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.

EURUSDUSDJPYGBPUSDUSDCHFAUDUSDNZDUSD
1 HourNeutral – Turning Lower?Bullish DivergencePossible Topping FormationBullish DivergenceTurning NeutralTurning Neutral
4 HourTurning Lower?Turning Lower?UpBullish DivergenceTurning NeutralNeutral – Turning Lower?
1 DayUpTurning LowerTurning HigherDownNeutral – Turning Higher?Turning Neutral
1 WeekTurning HigherNeutral – Turning Lower?Neutral – Turning Higher?Turning LowerUpTurning Higher
DXYS+PASX200GOLDSILVEROIL_WTI
1 HourNeutral – Turning Higher?Neutral – Turning Lower?Turning Lower?Turning HigherTurning NeutralTurning Lower?
4 HourTurning Higher?NeutralNeutral – Turning Lower?Possible Topping FormationPossible Topping FormationTurning Neutral
1 DayDownTurning NeutralTurning NeutralUpUpTurning Neutral
1 WeekTurning LowerTurning HigherUpUpUpUp
EURJPYEURGBPGBPAUDAUDJPYEURAUDAUDNZD
1 HourTurning LowerDownTurning NeutralNeutralTurning Lower?Up – Overbought
4 HourNeutral – Turning Lower?Turning LowerNeutral – Turning Higher?Turning NeutralTurning Lower?Turning Higher?
1 DayPossible Topping FormationTurning NeutralNeutral – Turning Higher?Turning NeutralTurning NeutralNeutral – Turning Higher?
1 WeekNeutral – Turning Higher?Neutral – Turning Higher?Turning LowerTurning Higher?Turning Lower?Turning Neutral

Silver

UsdJpy

GbpUsd

EurGbp

Us$Chf

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