Gold is rising above the 1300 level after poor economic data in the US
The Dollar rebounded at the New York close following weak US inflation data. While the Dollar Index (USD/DXY) was flat, the Greenback had different fortunes against its Rivals.
The Euro slipped further in early Asia as results in Sunday’s Austrian elections saw a shift to the political right. The People’s Party of Foreign Minister Sebastian Kurz claimed victory with a campaign built on a hard line stance on immigration. Sterling rose on hopes for more constructive Brexit negotiations.
A fall in the US Yen year yield weighed on USD/JPY which fell 0.57%.
China’s Trade Surplus fell to CNY 193 billion against forecast CNY 266 billion.
US Headline CPI missed with a print of 0.5% against a median forecast of 0.6%.
US Core CPI printed at 0.1%, less than the 0.2% forecast by most analysts.
US Headline Retail Sales: 1.6% against forecast 1.7%
US Core Retail Sales: 1.0% against forecast 0.9%.
US University Of Michigan Consumer Sentiment rose to 101. from 95.1 and a forecast of 95.1.
Global stocks were mostly higher. Wall Street’s Dow finished up 0.13%. The Japanese Nikkei closed up at fresh 20 year highs.
Global Yields fell. The yield on the US Ten year bond closed down at 2.27% from 2.32%. Germany’s Ten year Bund yield was down 4 basis points to 0.40%. Japan’s Ten year JGB yield closed flat at 0.05%.
USD/DXY – closed flat at 93.055 (93.081 Friday)
EUR/USD – slipped further in early Asia to 1.1810 from New York’s close of 1.1822 (1.1834 Friday).
USD/JPY – slips to close at 111.82 from 112.25 Friday as yield differentials narrow
GBP/USD – climbs to 1.3288 (1.3263 Friday).
AUD/USD – higher to 0.7888 from 0.7825 Friday.
Outlook: Disappointing US inflation data initially saw a broad based sell-off in the Dollar which was reversed at the New York close. Tepid inflation could worry Fed officials after they had signaled a third rate hike later this year. Financial markets see the chance of a December rate hike at around 83%. While the Dollar had mixed fortunes against its Rivals, market positioning remains short USD. The latest CFTC/Reuters report saw a rise in net speculative US Dollar short contracts.
Events and economic data releases today:
China September CPI and PPI: (GMT 1.30 am, Oct 16/Local Time 12.30 pm,Oct 16) forecast for Annual CPI: 1.6% from 1.8%; forecast for Annual PPI: 6.3% from 6.3%
Euro Zone Trade Balance: 9 am, Oct 16/Local Time 8 pm, Oct 16) forecast surplus: +EUR 20.3 billion from +EUR 18.6 billion
Canada Foreign Securities Purchases: (GMT 12.30 pm, Oct 16/Local Time: 11.30 pm, Oct 16): previous CAD 23.95 billion
US Empire State Manufacturing Index: (GMT 12.30 pm, Oct 6/Local Time: 11.30 pm, Oct 16) forecast: 20.3 from 24.4
Trading View: The knee-jerk reaction to the disappointing US inflation data was short-lived. The fall in US yields was matched by falls in global yields. Last week Mario Draghi reiterated the the ECB will need to keep rates low. The ECB has its policy meeting on Oct. 26. Politics and market positioning should be constructive for the Dollar as it attempts to reverse its decline which began this year. The latest CFTC/Reuters report saw 6 out of 8 currencies that are recorded with short US Dollar positioning.
Among the most extreme is the Canadian Dollar. Speculators increased their long Canadian Dollar contracts to +CAD 76,392 contracts from +CAD 75,128 contracts. Total net speculative CAD longs are the largest since the week of December 2013.
USD/CAD closed at 1.2475, little-changed from Friday’s 1.2465. USD/CAD has immediate resistance at 1.2550 and then at 1.2580. Immediate support lies at 1.2460. Look to buy dips with today’s likely range 1.2480-1.2580.
EUR/USD – failed to trade above the strong resistance level of 1.1870/80 (overnight high 1.18749). The Euro fell to close at 1.1822 from Friday’s 1.1834. The Austrian election results have seen a shift to the political right. While Austria is in no danger of leaving the European Union, they have been Germany’s closest ally for decades which could now change. Speculative market positioning remains at an extreme. The latest CFTC/Reuters data (week ended Oct 10) saw an increase in speculative EUR longs to +EUR 98,079 contracts from the previous week’s +EUR 90,833. That’s the largest total of speculative Euro longs for this year, not seen since 2011. EUR/USD has immediate resistance at 1.1850. Strong resistance remains at the 1.1870/80 level and that will need to break to see the Euro higher. Immediate support can be found at 1.1800/10 (overnight low 1.1805). Further support lies at 1.1780. EUR/USD looks poised to have a retest of the 1.1670 soon. Look to sell rallies with today’s likely range 1.1685-1.1735.
GBP/USD – jumped to 1.33377 overnight highs after the release of the US CPI data. Sterling then closed at 1.3286 slightly higher than Friday’s 1.3262. Brexit negotiations will continue to dominate Sterling trade. GBP/USD has immediate resistance at 1.3330/40. Support can be found at 1.3260 and then 1.3240. Likely range today 1.3270-1.3330.
USD/JPY – closed down at 111.85 from Friday’s opening of 112.25. The 5 basis point fall in the US Ten year yield pressurised the Dollar. In contrast Japanese 10 year JGB yields were flat at 0.05%. The Yen is one of two major currencies where the speculators are long of US Dollars/short of the currency. Immediate resistance lies at 112.20 and then at 112.50. USD/JPY has initial support at 111.70 and then at 111.50. Likely range today 111.70-112.20. The Japanese election is this coming Sunday, Oct 22.
AUD/USD – held the 0.7820 level well and jumped to an overnight high of 0.7897 after the US CPI data release. Strong metals prices also supported the Aussie which as up 0.61% from Friday. China’s September imports rose 8.1%, lower than the 8.8% forecast, but higher than August’s 5.5%. AUD/USD has immediate resistance at 0.7900. The strong resistance level is at 0.7920. Immediate support can be found at 0.7840 and then at 0.7820. Likely range today 0.7840-0.7900. Sell rallies.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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