FX markets are drifting sideways this morning European time as traders wait for the FOMC. This report will give you the key price levels for EURUSD for the likely volatility around FOMC later on today. While FX is in the waiting mode Crude Oil and Natural Gas markets are moving nicely. We will give you the price trends and key levels for trading these highly volatile markets. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
CHF is the strongest currency this morning while the major dollar counterparts just drift sideways waiting for the FOMC tonight. The benchmark US 10-year Treasuries yielded 1.33% at the end of the trading yesterday. Previous close: 1.31%.
USOIL started to recover after the drawdown in the stockpiles signalled to traders that demand might be improving. The precious metals basket has also recovered as the stock markets have been weak due to the Evergrande debacle in China.
The S&P 500 (-0.08%), the DJIA (-0.15%) and the Nasdaq (0.22%) are showing signs of downside volatility abating. The same can be seen at the sector level. The biggest loser, the industrial sector finished down only 0.53% and five sectors managed to close higher (even though the gains were small). The energy sector (0.23%) was leading the gains with healthcare (0.15%). The best TIOmarkets equity CFD performers were COP, USB, AXP, BKR and ORLY. Stocks with the biggest downside moves were LVS, DIS, WYNN, GE and HAS.
The above chart shows the % performance of each stock. Stocks are presented here with the S&P 500 tracking ETF (SPY, red line) to illustrate the performance of each stock relative to the benchmark index. This allows our readers to see the potential for intraday trading opportunities in these stocks. Often the sudden increase in volatility continues on the second day. You should, therefore, keep monitoring these stocks to see if they will satisfy your criteria for a trade. All % performance charts in this report are courtesy of Tradingview.com.
Today’s main risk event is the FOMC statement release. For details on other important macroeconomic releases, see the TIOmarkets economic calendar here.
With the FOMC coming up let’s take a look at EURUSD and the key price levels so that you are ready to trade the market. The pair is in a downtrend in intraday timeframes but is also trading at oversold levels as per Stochastics (5.3.3) in the daily timeframe. This is why the pair has been moving sideways this week. The ranging price action shows how traders are undecided as they are waiting for the FOMC tonight. The key price levels to focus on are 1.1664 (August low), 1.1700 (yesterday’s low), (1.1748 yesterday’s high and 23.6% retracement), the 1.1764 – 1.1788 confluence zone (the 20-period SMA, the 38.2% retracement level, a reactionary low, the bear channel high and Friday’s high).
USOIL is rallying after US Crude Oil inventories fell more than anticipated as demand improves. The rally started at levels where the SMA(50) and a bull channel low coincided. Now the market is trending higher in 8h timeframe and looks like it’s ready to tackle the 72.87 resistance next. These bullish indications are negated if the market creates a lower high and breaks yesterday’s lows. The other key price levels for USOIL are 66.90, 73.88 and 76.38.
It is intriguing, how the Natural Gas prices started to get weak soon after it was widely reported how the market is rallying on strong fundamentals. Now USNGAS has fallen to a two-week low. This weakness is associated with forecasts for warmer weather over the next week. Recent price action in USNGAS highlights the fact that the only fact we as traders can trust is the price. Explanations vary but the price (for those that know how to read it) tells the true story of what really matters: supply and demand balance. Now, the supply and demand balance has tilted to favour the bears. This doesn’t mean that the price will drop immediately but that the rallies are now more likely to fail than turn into another sustained uptrend. The key price levels for USNGAS are 4.202, 4.793, 5.264 and 5.682.
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 FED||Fed Chair Powell said on Friday (August 27th) in Jackson Hole Symposium that tapering could begin in 2021 but also voiced concerns about the spread of delta variant.|
|Stimulus||The US lawmakers have authorised approximately five trillion dollars of economic stimulus since the beginning of the pandemic. Now, US lawmakers have agreed to a $1.2 trillion infrastructure spending plan. The Fed officials consider ending the asset purchases in the middle of 2022.|
|Yields||Apart from the recent pickup (that started in August 2021), the Treasury yields have been moving lower since March 2021. All in all, the yields and interest rates are extremely low on both nominal and real basis.|
|Employment||After two highly positive employment reports (+938K and +943K) the August number (+235K) was a big disappointment but in fact at a level that used to be the norm in the years before the pandemic. This number could delay the Fed taper but isn’t likely to reverse their decision to taper.|
|Inflation||The month on month Core CPI (excluding food and energy) for August was confirmed at 0.1% (0.3% expected) while the headline inflation (y/y) came in line with expectations (5.3%, 5.3% expected, 5.4% prior). The core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July. Fed’s view that inflation is transitory seems correct.|
Open a VIP Black account now at www.TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here.
The Next Main Risk Events
- USOIL – Crude Oil Inventories
- USD – FOMC Economic Projections
- USD – FOMC Statement
- USD – Federal Funds Rate
- USD – FOMC Press Conference
For more information and details see the TIOmarkets economic calendar here.
Market News & Facts
- BOJ keeps its monetary policy unchanged
- API shows a drop in US crude stockpiles
- S&P ratings expects Evergrande to default
- Trudeau to win the Canadian elections
- RBA not looking to raise rates before 2024
- UoM consumer sentiment 71.0 (72.2 expected)
- New Zealand manufacturing PMI 40.1 (62 prior)
- Democrats looking to repeal Trump’s tax cuts
- China to release zinc, aluminium and copper from its reserves
- New Zealand GDP 2.8% (1.4% expected)
- Australian employment change -146.3k (-90k expected)
- UK August CPI 3.2% (2.9% y/y expected)
- China August retail sales 2.5% y/y (7% expected, 8.5% prior)
- US August CPI y/y +5.3% (5.3% expected)
- RBA’s Lowe: bond purchases likely to end in 2022
- OPEC: global oil demand to exceed pre-pandemic levels in 2022
Quick Links to Recent Analysis
The above analysis links are provided to help new readers to verify the effectiveness of our analysis. While all our analysis publications are time-sensitive they also help traders to understand how to learn forex trading and how to analyse the markets effectively. By reading past articles traders can see how to identify support and resistance levels or how to catch big market moves.
Quick links to our ‘How to’ articles
Our How to articles help especially new traders to grasp the basics and teaches them how to use technical tools in trading forex.
Chief Market Analyst
Open a VIP Black account now at www.TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here. For more analysis and commentary, visit our YouTube channel where you can find market commentary videos to support your learning and growth as a trader.
DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analyzes and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated.
Best pair to trade today Best stocks to trade right now Best time to trade Best time to enter a trad