- USD/CAD has bounced up from Thursday's low of 1.3325.
- The immediate bias remains neutral with pair stuck in Thursday's trading range.
USD/CAD is trading at 1.3353 at press time, having defended Thursday's low of 1.3325 early today.
Despite the recovery, the immediate bias remains neutral. That's because the pair is still trading well within the range of Thursday's candle, whose long upper and lower wicks indicate indecision.
A move above Thursday's high of 1.3418 would mean the period of indecision has ended with a bullish breakout. That would open the doors to the 100-day simple moving average (SMA), currently at 1.3462.
Alternatively, acceptance below Thursday's low of 1.3325 would confirm a bearish reversal.
With the 5- and 10-day SMAs trending north and the daily chart reporting a higher low and higher pattern, the odds appear stacked in favor of a break above Thursday's high of 1.3418.
Trend: Bullish above 1.3418
- GBP/USD consolidates the corrective bounce amid USD pullback.
- Teasing a symmetrical triangle breakout on the hourly chart
- Hourly RSI points north in the bullish territory.
GBP/USD turned positive for the first time in five days on Thursday, having bounced once again to near 1.2780 region on the US dollar’s retreat across its main competitors.
The improvement in the sentiment on Wall Street amid solid US New Home Sales data tempered the demand for safe-havens such as the greenback.
At the time of writing, the cable is consolidating the previous corrective bounce around 1.2750, awaiting a fresh impetus for a sustained move above 1.2780.
Technically, the price is ranging in a symmetrical triangle formation on the hourly chart since Tuesday.
The bulls are now eyeing to clear the falling trendline resistance at 1.2769 to confirm a bullish breakout, which could add legs to the correction move higher, with the pattern target at 1.2912 on the buyers’ radars.
The bullish crossover between the 21-hourly Simple Moving Average (HMA) and 50-HMA also backs the case for the further upside while the hourly Relative Strength Index (RSI) points north above the midline.
Alternatively, the immediate downside is capped by the 21-HMA at 1.2744, below which the horizontal 50-HMA support at 1.2732 will come into play. The rising trendline support at 1.2705 is the level to beat for the bears.
GBP/USD: Hourly chart
GBP/USD: Additional levels
- AUD/USD keeps gains above 0.7050 after Australia reports a drop in trade surplus.
- Australia's imports dropped by 7% in August and imports fell by 2%.
Australia's trade surplus decreased in August, the official data released at 01:30 GMT showed. So far, however, that has failed to elicit an adverse reaction from AUD/USD.
The nation's imports tanked 7% month-on-month in August following July's 7% rise. Meanwhile, exports fell by 2% in August, having declined by 4% in July. The trade surplus decreased to AUD 4,294 million from AUD 4,607 million.
The sharp decline in inbound shipments indicates a weakening of domestic demand. Meanwhile, the consecutive monthly drop in outbound shipments indicates weak demand conditions in the global economy.
The data comes a day after Australia's retail sales for August showed a 4.2% decline in consumer spending.
As such, AUD/USD is likely to have a tough time charting a strong recovery rally. The currency pair rose from 0.7042 to 0.7062 ahead of the trade data, having printed a two-month low of 0.7016 on Thursday. At press time, AUD/USD is trading near 0.7055.
The pair's daily chart shows a bearish lower high, lower low pattern, a below-50 or bearish reading on the RSI, and descending short-term moving averages.
Hence, a drop to the 100-day simple moving average (SMA) support, currently at 0.70, looks likely.
According to the Preliminary August Trade Balance data published by the Australian Bureau of Statistics (ABS) on Friday, “while both exports and imports declined in August 2020 a goods trade surplus of $4,294m (original, current price, merchandise trade basis) has been recorded”.
“Exports of goods in August 2020 declined from the revised July 2020 estimate of $28,935m by $616m (-2%) to $28,319m.”
“Imports of goods in August 2020 declined from the revised July 2020 estimate of $25,811m by $1,785m (-7%) to $24,026m.”
“From July to August 2020 imports from China decreased, down $1,007m (-13%) to $6,647m, with declines across a broad range of commodities.“
The aussie dollar remains unfazed by the trade figures, with AUD/USD keeping its recovery mode intact above 0.7050.
- Dollar's retreat from two-month highs puts brakes on gold sell-off.
- Gold's daily chart shows the market has turned indecisive.
- Risks, however, remain skewed in favor of deeper losses.
Gold bears are taking a hiatus amid the US dollar's pullback from two-month highs.
The yellow metal witnessed two-way business and closed on a flat note on Thursday, forming a Doji candle – an indecision sign.
The selling ran out of steam at $1,848 as the uptrend in the dollar index (DXY) paused at 94.59, the highest level since July 24. The DXY closed Thursday at 94.33 and remains sidelined near that level at press time.
Meanwhile, gold is currently trading near $1,863 per ounce, having ended Thursday at $1,867.
Downside risks persist
While the dollar index has pulled back from multi-week highs in the last 12 hours or so, the upside breakout from the two-month trading range of 92.00-94.00 confirmed earlier this week is still valid.
Besides, disappointment that Federal Reserve's recent decision to adopt average inflation targeting did not translate into more stimulus, renewed coronavirus fears, and growth concerns could continue to push the dollar higher in the run-up to the US elections.
As such, the path of least resistance for gold appears to be on the downside.
The federal government debt has jumped to nearly 25% of gross domestic product (GDP), courtesy of the significant surge in the increased welfare payments amid the coronavirus crisis, the Australian Treasurer Josh Frydenberg said at a news briefing in Canberra on Friday.
“Government debt for the year ending June 30 totaled A$491.2 billion ($346.6 billion), or 24.8% of the country's GDP.”
“The figure is slightly higher than Australia's official forecast in July of A$488.2 billion, or 24.6% of GDP.”
“The budget swung into a massive deficit of A$85.3 billion, slightly lower than its July forecast of A$85.8 billion.”
Amid risk-on buying and broad US dollar pullback, the recovery in the AUD/USD pair is gaining momentum above 0.7050. The AUD bulls ignore the above comments. The spot adds 0.13% to now trade at 0.7056.
In a statement released on Friday, China’s Commerce Ministry said that they will conduct an anti-dumping investigation on imports of some chloride products from the US, starting September 25.
The probe is at the request of domestic producers and would normally last for a year, but it could be extended to March 25, 2022, the Commerce Ministry added.
Earlier this month, the Ministry launched an anti-subsidy probe on certain glycol ethers imports from the US, effective from September 14.
Beijing, however, maintains that these investigations have nothing to do with the US-Sino trade deal.
AUD/USD is trying hard to extend the recovery from two-month lows of 0.7016, with the US dollar stalling its recent bullish momentum.
At the press time, the aussie trades 0.07% higher at daily highs of 0.7062.
The People's Bank of China (PBOC) has set the yuan reference rate at 6.8121 versus Thursday's fix at 6.8028.
The investment banking giant Goldman Sachs foresees Washington's stalemate on additional fiscal stimulus leading to a slower than expected US economic growth in the fourth quarter.
Economists have lowered their fourth-quarter gross domestic product forecast to 3% from 6% on a quarter-on-quarter basis after revising its base case to include a lack of additional fiscal stimulus until 2021, according to Business Insider.
Key quote (Source: Goldman's client note via Business Insider)
"We had previously assumed that Congress would attach a $1 trillion stimulus package to the continuing resolution at the end of this month that would include a partial extension of the extra unemployment benefit and additional PPP loans. We now think that any further stimulus will wait until early 2021," Thursday's client note said.
We are more confident that the widespread distribution of a coronavirus vaccine to the entire population will be achieved by Q3 rather than Q2 of the next year.
The emerging market currencies have been slammed over the past week or so. Names like Brazilian real, Mexican peso and South African rand have declined by 5.65% to 4.48%, respectively.
"We are in a real EM sell-off now," Robin Brooks, chief economist at the Institute of International Finance (IIF) and former chief strategist at the investment banking giant Goldman Sachs tweeted on Wednesday.
According to Brooks, traders have put a bid under the US dollar on disappointment that Federal Reserve's recent decision to adopt average inflation targeting did not translate into more stimulus and due to renewed coronavirus concerns and fading hopes for US fiscal stimulus.
- USD/JPY testing critical resistance structure in Tokyo on strength in the US dollar and equities.
- US dollar could be due to a bearish correction, making advances through 105.50 tough.
USD/JPY is currently trading at 105.48 between a range of 105.38 and 105.48, with the bulls in charge and pressuring the pair to test the bear's commitments at the newly formed resistance.
Overnight on Thursday, USD/JPY ranged between 105.20 and 105.53 while the US dollar was mixed against G10 currencies in the sessions.
US stocks ended in the green ina choppy session on Wall Street with a mixed sentiment in regards to the economic recovery.
US data mixed
US data showed that jobless claims lifted to 870k although continuing claims also fell by less than expected.
On the more positive front, US housing data was strong with New Home Sales for August smashing expectations.
The data showed a rise of 4.8% MoN on top of a near 15% rise the previous month (a 1.2% fall was expected).
This marked the fourth monthly rise, helped by record-low mortgage rates, but also, anecdotally, people reassessing where they’d prefer to live in a pandemic world. This takes the annualised pace of sales to 1m, the highest since 2007,
analysts at Westpac explained.
In other news, as investors await for updates with regards to further stimulus, US Treasury Secretary Mnuchin said in testimony that he hopes to restart negotiations on another fiscal relief bill with House Speaker Pelosi.
I'm willing to sit down anytime for bipartisan legislation, let's pass something quickly.
USD/JPY technical analysis
Meanwhile, the bulls are testing a critical resistance area market dup earlier this week in the surge in the value of the US dollar.
- USD/JPY Price Analysis: This could be the bull's last dance in the 105, eyes on 103.50s
It was called in the above analysis and there has been no real change to market nor the forecasting.
At this juncture, the US dollar is playing out as expected:
- EUR/USD created a Doji candle on Thursday, signaling indecision.
- Other daily chart studies continue to call a bearish move.
EUR/USD carved out a Doji candle on Thursday as it witnessed two-way business and ended the day on a flat note.
A Doji candle represents indecision. However, in this case, the candle has appeared at two-month lows. As such, one may take it to represent seller exhaustion and adopt a neutral stance.
However, other chart studies remain biased bearish. For instance, the 5- and 10-day simple moving averages (SMA) continue to trend south, and the 14-day relative strength index is hovering below 50.
The head-and-shoulders breakdown confirmed earlier this week remains valid, and the pair remains below the former support-turned-resistance at 1.1696 (Aug. 3 low).
As such, the odds remain stacked in favor of deeper declines. Key support levels are located at 1.1626 (Thursday's low) and 1.1495 (March 9 high). Meanwhile, resistance is seen at 1.1696 (Aug. 3 low) and 1.1768 (10-day SMA).
This is a developing story
- NZD/JPY is showing signs of bullish potential for a day trade.
- Bulls will look for a restest of the support structure for a run higher.
NZD/JPY has made a move to the upside following a healthy correction of the hourly impulse.
This gives rise to the prospects of further gains before the week is out offering a 1:3 risk to reward ratio (R/R) and high probability trade setup on the hourly time frame, administered and monitored from a 15-min time scale.
The hourly chart shows that the price has made a concerted effort to the upside and has corrected in what could be the start of the next bullish impulse.
There is a buy limit that needs to be filled if the price doesn't just bolt, that will reward the position with a 1:3 risk to reward ratio.
The stop loss will be moved to breakeven if there is a new support structure formed to the upside.
This is now a free ride towards the target.
- NZD/USD is likely to correct a portion of the downside, holding at support.
- Bears will be waiting patiently for the next downside confirmation.
NZD/USD is playing out in the makings of a reverse head and shoulders on the monthly time frame.
In the meantime, the bulls have an opportunity to clean up some of the destruction left behind by the bears in the latest sell-off to support structure.
The following is a top-down analysis of the monthly, weekly and daily chart which illustrates the various compelling patterns and markets structures.
Monthly reverse head and shoulders in the making
Weekly support and resistances
The weekly chart offers a triple top scenario with the makings of a head and shoulders and the case for the downside once the bulls complete the correction to the shown resistance structure.
Bulls will be looking to the lower time frames, such as the 4-hour charts, in order to take advantage of any progress to the upside.
However, the bears will have bigger fish to fry if the upside target is achieved where there is a more compelling case for the downside in the reverse head and shoulders pattern on the monthly chart.
- Gold is on the verge of a major run to the downside on the long term charts.
- The US dollar is stalling and could give some meanwhile room to the upside for gold.
The price of gold is currently trading at $1,868.30 between $1,867.51 and $1,871.37 following a session in North America where the precious metal managed a bid from a low of $1,847.90 to a session high of $1,877.03.
Gold's bullish case has been challenged by the broad dollar's gains of late which have catalyzed an aggressive positioning squeeze in the yellow metal.
To date, there have been a number of fundamentals going for the US dollar, including the Justice Ginsberg's passing and its implications for a Phase 4 deal, election uncertainty and the global spread of the coronavirus.
The US dollar, however, has stalled in its impulse and could be destined to a downside correction which should give the yellow metal some gas, (see the technical analysis below).
We reiterate that while weak price action is depressing sentiment for gold bugs, the pullback is unlikely to turn into a rout — the secular bull market is intact, as long-term inflation expectations will likely continue to rise post-election, particularly if a fiscal deal can be agreed upon in the US,
analysts at TD Securities argued.
Notwithstanding, high cross-asset correlations and a bloated positioning slate are punishing the late-longs in the yellow metal, which is trading nearly tick-for-tick with the broad dollar index.
Looking to US dollar the technicals, however, there could be some good news for the bulls ahead, if only monetarily.
Gold and DXY technical analysis
In yesterday's analysis, above, the dollar was expected to stall in 5-wave pattern forecast.
So far so good:
This could give rise to a short term recovery in gold if the 5-wave USD analysis is correct.
If the dollar picks up liquidity again and rallies, then the precious metal will have a hard time sustaining its bid.
DXY long-term chart analysis
Gold looking down the abyss
Daily gold chart, resistance ahead
- AUD/USD bears bailing out as price consolidates the down move.
- US dollar giving back some ground, could give rise to healthy upside correction in AUD crosses.
AUD/USD is currently trading at 0.7044 between a narrow start of the day range in Asia of 0.7042 and 0.7048 following an overnight session of corrective behaviour from a low of 0.7015 to 0.772 the high.
August's combination of rising equity prices and a sliding US dollar has been reversed in no uncertain terms, sending the AUD/USD back to late July levels.
However, despite the market chatter about Reserve Bank of Australia cuts next month, AUD/USD is performing the bid in improved risk appetite.
US stocks finished in the green on Thursday and the greenback is starting to find sellers across the board according to the DXY, (see below).
AUD/USD is responding to improved risk sentiment on Wall Street coming off a weak European session.
US equities were in the green as they digested strong US housing data. However, there was a disappointment in the initial jobless claims, and ongoing concerns about a lack of additional fiscal stimulus.
There is now the scope, from a technical basis for recovery, especially if commodities can maintain the bid, for an upside correction.
Oil, copper and the CRB index were marching ahead on dollar weakness. The CRB index was some 0.4% higher overnight.
AUD/USD technical analysis
Bearish long-term outlook
There is still plenty of work to be done by the bulls at this juncture as the 4-hour charts show heavily bearish conditions still.
DXY bearish for now
The hourly conditions show that the dollar is retesting what was support, now turned resistance structure.
- Dow jones unofficially closes up 49.68 points or 0.19%.
- Nasdaq unofficially closes up 40.01 points or 0.38%.
- S&P 500 unofficially closes up 9.29 points or 0.29%.
US stocks managed to hang on to gains on Thursday even as US jobless claims rose unexpectedly. However, a surge in the sale of New Homes offered some positives in an otherwise dubious economic background.
Apple Inc AAPL, Amazon.com Inc AMZN, Nvidia Corp NVDA and Facebook Inc .FB.O, all rose which have all been the pandemics best performers so far.
However, the S&P 500 briefly fell 10% below the intraday record peak it hit Sept. 2 for the second time in recent days.
Dow constituents, considered a barometer of economic confidence, lagged the S&P 500.
Unofficially, the Dow Jones Industrial Average had climbed 51.65 points, or 0.19%, to 26,814.78. The S&P 500 added 9.6 points, or 0.30%, to 3,246.52, while the Nasdaq Composite put on 39.28 points, or 0.37%, to 10,672.27.
on Thursday as data showed 870,000 Americans applied for jobless benefits in the week ended Sept. 19, up from 866,000 in the previous week, suggesting the jobs recovery may be running of steam.
Continuing claims also fell by less than expected.
Meanwhile, US housing data was strong.
New home sales for August smashed expectations, rising 4.8% m/m on top of a near 15% rise the previous month (a 1.2% fall was expected).
This marks the fourth monthly rise, helped by record-low mortgage rates, but also, anecdotally, people reassessing where they’d prefer to live in a pandemic world. This takes the annualised pace of sales to 1m, the highest since 2007. There was a 4.3% decline in the median selling price, even with the strong demand – reflecting the increase in the proportion of ‘cheaper’ properties sold,
analysts at ANZ bank explained.
SP 500 levels
- WTI bulls taking the baton from the bears on Thursday against an otherwise technically bearish backdrop.
- Demand-side fundamentals demand greatly on a vaccine.
WTI is currently trading at $40.19 having travelled between a low of $39.15 and a high of $40.34.
Commodities are performing well as the US dollar starts to show signs of exhaustion in its recent bullish correction.
The CRB index spent the majority of the day in North America climbing between 146.81 to a high of 148.48 to end on Wall Street some 0.4% higher.
However, while oil has been bid on Thursday, overall, the price of oil is giving back gains in a phase of consolidation in the low $40s and there are compelling technical prospects for the downside.
Fundamentally, though, there are continued hopes of a vaccine which should encourage social behaviours towards a rise in demand.
The OPEC put is crucial for energy markets to sustain on the recovery path,
analysts at TD Securities argued.
It's worth reiterating that OPEC opened the door for an extraordinary meeting in October if oil markets weaken further, which should mitigate concerns surrounding the stalling pace of the recovery in demand, given OPEC's willingness to fight back against the virus.
WTI technical analysis
In the above daily chart, the price of oil is being rejected by the daily resistance which opens prospects for an approach to the prior structure to the downside.
WTI weekly chart
The price looks to have completed the upside with prospects back to below the $40 area and into the low $30's, according to the structure.
- AUD/USD has fallen another 0.37% on Thursday.
- There could be some relief on its way with some strong support.
AUD/USD daily chart
The Australian dollar has been the worst hit during the recent bout of dollar strength. The market is heading to a pretty formidably zone at the 0.70 area. Adding to the strength of the psychological area is the 23.6% Fibonacci retracement and black support like which was a strong resistance back on 31/12/2020.
If this level fails there is another level to watch at the red horizontal line near 0.6836. This zone was important in early June as it acted as the main consolidation low before the really continued in mid-July.
The indicators are understandably in a very bearish position. The MACD histogram is red and the signal lines are just about to cross over to the downside. The Relative Strength Index is showing a bullish sign even though it is in a bearish position. This is called a bullish failure swing, it is when the market is making higher lows but the indicator makes a lower low (often moves into oversold).
There could be a small move back up in the near term but longer term this does seem like a decent reversal to the downside.
Democratic presidential nominee, Joe Biden, is touted to have Lael Brainard of the Federal Reserve, a centralist, as his Treasury secretary pick.
This would be a choice that would keep both Wall Street and progressives in-line.
The more provocative choice of Senator Elizabeth Warren hasn’t been ruled out though.
However, this may not be the favourite choice for the financial industry as she has been known for her crusade against the banks.
Meanwhile, Steven Mnuchin, who has served as Treasury chief since 2017, has publicly said he would serve a full second Trump term if he wins.
Here is what you need to know on Friday, September 25:
The dollar maintained its positive momentum throughout the first half of the day, extending its rally to fresh weekly highs against most major rivals, although demand for the greenback receded during US trading hours. Stubbornly high weekly unemployment claims in the US weighed on the greenback. Movements were limited amid a light macroeconomic calendar.
In the UK, Finance Minister Rishi Sunak unveiled an emergency jobs scheme, which will result in the government and firms top up wages of workers whose jobs were affected by the pandemic. The new Job Support Scheme will cover three-quarters of normal salaries for six months starting next November. The announcement is part of a wider plan to protect the economy over winter, according to Sunak.
In its final day of testimony, US Federal Reserve Chief Powell said that there is “downside risk to the economy if some form of support to households doesn't continue,” once again urging lawmakers to provide fiscal support.
Gold trimmed intraday losses but was unable to turn positive for the day. It finished the day around $1,865.00 a troy ounce. Crude oil prices recovered some ground, finding support in the better performance of Wall Street. WTI closed at $40.00 a barrel.
Bitcoin and Ethereum rebound strongly and are poised for further gains
- NZD/USD has started to make a slight come back as risk appetite improves.
- The US dollar may have run too far too soon, offering bullish prospects for the bird.
NZD/USD is recovering from a one-month low in the start of a movement which had been forecasted on Wednesday here.
- NZD/USD Price Analysis: Will the US dollar now give back some ground to the dollar bloc?
The bird has been under pressure this week, until the start of today's North American session.
USD strength returned and the Reserve Bank of New Zealand’s policy bias has also weighed significantly.
The RBNZ has re-affirmed its commitment to leave the OCR on hold till at least March, although is not pretending that there are no other policy tools left of the table, signalling a readiness to act if required.
The RBNZ reminded markets that a lower OCR and bank funding for the lending programme (FLP) are preferred options for further stimulus, noting that the FLP would be ready “before the end of this year.”
Meanwhile, we are seeing a bit of a comeback in risk appetite on Wall Street on Thursday which has likely helped the correction in the dollar bloc.
The S&P 500 is up some 0.5% at the time of writing, but off its highs by the same margin.
However, the commodity complex is firmly bid with the CRB index, oil and copper all behaving bullishly.
The DXY is on the backfoot, breaking a key old hourly resistance turned new support and resistance again on a restest; See below for this analysis.
A fall in the US dollar will give some upside opportunity in the bird as explained in the following flow of charts, again, founded on yesterday's analysis.
NZD/USD techncial analysis
As per yesterday's analysis, the price of the bird is turning higher in the demand area:
Price rejected from demand area
The price has been unable to break below the support structure and the focus is now on the upside towards a confluence of the resistance and a 38.2% Fibonacci retracement level.
From here, the US dollar needs to give back some ground to the presumed area of support forecasted yesterday as follows:
So far, so good
DXY 1D chart
DXY H1 chart
The US dollar has broken below support and is failing the retest of the structure that now acts as resistance, confirming the downside bias which is good for the NZD/USD bullish outlook.
- USD/CAD fell sharply after breaking below 1.3400 on Thursday.
- US Dollar Index lost its traction in the American session.
- WTI clings to decisive daily gains above $40.
The USD/CAD pair climbed to its highest level since early August at 1.3418 on Thursday but reversed its direction during the American trading hours. As of writing, the pair was down 0.33% on a daily basis at 1.3342.
The greenback, which has been gathering strength against its rivals since the start of the week, came under modest pressure in the second half of the day on Thursday. Although there was no clear catalyst behind the renewed USD weakness, a decisive rebound witnessed in major equity indexes in the US seems to be weighing on the US Dollar Index (DXY).
At the moment, the DXY is posting small daily losses at 94.30 and the S&P 500 Index is up 0.35%.
WTI recovery helps CAD find demand
On the other hand, rising crude oil prices are providing a boost to the commodity-related loonie and allowing the bearish pressure on USD/CAD to remain intact. After spending the majority of the day in a tight range near mid-$39s, the barrel of West Texas Intermediate (WTI) turned north in late American session and touched a daily high of $40.35.
Earlier in the day, the data published by Statistics Canada showed that payroll employment in July rose by 5.1%, or 739,700, but was largely ignored by the market participants. There won't be any macroeconomic data releases featured in the Canadian economic docket on Friday and Durable Goods Orders data from the US will be looked upon for fresh impetus.
Technical levels to watch for