NAS – Nasdaq rallied to my first target level at 12550. I said on Friday I’d look for long trades above 12180 with my T1 at 12550 and T2 at 12721 (edit: 12721, not 12271, sorry for the typo). This worked out great as the market reversal in equities (I’ve been writing about over the past week) continued to take shape. The nearest key support area in the 2h chart is 12352 – 12402. The remains bullish above 12326. Below the level we could see the market retracing back to 12200. If you’d like to know how to create trade setups with very low risk when trading any trade idea check out my detailed instructions on how to do it (here). By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
Gold bulls have had a tough time getting through the 1726 resistance level. They are trying very hard though as the higher lows in the daily chart evidence. The USD Index chart signals there could be more dollar weakness to come this week (bullish for gold) but we also have the US CPI report coming out tomorrow which could mean traders don’t want to commit to new directional moves before the report is out. Therefore, we should take the technical indications with a grain of salt until we know a) what the CPI number will be and b) how the USD traders and gold traders react to the inflation report. At the the time of writing this, the market still has an unbroken series of higher lows in the 4h chart. That’s bullish. Alternatively, blow 1711.33 we probably see the 1703.90 level tested again and then the series of higher lows is broken. This would increase the probability of gold trading down to 1695 or so.
USOIL rallied on Friday as bids for the dollar remained soft (as expected). The market rallied to a major resistance area where the 85.45 resistance is a key level. After printing Friday’s high at 86.75 the sellers have been pushing the price lower. My trade idea for oil was to look for sell signals below 87.42 with a T1 at 78.00 and T2 at 74.00. My alternative scenario was that, if USOIL rallies back above the 87.42 level the market could move to 90 dollars or so. This trade idea is still valid. The nearest key intraday price levels are 83.84, 84.79, and 85.74.
DAX rallied strongly on Friday and is now trading above the 13055 resistance level I talked about in the previous report. The market remains bullish as long as the US indices continue to show strength. In the intraday chart the nearest key support levels are at 12950, 13034.70 and 13138.
Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
|The Federal Reserve||Fed hiked the target range again by 75bps (to 2.25%-2.5%). This was the fourth consecutive rate hike. The rate hike was in line with analyst forecasts. The Fed noted that ongoing increases in the target range will be appropriate but the next decisions will be data-dependent.|
|Yields||The 10-week range in the US 10-year treasury yield has been from 2.516% to 3.498%.|
|Employment||The US economy added 258 thousand new jobs. June number was revised from 390K to +384K and the average hourly earnings increased 0.5% (month over month) vs 0.3% predicted by the analysts. Such strong growth in employment and earnings reminds us how strong the US economy still is.|
|Inflation||The US inflation rate dropped more than expected. The July reading (YoY) came in at 8.5% after a 40-year high of 9.1% prior. Analyst forecasts had put the number at 8.7%. The cost of energy rose 32.9% (vs. 41.6% in June). Lower cost of petrol (44% vs 59.9%), fuel oil (75.6% vs 98.5%) and natural gas (30.5% vs 38.4%) contributed to the decline. The cost of electricity however increased by 15.2%. Food inflation however increased by 10.9% vs 10.4% prior.|
The Next Main Risk Events
- AUD NAB Business Confidence
- USD CPI and core CPI
- GBP CPI
- USD PPI and core PPI
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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