quiet trade, but the USD shows the potential to bounce before a larger move lower, which could eventually allow AUD/USD to reach for 66c.

By : Matt Simpson, Market Analyst

Market Summary:​

• Market volatility was its typically low for a long weekend in the US and lack of news flow, but with traders set to return to their desks today then perhaps volatility can now expand as the week progresses
• With US cash markets closed, European bourses struggled to gain any real momentum although the FTSE 100 tapped a 6-week high whilst the DAX performed a low-volatility down day after it reversed from its record high on Friday
• S&P 500 E-mini futures ticked higher on Monday although take note of the daily reversal patterns near its record high (dark cloud cover, bearish pinbar) which warn of a minor pullback
• The key technical take for USD pairs is that the US dollar rally looks set for a retracement lower on the weekly charts, but first the daily charts show the potential for a minor rebound higher
• The US dollar index formed a small Rikshaw man doji above 104, EUR/USD formed a small doji below 1.08, GBP/USD closed flat with a Rikshaw man doji after its high met resistance at the 50-day EMA, USD/JPY is coiling up on the daily chart above 150 – which implies volatility could return (although the breakout’s direction is yet to be revealed)
• NZD/USD offered the most excitement among FX majors, rising for a fourth day and closing about its 50-day EMA, yet elsewhere ranges were very small.
• New Zealand’s services PMI expanded at its fastest pace in eight months, and ANZ now expect the Kiwi dollar to rise steadily though the year (the local bank who recently upwardly revised their RBNZ forecast to 2x 25 RBNZ hikes)
• The US dollar is curling higher on the 4-hour chart against CAD, CHF and JPY whilst AUD/USD and NZD/USD are near cycle highs, hinting at a pullback for the antipodean pairs
• Gold rose for a third day yet met resistance at the 50-day EMA and formed a small shooting star candle, to warn of a pause or retracement lower from $2020

Events in focus (AEDT):​

• 11:30 – RBA meeting minutes
• 18:00 – PBOC loan prime rate (1 and 5-year)
• 21:15 – BOE Bailey speaks
• 00:30 – Canadian inflation report

US dollar index technical analysis:​

The US dollar index has risen over the past seven weeks mostly in a straight line. Yet it formed a shooting star reversal candle around the 105 handle, trend resistance and the 61.8% Fibonacci level. A pullback on the weekly chart does not seem impossible, although the daily chart hints at a bounce first. Prices are holding above the 104 handle and 10-day EMA, and a small doji formed on Monday. Traders should be on guard for little spikes of volatility either side of Monday's range as traders return, but the bias is for a minor bounce before momentum turns lower. If so, that could see AUD/USD retrace lower from its 4-day rally.

AUD/USD technical analysis (daily chart):​

The Australian dollar rose for a fourth day on Monday, which suggests the bullish sequence may be vulnerable to a bearish candle or two appearing. Monday’s small-ranged candle tagged but failed to close above 0.6550 resistance, and looks set to close around its 10-day EMA as part of a small inverted hammer.

Given the two bullish pinbars on the weekly chart, I suspect AUD/USD is building up to a break higher. And that could eventually see it reach for the 66c handle near the 200-day EMA and high-volume node from the prior decline. But that fact that the US dollar index is holding above 104 and looks set for at least a minor bounce suggest AUD/USD may retrace lower form current levels before making a break above Monday’s high.

AUD/USD technical analysis (1-hour chart):​

An uptrend has formed on the hourly chart of AUD/USD, although a false break of 0.6550, 2-bar reversal and subsequent lower high and lower low off the higher warns of a potential retracement lower. A bearish divergence also formed with the RSI (14) to show the bullish trend is losing momentum.

My bias is for a retracement lower towards 0.6520/20 near the high-volume node of the uptrend. A break lower brings the weekly pivot into focus near the 0.6500 handle.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

Gold rises on renewed Fed-cut bets, crude oil falters at resistance. Feb 21st 2024​

Soft inflation figures from Canada and a poll of economists backing a June Fed cut sent gold higher on Wednesday, as traders refreshed their dovish bets. Crude oil has also faltered once more at a key resistance area.

By : Matt Simpson, Market Analyst

Market Summary:​

• A set of softer inflation figures for Canada weakened bolstered bets that the BOC and central banks in general will begin cutting interest rates sooner
• CAD was the weakest major with the USD a close second, the Canada’s OIS curve curling lower on refreshed easing bets
• A slim majority of economists expect the Fed will cut their interest rate by 25bp in June, according to a Reuters poll (which would lower the Fed’s target band to 5.00 – 5.25%)
• This is in line with Fed fund futures ricing, which also imply with a slim majority of 51.2% of such a move
• US traders returned to their desks after the long weekend and provided a volatile session for FX majors; the US dollar index fell to a 12-day low before recouping around half of the day’s losses to close above 104, sending EUR/USD back above 1.08
• AUD/USD rose for a fifth day, but once again saw a false intraday break above 0.6550 to closed with a wide-legged hammer, whilst NZD/USD reached a 5-week high but met resistance at 62c before pulling back
• US yields were lower across the curve (particularly at the lower end which is more sensitive to monetary policy) which weighed on the US dollar and allowed gold rise for a fourth day and tag $2030
• New Zealand’s producer prices in Q4 were hotter than expected, although lower than Q3 which keeps the pressure on the RBNZ to potentially hike – or at reintroduce a tightening bias at their next meeting
• Nvidia fell -4.5% during its worst day of the year ahead of a key earnings report, and managed to take Wall Street indices down with it
• Options markets imply an +/-11% move on the stock, which in turn could turn into a make or break situation for Wall Street indices as the week progresses
• The Nasdaq 100 and S&P 500 fell to a 4-day low, with the S&P closing back below 5000

Events in focus (AEDT):​

• 10:30 – Australian leading index (Melbourne Institute)
• 10:50 – Japan’s trade data
• 11:00 - Australian wage price index

Gold technical analysis:​

With gold now having risen for a fourth consecutive day, it has allowed a nice bullish trend has develop on the 1-hour chart. The recent leg higher was accompanied with rising volume, which diminished as prices retraced. Prices are now trying to build support around the 10-day EMA and prior highs / double top around $2024 and RSI (2) is oversold, so perhaps a inflection point is near. Also note that RSI 14 is holding above 50, which backs up momentum of the overall trend.

Bulls could seek dips with a view to target the $2036 to $2040 region, near the weekly R1 pivot and monthly pivot point. A weaker US dollar and lower yields would be the ideal scenario for gold to extend its current rally. However, I suspect the $2040 region may provide some resistance or a pullback.

Crude oil technical analysis:​

In the first week of the month crude oil produced a nice bounce from the 2024 open price, in line with my bullish bias. Although it is now struggling to make a break above the 2023 open. A bearish engulfing candle formed around this key level at the end of January, and we have since seen a subsequent bearish engulfing and bearish outside day form which both failed to retest the January high. The only thing that appears to be holding it up at this stages is the 200-day EMA, but as we can see a bearish divergence with RSI 2 coupled with failed attempts to retest the Jan high, I suspect a move lower is in order – even if the 200-day EMA sits nearby.

Bears can either seek shorts beneath the 200-day EMA, or fade into rallies towards the 2023 highs with a stop above either the January high or $80 handle, with $76 and $74 being viable downside targets (assuming it provides a satisfactory reward to risk ratio).

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.