Forex Market Commentary
What goes round comes back. markets today are so inter-connected that a hiccup in Shanghai could cause a major pneumonia in New York. The Fed took on a more hawkish tone with labor markets inching closer and closer to the 5% unemployment mark and core inflation running at 1.7%. But 2 major factors stood out to mute the reaction of Dollar traders to deny the kind of momentum push toe the 100 mark on the USDX and a challenge of the Maginot line of a defense at the 1.05 on the EUR/ USD.
1. Is it really all there about the US Economy and has the Fed over stated it's position and stretched ahead it's imagination to think the US economy stands poised to race ahead with stellar GDP growth?
See on Bloomberg:
http://www.bloomberg.com/news/articles/2015-07-30/the-u-s-economy-s-top-speed-has-probably-been-overestimated-for-years
2. Wither crude oil? Crude oil under pins everything that shapes commodity price inflation and consequentially indirectly affects GDP growth. The Saudis made the big push on production and engaged a price war at the close of last year and large specs drove the futures prices of WTI down down down. Then we hit rock bottom in the 40's this year and impressively crude oil climbed on the sentiment that China was going to lead the way and roar back against its current mundane 7% annual GDP growth. That didnt happen; Shanghai equities took a tumble and crude oil futures sunk once again to the nether regions of the 40's once again.
See on Reuters:
http://www.reuters.com/article/2015/08/01/us-oil-usa-hedgefunds-idUSKCN0Q52JD20150801
Given points 1 and 2; where lies the fundamental basis for underlining the hawkish sentiment of a 50 basis point rate hike? Only a stellar Q3 can now guarantee a 25 basis points increment should unemployment tighten to 5% around Sept-Oct 15. But core inflation? Given that crude oil has sunk 15 Dollars in the last 3 weeks alone the basis for runaway inflation has all but vanished. hence the muted reaction of traders unwilling to make the kind of assault on the USDX 100 mark and the bastions of the EUR/ USD 1.05. Europe today is not the mess it was last August 2014 when uncertainty in the ECB and the Greek woes were at their highest and which consequentially led the large specs to assault the EUR/ USD and throw it down from its perch of 1.35 mark. Given the current China woes domino pushing crude oil down pushing expectations of US inflation down where lies the rational for a mighty Dollar appreciation hence the unwillingness of specs to push the EUR/ USD on the same kind of scale as last year.
Crude oil prices down, Dollar stabilizing sets the tone for a look at gold bullion. Specs pushed bullion down from 1150 to the 1090 region last few weeks. But Xmas 15 is just around the corner and Q4 retails sales should help underpin consumer demand for the precious metal. Gold net shorts in the market should be closing out soon with short covering so small traders watch out for that bounce and heavy defenses around the 1050 mark
See on Reuters:
http://www.reuters.com/article/2015/07/31/us-hedgefunds-paulson-gold-idUSKCN0Q52LL20150731
Equities around the world were more or less flat with SSE Composite Index at 3,663.73 down 42.04 points (+1.13%), Euro Stoxx50 3601.00 up 23 points (+0.64%) and the Dow at 17689.86 or down 56.12 points (-0.32%) in a lack lustrous day.
Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.
USDX
US Dollar
97.209 -0.278 -0.36%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
97.209 -0.278 -0.36%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
EUR
1.098400 +0.004830 +0.44%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
1.098400 +0.004830 +0.44%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
Crude Oil
46.81 -1.71 -3.53%
Support 45.56 Resistance 49.40
Forward 1 year - 53.50s.
Forward 1 year - 53.50s.
Gold
1095.48 +10.53 +0.97%
Forward 1 year - 1,101.4s.
Pieter Bergli - DeLoren Trust Holdings
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