23 Sept: Stocks & US$ both firm on C/B chat. RBNZ Meeting & Australian R/S ahead. Global flash PMIs in focus. Powell up again later today.

23 Sept: Stocks & US$ both firm on C/B chat. RBNZ Meeting & Australian R/S ahead. Global flash PMIs in focus. Powell up again later today.

The US stock indices finished Tuesday on a positive note, as gains in consumer discretionary, communication services and tech sectors all helped the broader market shake off ongoing weakness in the financial sector as well as the concerns over a second wave of Covid-19. The market was led higher on Tuesday by Amazon, +5.7%, but was somewhat dragged back by the major financials, where Morgan Stanley Goldman Sachs, Bank of America Corp all ending the day down by 1%-2%.

In the FX markets the US$ ended the day on a strong note, underpinned by comments from various central bankers through the session. The RBAs Debelle got things under way in sending the Aud$ lower after his comments yesterday with regard to lower interest rates and the possibility of  RBA intervention in the FX markets. In Europe, the Euro received no assistance after ECB Board member Fabio Panetta said that the ECB should err on the side of too much stimulus rather than too little. The Fed then entered the market, with Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin both backing more aid for small businesses but were light on details. Powell noted the improvement in the US economy after the collapse in March and April, but he and Mnuchin both said that more targeted stimulus is likely needed to promote a further recovery. Finally, BOE Governor Bailey did not really help Sterling by commenting that the coronavirus issues and Brexit setbacks would only increase policy speculation in the UK.

In the commodities sector, the precious metals remain heavy, with Gold currently clinging on to 1900 although the 4 hour charts look heavy, possibly eyeing the 12 August low of 1863, while Silver seems to be carving out a bear flag with a measured target of around 20.80/21.00 – so worth watching. WTI ended the day unchanged at 39.80.

Looking ahead, the early focus on Wednesday will be the Interest Rate Decision to come from the RBNZ Meeting although no change to policy is likely, ahead of the NZ election which will take place on October 17. The main interest will therefore lie in the statement, at which the RBNZ will likely reiterate that they will keep conditions in line with those required to help the economy recover from the pandemic. That aside , the Preliminary Australian Retail Sales for August will be released, but it will be the global flash Mfg/Services/Composite PMIs  that will drive activity through the session (Australia, Japan, EU, UK, US) along with more central bank speakers, including Kuroda (BOJ), Mester, Powell (US Fed). Have a good day.

Economic data highlights will include:                         

Wed: Global Preliminary Markit Mfg/Services/Composite PMIs (Australia, Japan, China, EU, UK, US), RBNZ Interest Rate Decision, Statement, ECB Non-Monetary Policy Meeting, US House Price Index, EIA Weekly Crude Stocks Change, Fed’s Mester Speech, Fed Chair Powell testifies to Congress.

Market moves, in brief:

FX: DXY 93.97 (+0.44%)

Bonds: US10Y; 0.674% (+1.23%), German 10Y; -0.508% (+3.53%), UK 10Y; 0.199% (+25.87%), Australian 10Y; 0.845% (-2.43%), NZ 10Y; 0.523% (-2.59 %), China 10Y; 3.093% (-0.70%)

Stock Indices: DJI; 0.52%, S+P; +1.05%, NASDAQ; +1.71%, EUStoxx50; +0.10%, FTSE100; +0.43%, Shanghai Composite; -1.29%, ASX200SPI: +1.41%

Metals: Gold $1900 oz (-0.64%), Silver $24.40 oz (-1.25%), Copper $3.0710 lb (+1.10%), Iron Ore $124.00 per tonne (NYMEX) (-0.38%),

Oil: WTI $39.74pb (-0.08%)

EURUSD: 1.1709
Res  1.1735  1.1760  1.1785
Sup  1.1690  1.1665  1.1640
USDJPY: 104.95
Res  105.15  105.40  105.65
Sup  104.70  104.45  104.20
GBPUSD: 1.2737
Res  1.2770  1.2800  1.2835
Sup  1.2705  1.2675  1.2645
USDCHF: 0.9194
Res  0.9210  0.9230  0.9250
Sup  0.9175  0.9155  0.9135
AUDUSD: 0.7169
Res  0.7185  0.7205  0.7225
Sup  0.7150  0.7130  0.7110
NZDUSD: 0.6635
Res  0.6650  0.6670  0.6690
Sup  0.6620  0.6600  0.6580
S&P.fs: 3298.93
Res  3325.00  3350.00  3375.00
Sup  3270.00  3245.00  3220.00
DJ30.fs: 27174.00
Res  27350.00  27500.00  27645.00
Sup  26970.00  26815.00  26645.00
SPI200.fs: 5832
Res  5850  5865  5885
Sup  5815  5795  5775
XAUUSD: 1901.40
Res  1910.00  1920.00  1930.00
Sup  1890.00  1880.00  1870.00
XAGUSD: 24.42
Res  24.65  24.90  25.15
Sup  24.20  23.95  23.70
WTI.fs: 39.80
Res  40.80  41.80  42.80
Sup  39.00  38.00  37.00

Trend Table: September 23, 2020

As we pointed out on Telegram yesterday (sign up/join us at: https://t.me/orchardforex ) the DXY was breaking above the neckline of the reverse head/shoulder and now at 94.00, it seems to have the chance to head on to its measured objective of around 95.50.

Generally, the US$ seems set to remain underpinned against most majors, with the possible exception of the Jpy.

Stocks have gone into choppy mode so I have no firm view.

The metals look heavy and possibly have another leg lower ahead.

See charts, below.

1 Hour Bullish Divergence Up – Overbought Bullish Divergence Possible Topping Formation Bullish Divergence Bearish Divergence
4 Hour Down Up Down Up Down Down
1 Day Turning Lower Turning Lower Turning Lower? Turning Neutral Neutral – Turning Lower? Turning Neutral
1 Week Possible Topping Formation Neutral – Turning Lower? Turning Lower? Possible Basing Formation Possible Topping Formation Possible Topping Formation
1 Hour Bearish Divergence Neutral – Turning Higher? Turning Higher Turning Higher Up Neutral – Turning Higher?
4 Hour Turning Higher Turning Higher Turning Higher Turning Lower Down Turning Lower
1 Day Turning Higher Turning Neutral Neutral Turning Neutral Turning Lower Turning Neutral
1 Week Possible Basing Formation Overbought – Turning Lower? Turning Neutral Overbought – Turning Lower? Overbought – Turning Lower? Turning Neutral
1 Hour Turning Higher? Turning Neutral Turning Neutral Turning Higher? Neutral – Turning Higher? Turning Neutral
4 Hour Possible Basing Formation Turning Neutral Turning Neutral Down Turning Higher? Turning Neutral
1 Day Turning Lower? Turning Neutral Possible Basing Formation Turning Neutral Turning Neutral Turning Neutral
1 Week Possible Topping Formation Turning Neutral Turning Neutral Possible Topping Formation Turning Neutral Possible Topping Formation

DXY Daily

Breaking above the Head/Shoulder neckline

EurUsd: If the DXY outlook is correct, that puts the Euro down at around 1.1525, near enough to the March 1.1495 high and the 61.8% Fibo of the June-September rise at 1.1491. That makes 1.15-ish the next major target although we are currently sitting on decent support at 1.1680 (38.2% of 1.1168/1.2011 as well as 23.6% of 1.0635/1.2011). A break of this would open the way to 1.1585 (50% of 1.1168/1.2011) and then towards the 1.1490/1.1520 area. Staying short/selling rallies is preferred, with a SL now placed above the neckline – at 1.1765 – preferably above 1.1800 in case we see a short-term spike.


A word of caution. US$Chf – often the leader in a US$ move – possibly has yet to break its own neckline, depending on where you draw the neckline from. As per the chart where there are 2 possibilities.. I think the dollar will break higher but some caution is required. If it fails to do so we could yet see a reversal, dragging the US$ lower and the Euro higher. I don’t think this will be the case but stay nimble.

AudUsd: The Aud is currently sitting on the support that we have mentioned many times previously, at  0.7165 (38.2% of 0.6808/0.7413), and looks heavy heading into Wednesday trade, where a break of the session low of 0.7155 and the rising trend support at 0.7150 would open the way from a grind towards 0.7100. Below 0.7100 opens the way to the 24 July low of 0.7069. On the topside, resistance will now be seen at 0.7190/0.7200 and again at 0.7235. We may see a short term squeeze higher on the back of the firmer stock markets but staying short and/or selling rallies with a SL placed just above the Tuesday high of 0.7235 is preferred. Remember that we have the Australian August Preliminary Retail Sales ahead. RBNZ announcement too.


Carving out a bear flag?


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