The risk-on mood continued yesterday with the US stocks heading higher and commodities rallying together with the commodity currencies. USD has been weak as treasury yields continue retracing from their peak. Investors are buying bonds now that the Fed isn’t setting a definite timetable for tapering. Apple stock was among the best performing TIOmarkets equity CFDs yesterday. The company announced that the next iPhone will include satellite capabilities allowing emergency calls outside of the normal mobile phone network coverage. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
The risk-on mood continues with the commodity currencies again quite strong and leading the rally against the USD (-0.21%) at the time of writing this. NZD (+0.85%) is the strongest while JPY (-0.02%) and CHF (-0.30%) are the weakest of the USD rivals. The percentages are relative to the levels at the time of the London session open yesterday. The benchmark US 10-year Treasury yield continued to move lower and finished the day at 1.29% (previous 1.31%).
USOIL (+1.39%) has rallied since the London open yesterday but the daily chart reveals some bearishness in the price. A top-heavy daily candle where open and closing prices are near to each other and a long spike downwards is not a bullish signal. Especially, when such a candle appears right at a resistance (69.62) like this time. Two factors are in play here. Uncertainty created by Hurricane Ida and the fact that OPEC+ is planning to go ahead with production increases were reflected in WTI Crude prices. Silver (+0.89%) and platinum (+0.59%) provided once again much more interesting opportunities for intraday traders than gold (+0.15%) which retraced a bit lower (as we suggested yesterday).
Strength in the US stock market continued yesterday, especially in the tech-heavy Nasdaq index which soared 0.90% with the help of AAPL rallying over three per cent. The company reported yesterday that the next iPhone could include satellite capabilities for emergency situations. S&P 500 (+0.43%) didn’t fare as well as Nasdaq as the index was dragged down by the financial (-1.41%), energy (-1.18%) and industrial (-0.11%) sectors. The best performing sector was real estate (+1.22%). The Dow Jones Industrial Average (-0.16%) was the weakest of the major indices yesterday.
Biggest bullish movers in our CFD selection yesterday were: PYPL (+3.63%), AAPL (+3.03%), HPQ (+2.87%), IDXX (+2.76%) and BAX (+2.71%). In the above performance chart, the stocks are presented 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 which means that you should 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.
The biggest losers yesterday were: NTES (-3.50%), AAL (-3.44%), TPR (-3.31%), EOG (-3.25%) and WFC (-2.83%). No stocks on our earnings watchlist today. In the above performance chart, the stocks are presented 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 which means that you should 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.
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EURUSD managed to overcome the 1.1804 resistance but is now facing the next resistance, the top of the bear channel at 1.1827. The 1.1804 level is now, at least in theory, a support level but whether the level will hold is another matter. As always, we don’t anticipate but react to what the market does at key price points. If EURUSD can hold above 1.1804 or create a higher low above 1.1663 the trend is likely to reverse. In such a case, we should see a move to the 1.1870 – 1.1910 range. A failure to do either of these would indicate the market would be bearish and likely to head to the 1.1600 support level. The key price levels in EURUSD are 1.1600, 1.1663, 1.1804, 1.1908 and 1.2262. If you need deeper insights on trading and markets and help in creating a trading strategy, join our free strategy workshops at TIOmarkets.com/webinars.
Cable is running higher after creating a higher low near a weekly support level (1.3571). The 1.3785 resistance has been tested a couple of times and now GBPUSD is trying to push above it. If this push higher is successful the next confluence zone to come into play is at 1.3830 – 1.3850 (descending channel top and the 38.2% retracement level). A breakout from the channel could open up a way to 1.3910 (the 50% retracement level) while the next significant zone after this is the 1.3980 – 1.3990 (a swing high and the 61.8% retracement level). A failure to stay above 1.3785 would signal weakness and could bring 1.3679 into play. The key price zones and levels in GBPUSD are 1.3571, 1.3602, 1.3679, 1.3785, 1.3830 – 1.3850, 1.3910 and 1.3980 – 1.3990.
After creating a higher reactionary low AAPL rallied to the upper end of a bull channel. The company announced that the next iPhone will include satellite capabilities allowing emergency calls outside of the normal mobile phone network coverage. The key price levels in AAPL are 144.70, 146.80 and 151.60. Stock stays bullish above the 146.80 support.
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||The last two employment reports have been very positive (+938K and +943K) indicating that the hawks in the Fed will have fundamental backing for their views on early tapering and rate hikes.|
|Inflation||The month on month Core CPI (excluding food and energy) for July came in at 0.3% (0.4% expected) which indicated a big drop in the rate of inflation from the month before (0.9%). The Fed has earlier taken a view that inflation is transitory and will be therefore likely to fade away. Even though one data point doesn’t make a trend it seems that the Fed has been correct in their inflation projections. The lumber futures for instance are once again trading at October 2020 levels and down over 70% from their May highs.|
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Market News & Facts
- China Services PMI 47.5 (52 expected)
- China Manufacturing PMI 50.1 (50.1 expected)
- USD – US Pending Home Sales -1.8% (0.4% expected)
- US Revised UoM Consumer Sentiment 70.3, (70.9 expected)
- US Core PCE Price Index m/m 0.3% (0.3% expected, 0.5% prior)
- Over 95% of the Gulf crude oil production offline due to Hurricane Ida
- COVID-19 boosters for to all vaccinated people in Israel
- Australian retail sales -2.7% (-2.6% expected)
- US durable goods orders for July -0.1% (-0.3% expected)
- EU might again impose travel restrictions on Americans
- Nakamura (BOJ): Economy in a severe state but improving
- Semiconductor chip shortage continues
- US services PMI 55.2 (59.5 expected)
- Pfizer covid vaccine received full acceptance from FDA
- Paypal accepts bitcoin from this week
- RBNZ Chief Economist: No pressure to act on monetary policy
Quick Links to Recent Analysis
The Next Main Risk Events
- CNY – Manufacturing PMI
- CAD – GDP m/m
- USD – Chicago PMI
- USD – CB Consumer Confidence
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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