Forex Market Commentary
That US Dollar just wont go down in lack-lustre trading with all eyes on this coming friday. Already the ISM Manufacturing report was seen to dip from 53.5 to 52.7 and then the ISM Non-Manufacturing report revealed a positive change from 56.3 to 60.3 to reach the highest level in a decade. The divergence between manufacturing and non-manufacturing points out to a disparity in the US economy where manufacturing companies are getting hurt by the strong Dollar which reduces competitive prices in the export market in contract to domestic sectors like banking and retail which are not as much exposed to the strong Dollar. This key point is alerting the Fed to take action and traders feel confident that a rate hike has to come in September and sooner rather than later. Yields on one month Treasuries have been rising this week to reflect a 25 basis point hike next month to signal the first ever hike since 2008. On this basis USDX hovers at the 97 mark waiting to challenge the April high of 100 once again. Add to this the possibility that the Chinese authorities may increase Treasury purchases at the end of this year then there we have 2 reasons to watch for Dollar demand and the USDX piercing and sustaining a breakout above the 100 mark. Given this performance EUR/ USD is likely to fall back to the 1.05 resistance mark should traders be convinced enough to make an assault on the USDX 100 mark this week.
The Chinese policy makers need to acquire more Dollar investments in order to devalue their Yuan and save their perilous plummet as GDP growth grinds down to 7% per annum. But this is the cost of development. Consumers have seen their purchasing power increase over the last decade and wages have steadily risen in China. Therefore to regain competitiveness the Chinese will be forced to devalue their currency versus the Dollar. The strong Dollar will also help push crude oil down to the lower 40's where once again the Chinese importers may seem bargains and make huge purchases again like the beginning of this year to bring crude oil up to a stable 50's mark next year. China is in a conundrum; the government has already spent 900 billion yuan ($145 billion) to keep up the Chinese equities market which makes us wonder were the market actually allowed to float freely; where would the true value lie?
http://www.bloomberg.com/news/articles/2015-08-06/china-s-stock-buying-spree-seen-at-145-billion-with-more-to-go
and on Reuters read the following article where traders are in fear of the worst crisis to hit US oil companies since the early 1980's
http://www.reuters.com/article/2015/08/05/us-oil-majors-idUSKCN0QA1OW20150805
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
97.775 -0.127 -0.16%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
97.775 -0.127 -0.16%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
EUR/USD
1.093200 +0.002400 +0.22%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
1.093200 +0.002400 +0.22%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
Crude Oil
44.95 -0.20 -0.44%
Support 44.56 Resistance 48.40
Forward 1 year - 53.50s.
Forward 1 year - 53.50s.
Gold
1086.95 +1.94 +0.18%
Forward 1 year - 1,101.4s.
Pieter Bergli - DeLoren Trust Holdings
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