Asian stocks gained on Tuesday following the advance in U.S stocks overnight, with all three U.S equity benchmarks closing higher overnight. On Wall Street, the Dow Jones ended yesterday’s session up 0.58 percent to 18,502.00, the S&P 500 rose 0.52 percent to finish at 2,180.28 while the Nasdaq added 0.26 percent to 5,232.33, as bullish sentiment was fueled by evidence that the world’s largest economy is growing.
Reports from the Commerce Department released on Monday reported that U.S consumer spending rose for a fourth straight month in July at the pace of 0.3%, based on strong demand for long-lasting manufactured goods such as automobiles, and rising household income. Meanwhile, the core personal consumption expenditure (PCE) price index, which excludes the volatile food and energy components, inched up 0.1% in July, maintaining the same pace as in June.
As a result, the core PCE – the Fed's favorite barometer for inflation - increased 1.6 percent on a year-over-year basis, remaining below the fed's target of 2 percent. To fully assess the outlook for the U.S monetary policy, investors are now shifting their attention to the monthly jobs data on Friday, which is forecast to report that 180,000 more jobs were added in July.
Crude prices continued to trade in a thin range as a stronger U.S dollar and focus on surging output from the Middle East weighed down the speculation over an output cap deal next month, even after data from energy monitoring service Genscape reported a drawdown of 287,444 barrels at the Cushing, Oklahoma delivery point for U.S. crude futures during last week.
NZDUSD is trading in an upward trending price range with higher highs and higher lows. The pair has just pulled back from the lower boundary of the trading channel, at the one-week low of 0.72080. However the market keeps attempting a test of this support. The %K line reversed into a downward movement after surging close to the overbought zone and is likely to cross over the %D line from above. With the two MAs converging above the price action, the pair is expected to retreat further, but the support at 0.72080 should be broken through ideally before a short position is attempted.
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GBPUSD fell back into the downward sloping range after failing to reach the 1.33000 psychological level. The MA20 has penetrated the MA50 from above, consolidating the down move following a brief correction. With the divergence between the +DI line and –DI line and the low reading on the RSI, GBPUSD is much likely to dip further.
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After a period of moving sideways around the 23.6% retracement at 0.47741, the pair has fallen below both this level as well as the 50-period moving average, which suggests further down moves. As can be seen from the RSI chart, the index has slid to 42.84. The bear is dominating the market and the currency pair is forecast to head downwards to the 38.2% Fibonacci level.
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Copper is trading indecisively in a narrow range after a sharp selloff last week. The commodity is retreating from the MA20 and the resistance at 2.0904, and is anticipated to gather more bearish momentum as the –DI and +DI are converging, not to mention the RSI index is witnessing higher highs and higher lows but continues to stay below 50 and is pointing lower.
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U.S crude prices are experiencing a period of consolidation. Both sides are taking cautious steps which can be seen in the short bodies of recent candles. Buyers are failing to get the price action through the MA20, while sellers are not able to break through the support at the 61.8% retracement level at 46.87. The commodity is likely to drift slightly lower until updated fundamental factors provide direction later in U.S session.
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The Euro Stoxx 50 index retains its bullish momentum and is flying higher within the upward trending range. The index has crossed over the moving average price levels, but has still been locked within the range marked by the support at 2977.50 and the resistance at 3015.00. The RSI index has soared above the 50 line, and is supporting a breakout above the 3015.00 level.
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Japanese stocks traded higher on Wednesday after sluggish domestic data and prospects of further easing by the Bank of Japan contributed to dragging down the Yen. Japan’s Nikkei 225 index added nearly 1.0% to jump to a two-week high at 16903.00, supported by comments from BOJ board member Yukitoshi Funo that the central bank would make full use of its existing policy tools to encourage spending and dislodge the “deflation mindset”.
According to data released earlier on Wednesday, Japanese industrial production was unchanged in July, defying forecasts calling for a 0.7% gain from June. Compared to July 2015, Japan’s industrial output declined 3.8%, underscoring the fragility in factory activity.
Meanwhile, upbeat U.S. data lifted the dollar overnight. Published by the Conference Board, the U.S Consumer Confidence Index for August stood at 101.1 - the highest level since September 2015. In an interview with Bloomberg last night, Fed Vice Chairman Stanley Fisher said that the country’s job market which is nearing full strength can withstand a tightening of rates while the pace of rate hikes will be based on upcoming economic data.
Data from the American Petroleum Institute showed that U.S. crude stocks rose by 942,000 barrels to 525.2 million barrels in the week to Aug. 26, topping analysts' expectations for an increase of 921,000 barrels. Official U.S. oil inventories data published by the EIA, is due later today, and is expected to show an increase of 1.1 million barrels last week.
Fig: AUDNZD H4 Technical Chart
AUDNZD is on the last stages of a double-top pattern. The price surpassed the neck level at 1.04550 last week and fell deeper towards the major support at 1.04000, before pulling back to hit the 1.04550 handle. As we can see from the chart, this level has played an important part as a support zone previously, and is now returning as an important resistance at which the AUDNZD failed and was forced to reverse lower. The divergence between the +DI line and –DI line and a surging ADX index has helped the pair break through the 1.04000 level easily, and is expected to dampen the price lower.
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Fig: USDCHF H4 Technical Chart
USDCHF has pulled back from the solid resistance at 0.98420 after soaring more than 300 pips consistently, from the low at 0.95370. As a result of an overblown market where the bulls have been exhausted after a long period of time supporting prices higher, the U.S dollar is making some corrective moves. With the two MAs placed below the price action, the pair is expected to extend the rally.
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Fig: USDCAD H4 Technical Chart
USDCAD has been on the rise after breaking above the 23.6% Fibonacci retracement level at 1.28959. The market has once again entered overbought territory and reversed lower. Still, the directional strength index is pointing upwards, suggesting that the bull is prevailing in the market.
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Fig: SILVER H4 Technical Chart
Silver has moved past the MA20 at 18.680 from below, but has kept floating under the MA50. The moving average has deterred every attempt by the market to break above this zone of resistance for the last two weeks. The silver market has been held inside bearish territory for some time now, which has helped push prices towards the 38.2% retracement level at 18.288.
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Fig: Natural Gas H4 Technical Chart
Natural gas has entered into a phase of consolidation recently, after dropping back to the 2.811 support level. The price has penetrated the MA20 from above but still has support from the 50-period moving average, which is in the same zone as the current prices. The RSI and The Stochastics are both pointing towards a bearish market. As a result, natural gas is forecast to plummet below the 2.811 threshold.
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Fig: NASDAQ100 H4 Technical Chart
The Nasdaq100 index is on the verge of falling through the recent price range between the resistance at 4835.00 and the support at 4766.00. A convergence between the two MAs has occurred above the price action, after prices broke through both MA's from above yesterday. The RSI and Stochastics are both below the average level. Further falls may be on the way.
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Crude prices nudged lower in the European trading session on Wednesday. The burden stemming from a strong U.S dollar and a rise in U.S oil inventories that was reported yesterday continued to pin crude prices around two-week lows. Meanwhile, a statement from Iraq’s PM that his country is supportive of an output cap and a production outage in the Gulf of Mexico due to storms have not been able to provide support to prices.
Data from the American Petroleum Institute on Tuesday reported that U.S. crude stocks rose by 942,000 barrels to 525.2 million barrels in the week to Aug. 26, topping analysts’ expectations for an increase of 921,000 barrels. Concerns over a production glut in the U.S persist as higher crude prices are widely believed to appeal to high-cost shale oil producers and induce them to come back into the market.
Cautiousness can be felt in the market in the trading thus far, as official U.S. oil inventories data published by the Energy Information Administration, is due for release later today, and is expected to report an increase of 1.1 million barrels in stocks as of last week.
On Tuesday, Iraq’s Prime Minister Haider al-Abadi sent a contradictory signal to what he had indicated last week, when he stated that the OPEC’s second-largest petroleum producer is still not producing as much oil as it should be. Mr. Abadi’s latest comment that “We support freezing oil production by OPEC due to the sharp decline in oil prices” may confuse the market with regards to Iraq’s actual strategy. The country’s new oil minister Jabar Ali al-Luaibi has been calling on companies to increase exports to generate more national revenue, and the prime minister now seems to be contradicting his and the oil minister’s earlier statements.
Iraq is pumping 4.6 million barrels per day and is desperately in need of oil revenue to support its war against the Islamic State. With 95% of budget coming from oil, Iraq will need to choose between price and quantity when it comes to the mandate of maintaining government income. The market is still not clear about the outcome of the informal meeting next month between OPEC and non-OPEC oil producers.
Fig: WTI D1 technical chart
Crude prices seem to be bottoming out around 23.6% retracement level at $45.56 per barrel after falling back to test the 20 day moving average. It is not clear if the current slide is just a correction or a reversal into a downtrend as the RSI remains in bullish territory even though it is pointing downwards. Traders may need to wait for further signals before aggressively buying puts or calls. For intraday trading, the markets seem cautious and not willing to go long. Therefore put options are suggested.
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Technical Analysis 1st September by Option Banque
Daily Report on September 01, 2016
Asian stocks recovered from early losses on Thursday, as investors have been inspired by better than expected readings from Chinese manufacturing surveys. The slump in crude oil prices which had sapped Wall Street’s confidence overnight, is temporarily losing steam. Markets remained cautious ahead of Friday’s Non-farm Payrolls, which are being seen as a key deciding factor in being able to assess the possibility of the Fed hiking rates at its September meeting.
According to the China Federation of Logistics and Purchasing, the country’s official manufacturing purchasing managers index for August unexpectedly rose last month to the highest in almost two years, after dropping below the 50 threshold in July. Manufacturing purchasing managers’ index rose to 50.4 last month while Non-manufacturing PMI stood at 53.5, remaining above 50 which indicates improving conditions.
The ADP Challenger Layoffs report on Wednesday showed that the U.S private-sector added 177,000 jobs in August, virtually in line with estimates of about 180,000, from economists polled by The Wall Street Journal. But the dollar’s gains were deterred after the Institute for Supply Management-Chicago announced that its Business Barometer dropped to 51.5 points in August and failed to match expectations.
Crude prices climbed back after sliding on news from the U.S. Energy Information Administration that indicated domestic crude inventories rose by 2.3 million barrels in the week ended Aug. 26. Economists had forecast the report to show an increase of only 1.1 million barrels.
The U.S. Institute for Supply Management's (ISM) manufacturing activity PMI is due later today, and is forecast to come out at 52.0 points.
Fig: AUDCHF H4 Technical Chart
AUDCHF is struggling below the resistance at 0.74240 on the one hand, but on the other hand, it is receiving support from the two moving averages placed below the price action. In the last two failed attempts, the rally was torn apart as the market reversed after hitting the overbought area. This time, the market has gradually built up momentum, taking a longer period of time to push prices back towards the 0.74240 level, indicating that the bulls are riding a steadier up-wave. The pair, therefore, is expected to break above this solid handle.
Buy Digital Call Option from 0.74240 to 0.74500 valid until 20:00 GMT September 01, 2016
Fig: EURGBP H4 Technical Chart
EURGBP is moving in a triangle pattern and seemingly trying to break out of the triangle towards the downside, having gradually slid from the highs. The price has breached major support at 0.85000 but failed to fall further below the support trendline connecting the recent lows. As the market sentiment is still bearish, the pair is anticipated to extend its slide.
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Fig: NZDUSD H4 Technical Chart
NZDUSD remains in an upward trending price range with higher highs and higher lows. The pair could not break above the moving average yet again, and had to retreat back to the lower boundary of the trading range. However, as RSI is pointing upwards, the bull seems to be getting stronger and the market may attempt another break through the MA's to climb higher.
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Fig: GOLD H4 Technical Chart
The yellow metal continued to retreat and is plateauing around 1305.27. We haven’t seen any steep plunge since the slide started on August 18. Cautious sentiment has prevented gold from falling too far too fast, but bearish sentiment has continuously depressed the precious metal lower. That is the reason why the gold market has not fallen into the oversold area and still has room for further declines.
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Fig: BRENT H4 Technical Chart
Brent bounced back from the 23.6% retracement after plummeting steeply yesterday. The sharp slump has pushed the commodity into the oversold territory, and we are witnessing a period of correction and consolidation. Brent prices are expected to break below the near term support at 46.72 as the two MAs placed above the price action are creating downward pressure on prices.
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Fig: Dow Jones H1 Technical Chart
Dow Jones created a wide up on the opening and crossed over the MA50 at 18441.21. The index is highly likely to form a double bottom as it is heading for a retest of the resistance at 18521.00, after falling to as low as 18330.05. The RSI index has surpassed the 50 line and is confirming the up-move
Buy Digital Call Option from 18470.00 to 18521.00 valid until 20:00 GMT September 01, 2016