29 July: A wild ride for the metals and stocks heavy, US$ mixed ahead of today’s FOMC Meeting. Australian CPI coming up.

29 July: A wild ride for the metals and stocks heavy, US$ mixed ahead of today’s FOMC Meeting. Australian CPI coming up.

It has been a mixed session on Tuesday, at the end of which the US$ is mixed, with the DXY very slightly firmer, while stocks have given up a little ground with the Nasdaq leading the decline by losing 1.25%. The main action was seen in the metals where some wild swings were seen in Gold and Silver although both have ended up not too far from where they started the session.

Stocks were generally heavy after some rather mixed corporate Q2 earnings results, and both 3M and McDonald’s came under pressure after delivering quarterly earnings that fell short of expectations, with both companies citing coronavirus-led weaknesses in results.  Amazon, Apple, and Alphabet were all negative on the day and ensured that the Nasdaq traded under some downside pressure.

In the FX markets, the results were mixed, with the Euro easing back a little against the US$, as traders cut some risk positions ahead of today’s upcoming FOMC Meeting. The Chf, Jpy and Sterling made some minor gains while the Aud$ and the NZ$ consolidated their recent uptrend.

Looking ahead, Wednesday is going to begin with the Australian CPI (CPI, exp -2.0%qq, -0.4%yy; Trimmed Mean, exp +0.1%qq, +1.4%%yy) although it then goes very quiet until the US session where some secondary data will be lost amongst the headlines coming from the FOMC Meeting – Interest Rate Decision/Press Conference/Statement.  The Fed is set to leave its policy unchanged but may show openness to controlling the yield curve, while the dot-plot shows no chance of the Fed raising rates at least until 2022. The idea of controlling the curve would be that the Fed keeps long-term borrowing costs depressed within a controlled band, such as is currently implemented by the bank of Japan, which allows 10-year JGBs to trade within a limited range around 0%, thus lowering long-term borrowing costs.  We shall have to wait and see on that one, but either way, Powell is likely to be very dovish in his outlook. The other US data will consist of the Wholesale Inventories, Pending Home Sales and the monthly Goods Trade Balance. The EIA Weekly Crude Stocks Change are also due for release. Have a good day.

Economic data highlights will include:

Wed: Australian CPI, EU Non – Monetary Policy Meeting, US FOMC Meeting – Interest Rate Decision/Press Conference/Statement/Projections, Goods Trade Balance, Pending Home Sales, Wholesale Inventories

Market moves, in brief:

FX: DXY 93.76 (+0.12%)

Bonds: US10Y; 0.581% (-5.98%), German 10Y; -0.510% (-4.06%), UK 10Y; +0.106% (-5.70%), Australian 10Y; +0.933% (+3.86%), NZ 10Y; 0.856% (+1.84 %), China 10Y; 2.938% (+1.59%)

Stock Indices: DJI; -0.77%, S+P; -0.65%, NASDAQ; -1.27%, EUStoxx50; +0.02%, FTSE100; +0.40%, Shanghai Composite; +0.68%, ASX200SPI: -1.21%

Metals: Gold $1957 oz (+0.78%), Silver $24.32 oz (-1.14%), Copper $2.911 lb (+0.47%), Iron Ore $107.40 per tonne (NYMEX) (-0.25%),

Oil: WTI $41.00 pb (-1.52%)

CURRENCIES
EURUSD: 1.1717
Res  1.1740  1.1765  1.1785
Sup  1.1695  1.1670  1.1645
USDJPY: 105.07
Res  105.25  105.45  105.65
Sup  104.95  104.75  104.55
GBPUSD: 1.2931
Res  1.2955  1.2975  1.2995
Sup  1.2905  1.2885  1.2865
USDCHF: 0.9176
Res  0.9200  0.9220  0.9245
Sup  0.9155  0.9130  0.9105
AUDUSD: 0.7156
Res  0.7170  0.7185  0.7200
Sup  0.7140  0.7125  0.7110
NZDUSD: 0.6656
Res  0.6670  0.6685  0.6700
Sup  0.6640  0.6625  0.6610
INDICES / COMMODITIES
S&P.fs: 3211.93
Res  3260.00  3245.00  3230.00
Sup  3195.00  3180.00  3165.00
DJ30.fs: 26273.00
Res  26375.00  26455.00  26535.00
Sup  26225.00  26145.00  26065.00
SPI200.fs: 5963
Res  5985  6010  6035
Sup  5950  5925  5900
XAUUSD: 1959.39
Res  1970.00  1980.00  1990.00
Sup  1945.00  1935.00  1925.00
XAGUSD: 24.39
Res  24.60  24.85  25.10
Sup  24.10  23.85  23.60
WTI.fs: 40.98
Res  41.50  41.95  42.35
Sup  40.70  40.25  39.80

Trend Table

The markets are generally steady/mixed ahead of the upcoming FOMC Meeting although it has been a wild ride in the metals. In the FX markets, the DXY currently sits at 93.75, and although the short term momentum indicators look mildly constructive the longer term charts appear to be headed lower, where medium term targets would be seen at around  92.25 (14 May 2018 low) and eventually at 91.73 (76.4% of 102.98/88.25). Selling rallies (i.e. buying Euros on dips) seems to be the plan here, but I would wait until the results of the Fed meeting are confirmed before getting involved. As we said before, without a sharp turnaround in the deteriorating pandemic data in the US, any economic recovery is going to be difficult, while the increasing tensions between the US/China are also adding to trader’s caution, which will not help the dollar in the longer term.

In the other currencies, Sterling looks as though it may play some catch-up with the recent rally seen in the Euro but rather than trade against the US$, I suspect that selling EurGbp may be a safer trade.  Keep any SL above 0.9150.

US$Jpy continues to look heavy and briefly traded sub 105.00. A sustained move below here would target 104.50 and then 103.65 (76.4% Fibo target). Keep a SL above 105.65.

Note that Us$Chf made a new 5 year low on Tuesady although it is currently sitting on decent support. I would still prefer to sell rallies though, lookng for a run to 0.9100 and possibly lower.

The Aud$ and the Nzd$, both remain firmly in their respective uptrend although the short term charts do look rather neutral ahead of the Australian CPI, due later this morning. Another rangebound session may lie ahead, I suspect (Aud; 0.7130/0.7185/Nzd; 0.6635/0.6700?).

As we said previously, the metals look as though they have room to run higher still, and although after the gyrations seen yesterday, traders are going to be very cautious today. I think we will eventually see a run to $2000 oz, and with the weakness currently seen in the US$ that may occur sooner rather than later. After the previous sessions 8% rally in Silver, it then shot up by another 8% in early Asia yesterday, reaching 26.19, and the 26.10 target (38.2% of 49.78/11.63), before collapsing by 15% and then returning to where it had started the day. A wild ride and leaving no one happy – apart from the Brokers B-book! caution is required today but I still prefer to buy dips.

Stocks are seeing the longer term charts turn neutral so I would not be getting to involved at this stage although if the major US$ trillion support package is announced, then stocks will most likely fly higher. In the meantime, wait for the Fed, later today.

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Neutral – Turning Lower? Bullish Divergence Possible Topping Formation Bullish Divergence Turning Neutral Turning Neutral
4 Hour Turning Lower? Turning Lower? Up Bullish Divergence Turning Neutral Neutral – Turning Lower?
1 Day Up Turning Lower Turning Higher Down Neutral – Turning Higher? Turning Neutral
1 Week Turning Higher Neutral – Turning Lower? Neutral – Turning Higher? Turning Lower Up Turning Higher
DXY S+P ASX200 GOLD SILVER OIL_WTI
1 Hour Neutral – Turning Higher? Neutral – Turning Lower? Turning Lower? Turning Higher Turning Neutral Turning Lower?
4 Hour Turning Higher? Neutral Neutral – Turning Lower? Possible Topping Formation Possible Topping Formation Turning Neutral
1 Day Down Turning Neutral Turning Neutral Up Up Turning Neutral
1 Week Turning Lower Turning Higher Up Up Up Up
EURJPY EURGBP GBPAUD AUDJPY EURAUD AUDNZD
1 Hour Turning Lower Down Turning Neutral Neutral Turning Lower? Up – Overbought
4 Hour Neutral – Turning Lower? Turning Lower Neutral – Turning Higher? Turning Neutral Turning Lower? Turning Higher?
1 Day Possible Topping Formation Turning Neutral Neutral – Turning Higher? Turning Neutral Turning Neutral Neutral – Turning Higher?
1 Week Neutral – Turning Higher? Neutral – Turning Higher? Turning Lower Turning Higher? Turning Lower? Turning Neutral

Silver

UsdJpy

GbpUsd

EurGbp

Us$Chf

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