Dow Jones Tries to Turn Green on Upbeat Consumer Sentiment Data

Dow Jones Tries to Turn Green on Upbeat Consumer Sentiment Data


DJI PRICE OUTLOOK: DOW JONES INDUSTRIAL AVERAGE CLAWS BACK LOSSES ON UPBEAT CONSUMER SENTIMENT REPORT

  • Dow Jones pivots higher with the S&P 500 and Nasdaq owing to consumer sentiment data
  • Consumer sentiment data for September showed improvement and topped forecast
  • Stocks attempt to turn positive and claw back recent downside after holding weekly lows

Equities are erasing early session losses as major stock indices like the Dow Jones, S&P 500 and Nasdaq turn positive shortly following the New York opening bell. The release of preliminary consumer sentiment data for September from the University of Michigan crossing the wires just now may be contributing to the recovery in risk appetite.

CONSUMER SENTIMENT REPORT – UNIVERSITY OF MICHIGAN SURVEY OF CONSUMERS (SEP 2020)

Chart of Consumer Sentiment Report September 2020 University of Michigan

Chart Source:DailyFX Economic Calendar

Headline consumer sentiment was reported at 78.9, which topped market forecast of 75.0 and improved from 74.1 the prior month. The improvement in consumer sentiment was attributed to their slightly rosier outlook for the US economy.

Change in Longs Shorts OI
Daily-3%5%1%
Weekly5%3%4%

DOW JONES PRICE CHART: 1-MINUTE TIME FRAME (17 SEP TO 18 SEP 2020)

Dow Jones Index Price Chart Stock Market Outlook

Chart created by @RichDvorakFX with TradingView

As mentioned, it is likely that stocks are advancing on the back of the upbeat consumer sentiment report. DJIA price action has faced selling pressure over recent trading sessions, but the equity benchmark has maintained weekly lows as dip buyers defend key technical levels. With market volatility on the rise, however, stocks could struggle to remain in favor.

Keep Reading: Crude Oil Price Climbs to Test 50-DMA in Wake of OPEC+ Update

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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ZAR Strengthens as SARB Signals End to Rate Cuts

ZAR Strengthens as SARB Signals End to Rate Cuts


USD/ZAR Analysis:

  • USD/ZAR continues bearish momentum as SARB keeps rates on hold: Repo Rate remained at 3.5%
  • Inflation close to the midpoint of the 3% – 6% target band and commodity prices remain elevated (positive for SA exports)
  • Implied policy rate path indicates the possibility of no further repo rate cuts for 2020

Visit the DailyFX Educational Center to discover why forex-related news events are key to fundamental analysis

MPC Vote to Maintain Key Repo Rate

The Monetary policy Committee (MPC) voted on Thursday to keep South Africa’s repo rate unchanged. The South African Reserve Bank (SARB) Governor, Lesetja Kganyago announced that the decision had been made with close consideration to the expected economic lift for Q3 and Q4, maintained inflation over the medium term and the fact that elevated commodity prices have contributed to a robust trading environment.

central bank announcements can have great implication for FX markets. Find out How Central Banks Impact the Forex Market

Analysts were mixed in their expectations between holding or cutting the interest rate and the market seemed to have been similarly undecided ahead of the meeting with price action showing no discernable direction. The chart below shows the immediate move lower for the pair as Kganyago explained that the future implied policy rate path did not project any further cuts for the remainder of 2020 and even allows for potential for the second half of 2021. However, should there be any threats to the current outlook that appear through observed economic data, the Reserve Bank stands ready to react appropriately.

USD/ZAR 4 Hour Chart: Highlighting Rate Announcement

USDZAR 4 hour chart SARB rate decision

Chart prepared by Richard Snow, IG

For all market-moving data releases and events see the DailyFX Economic Calendar

ZAR Key Trading Levels

The daily chart below shows continued Rand strength as the rate decision seems to have buoyed ZAR bulls even further after the breakdown of the 16.3358 level of support. Further rand strength would bring the 61.8% Fib level (drawn from the Jan low to April high) into focus at roughly 16.0000. The 16.0000 figure also represents a psychological round number and may have some influence in future price action.

However, off the back of such a strong and sudden move, it would not be unusual to see a slight retracement of the current bearish momentum. USD/ZAR bulls may focus on a rebound off the 61.8% level that would turn the focus back to the 16.3358 resistance level. Continued upward momentum brings into play the 16.9500 and 17.0000 levels.

USD/ZAR Daily Chart: USD/ZAR Eying 61.8% Fib Retracement

USDZAR Daily chart

Chart prepared by Richard Snow, IG

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX





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Brexit Trade Talk, New Lockdowns and UK Retail Sales Data

Brexit Trade Talk, New Lockdowns and UK Retail Sales Data


GBP/USD Price, Chart and Analysis:

  • EU/UK trade talks given hope.
  • Localised lockdowns near as COVID-19 continues to spread.
  • UK retail sales boosted by online sales.

For all economic data and events, see the DailyFX Calendar.

Sterling took a sharp leg higher Thursday after comments from European Commission President Ursula von der Leyen hit the wires, saying that she was ‘convinced’ a trade deal between the EU and the UK was still possible. Von der Leyen added that the UK’s Internal Market Bill was a distraction and suggested that that the trade talks should continue while the political issues were being addressed. The British Pound jumped after the release, hitting 1.3100 against the US dollar and the pair still retain most of yesterday’s gains in early trade today.

The government is looking at new localized lockdowns as COVID-19 continues to spread, according to new media reports. The UK recorded 3,395 new cases yesterday, the sixth straight day that the numbers have been above 3,000, and fears grow that the number of hospital admissions will soon rise sharply. Health Minister Matt Hancock said that a new national lockdown remained the last line of defence, adding that new local lockdowns should help prevent this from happening.

UK retail sales data for August released earlier today showed a continued recovery but a slowing pace. Annual retail sales rose by 2.8%, slightly below market expectations but double the number seen in July, while retail sales ex fuel rose by 4.3% compared to 3.1% last month. Growth was led by online food and clothes sales while the high street and fuel sales continued to suffer.

British Pound (GBP) Latest: Brexit Trade Talk, New Lockdowns and UK Retail Sales Data

GBP/USD trades around 1.2885 and continues to hold onto a majority of Thursday’s gains. This week’s highs between 1.3002 and 1.3036 may provide an initial zone of resistance, while the 50-dma and the 20-dma at 1.3074 and 1.3102 respectively should hold in the short-term. Support around 1.2860 -1.2875.

GBP/USD Daily Price Chart (January – September 18, 2020)

British Pound (GBP) Latest: Brexit Trade Talk, New Lockdowns and UK Retail Sales Data

Change in Longs Shorts OI
Daily-6%-1%-4%
Weekly-11%18%3%

IG client sentiment data shows 44.81% of traders are net-long with the ratio of traders short to long at 1.23 to 1. The number of traders net-long is 3.95% lower than yesterday and 12.07% lower from last week, while the number of traders net-short is 3.17% lower than yesterday and 21.59% higher from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

Traders of all levels and abilities will find something to help them make more informed decisions in the new and improved DailyFX Trading Education Centre

What is your view on Sterling – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.





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EUR/USD Selloff Ahead? Biden-Trump Spread Narrows

EUR/USD Selloff Ahead? Biden-Trump Spread Narrows


2020 Election, Biden-Trump Spread, EUR/USD – Talking Points

  • Biden-Trump spread narrowing as mega donors start heavily injecting cash
  • Political volatility may start to build up heading into the presidential debate
  • EUR/USD could be at a trend-defining point after the pair broke two uptrends

47 DAYS UNTIL THE US PRESIDENTIAL ELECTION

With less than 50 days to go until the US presidential election, markets are tensing up ahead of the first debate between Democratic nominee Joe Biden and President Donald Trump on September 29. According to data from RealClearPolitics, the spread between the two candidates for the general election has moderately narrowed to a 5.8-point spread.

2020 US Election Polls

EUR/USD Selloff Ahead? Biden-Trump Spread Narrows

Source: RealClearPolitics

This marks a notable deviation from the roughly 7-point lead Mr. Biden has been able to maintain over Trump for some time. Attention to how battleground states like Florida and Pennsylvania perform will be more crucial as campaigns put – in some cases as much as $30m – in TV ad money in key swing states like Florida to capture as many electoral votes as possible.

However, with increasingly less time until November 3, the probability of wild cards being drawn out are rising. Former presidential candidate Mike Bloomberg has pledged to spend over $100m in Florida to support Biden. This frees up more cash to spend in other states in an effort to squeeze out Mr. Trump. However, the president also has an ace up his sleeve.

GOP mega donor Sheldon Adelson has pledged to spend between $20m-$50m for the new pro-Trump super PAC called Preserve America. Pressure on the incumbent to garner more funds may become more urgent after the Biden campaign – together with the DNC – raked in $364.5m in August compared to the GOP which raised $210m last month.

With less financial capital, Mr. Trump may have to start using social capital. This may manifest as bolder statements and policy measures during the campaign and debates as a way to draw attention away from the TV ad time his opponent is using. Increased political volatility may dent already-fragile markets and drive up demand for the haven-linked USD and anti-risk JPY higher.

EUR/USD Price Analysis

EUR/USD has broken below both upward-sloping support zones – marked as “Uptrend 1” and “Uptrend 2” – potentially setting the pair up for a reversal. However, clearing a formidable but narrow support zone between 1.1720 and 1.1698 may be critical in marking the start of a meaningful pullback.

Change in Longs Shorts OI
Daily-16%20%5%
Weekly-12%17%5%

EUR/USD – Daily Chart

EUR/USD Selloff Ahead? Biden-Trump Spread Narrows

EUR/USD chart created using TradingView

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter





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Gold Price Continues to Rebound from 50-Day SMA Following FOMC

Gold Price Continues to Rebound from 50-Day SMA Following FOMC


Gold Price Talking Points

The price of gold continues to trade within the monthly range following the Federal Reserve interest rate decision, and current market trends may keep the precious metal afloat as the crowding behavior in the US Dollar persists in September.

Gold Price Continues to Rebound from 50-Day SMA Following FOMC

The price of gold tagged the 50-Day SMA ($1935) for the second time this month as the update to the Fed’s Summary of Economic Projections (SEP) showed no change in the interest rate dot-plot, and it seems as though the central bank is in rush to alter the path for monetary policy as the longer run interest rate forecast remains unchanged from the June meeting.

Image of Federal Reserve interest rate forecast

Source: FOMC

The reaction suggests market participants were anticipating a more dovish forward guidance as the Federal Open Market Committee (FOMC)plans to “achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time,” but little hints of a looming shift in the monetary policy outlook are likely to keep current market trends in place as the central bank remains on track to “increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace.

Looking ahead, Chairman Jerome Powell and Co. may stick to the same script at the next interest rate decision on November 5 as “forecasts from FOMC participants for economic growth this year have been revised up, but the wait-and-see approach may continue to coincide with the crowding behavior in the US dollar even though the Fed’s balance sheet climbs back above $7 trillion in August.

Image of IG Client Sentiment

The IG Client Sentiment report once again reflects a net-long US Dollar bias as retail traders are net-long USD/CHF, USD/CAD and USD/JPY, while the crowd is net-short GBP/USD, AUD/USD, EUR/USD and NZD/USD.

It seems as though the tilt in retail sentiment will persist as the macroeconomic environment remains largely unchanged, and the pullback from the record high ($2075) may prove to be an exhaustion in the bullish trend rather than a change in market behavior as the price ofgold trades to fresh yearly highs during every single month so far in 2020.

With that said, it remains to be seen if bullion will extend the rebound from the 50-Day SMA ($1935) as the moving average continues to track the positive slope from earlier this year, and the Relative Strength Index (RSI) may help to validate the continuation pattern established in August as the indicator appears to be bouncing back from its lowest reading since June.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

Gold Price Daily Chart

Image of gold price daily chart

Source: Trading View

  • The technical outlook for the price of gold remains constructive as it trades to fresh yearly highs during every single month so far in 2020, with the bullish price action also taking shape in August as precious metal tagged a new 2020 high ($2075).
  • The price of gold cleared the previous record high recorded in September 2011 ($1921) even though the Relative Strength Index (RSI) failed to retain the upward from June, but the indicator registered a new extreme reading (88) for 2020 as the oscillator pushed into overbought territory for the third time this year.
  • In turn, theRSI sell-signalregistered in August could be indicative of a potential exhaustion in the bullish behavior rather than a change in trend as it breaks out of the downward trend, and the indicator may help to validate the wedge/triangle formation as the oscillatorappears to be bouncing back from its lowest reading since June.
  • Will keep a close eye on the RSI as it seems to have bottomed out in September, but need to see the oscillator to push towards overbought territory to indicate a bullish outlook, with a move above 70 likely to be accompanied by higher gold prices like the behavior seen in July.
  • Until then, the price of gold may continue to consolidate following the string of failed attempt to close below $1907 (100% expansion) to $1920 (161.8% expansion), but need a closing price above the Fibonacci overlap around $1971 (100% expansion) to $1985 (261.8% expansion) to bring the $2016 (38.2% expansion) to $2025 (78.6% expansion) region back on the radar.
  • A break/close above the $2016 (38.2% expansion) to $2025 (78.6% expansion) region opens up the record high price ($2075), with the next area of interest coming in around $2064 (50% expansion) followed by $2092 (161.8% expansion).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong





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Crude Oil Price Climbs to Test 50-DMA in Wake of OPEC+ Update

Crude Oil Price Climbs to Test 50-DMA in Wake of OPEC+ Update


OIL PRICE OUTLOOK: CRUDE OIL REBOUNDS INTO RESISTANCE AMID OPEC+ REPORT

  • Oil price action responded positively to the latest OPEC+ update from top energy ministers
  • The commodity has advanced 10% so far this week but still trades down month-to-date
  • An ominous back-test of the 50-day moving average could undermine the rebound by crude

Crude oil has clawed back recent losses over the last three trading sessions. Oil price action now trades about 10% higher this week, but the commodity is still lower on a month-to-date basis. A recovery in market sentiment, indicated by stagnating selling pressure across major stock indices, likely helped provide buoyancy to crude oil.

Speculation headed into the latest OPEC+ update may have boosted petroleum prices as well. Top energy ministers comprising the JMMC gathered to discuss latest oil market outlook and review production quota compliance. Crude oil was jawboned higher with commentary stating ‘further necessary measures may be needed’ in light of slumping demand as the global economic recovery stalls.

CRUDE OIL PRICE CHART: 4-HOUR TIME FRAME (25 AUG TO 17 SEP 2020)

Crude oil price chart forecast

Chart created by @RichDvorakFX with TradingView

Remarks from Saudi Prince Abdulaziz, who said “I will make this market jumpy,” might have scared oil shorts with weak hands as the energy minister doubled down on his remarks with additional expletives. Further, the JMCC suggested to OPEC officials that the compensation period for overproduction be extended through year-end, which could encourage more conformity among the oil cartel and facilitate market stability.

Crude oil could struggle to extend its rebound, however, as the commodity clashes with a critical zone of technical resistance around the $41.00-price level. This area of confluence is highlighted by the 61.% Fibonacci retracement of last month’s high to this month’s low. Also, the relative strength index is perched on the edge of ‘overbought’ territory.

CRUDE OIL PRICE CHART: DAILY TIME FRAME (23 APR TO 17 SEP 2020)

crude oil price chart forecast moving average crossover

Chart created by @RichDvorakFX with TradingView

Not to mention, a bearish moving average ‘death-cross’ potentially looms, and threatens to send crude oil price action lower. Reclaiming the 200-day moving average could serve as an encouraging technical development for oil bulls, but a back-test of the 50-day moving average could keep a lid on further advances attempted by the commodity.

Change in Longs Shorts OI
Daily-16%5%-8%
Weekly-29%37%-10%

CRUDE OIL PRICE CHART & VIX INDEX OVERLAID: DAILY TIME FRAME (27 APR TO 17 SEP 2020)

Crude oil price chart volatility VIX Index

Chart created by @RichDvorakFX with TradingView

Oil price may nevertheless mirror the direction of expected market volatility gauged by the S&P 500 VIX Index, or ‘fear-gauge.’ Crude oil and the VIX Index tend to move in opposite direction as illustrated by their generally-strong negative correlation. A higher VIX Index level suggests greater risk aversion as traders seek downside protection, which would likely be associated with a breakdown in broader sentiment and economic conditions. In turn, this could correspond with bearish headwinds for oil price action. Although, if the VIX ‘fear-gauge’ reverts back lower, the price of crude oil could approach August highs near the $43.00-handle.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight





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