The dollar fell against the yen and the euro on Friday as a combination of weak U.S. economic data and ongoing risk aversion stemming from a fresh drop in oil prices weighed.
Oil prices fell through the $30 a barrel level on Friday, pressured lower by expectations that Iran will resume exports as soon as international sanctions are lifted, amid a global supply glut.
The dollar also came under pressure after data showing that U.S. retail sales unexpectedly fell in December, while U.S. industrial production also fell last month, down for the third consecutive month.
China’s Shanghai Composite entered a bear market Friday, European equities ended sharply in the red, while Wall Street closed more than 2% lower after hitting a near 15-month low.
This week, investors will be awaiting data on Chinese fourth quarter growth, amid concerns over the outlook for the world’s number two economy, while Friday’s data on euro zone private sector growth will also be in focus. Investors will also be awaiting monetary policy announcements from the BoC and the European Central Bank.
Today U.S. markets will be closed for Martin Luther King Day.
The single currency surged to near one-month highs, as a wave of soft U.S. economic data potentially increased the probability that the Federal Reserve could delay its next interest rate hike beyond the first quarter of 2016.
The currency pair traded in a broad range between 1.0855 and 1.0984 before settling at 1.0916, up 0.0051 or 0.47% on the session. The euro ended the week virtually flat against the dollar, down 0.15%. After tumbling approximately 10% against the dollar in 2015, the euro is up approximately 0.5% against its American counterpart over the first two weeks of the New Year.
The downbeat USA data released on Friday supported the euro and investors also digested dovish signals from the European Central Bank that it could be on the verge of approving further easing measures, to stave off persistently low inflation and bolster economic growth throughout the euro zone.
Fluctuations in EUR/USD are expected to be minor until the ECB's critical interest rate decision at its Governing Council's meeting this Thursday in Frankfurt.
Pivot: 1.0945Support: 1.0835 1.08 1.077Resistance: 1.0945 1.0895 1.103Scenario 1: short positions below 1.0945 with targets @ 1.0835 & 1.08 in extension.Scenario 2: above 1.0945 look for further upside with 1.0985 & 1.103 as targets.Comment: the RSI is badly directed.
Gold
Gold prices posted their biggest one-day gain in six weeks on Friday, as market players sought refuge in the yellow metal amid steep declines in global stock markets. A batch of soft U.S. economic data and weakness in the U.S. dollar provided further support.
Despite Friday’s gains, gold prices lost $7.20, or 0.65%, on the week. Futures are still up almost 3% so far this year, as safe-haven demand was boosted amid a global stock market rout, worries over the Chinese economy and heightened geopolitical tensions.
In the week ahead, investors will continue to focus on economic reports out of China, with Tuesday’s closely-watched fourth quarter GDP report in the spotlight.
Meanwhile, market players will keep an eye on upcoming U.S. data on inflation, building permits and housing starts, to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Pivot: 1085Support: 1085 1076 1071Resistance: 1100 1106 1113Scenario 1: long positions above 1085 with targets @ 1100 & 1106 in extension.Scenario 2: below 1085 look for further downside with 1076 & 1071 as targets.Comment: the RSI is mixed to bullish.
WTI Oil
Oil futures fell further below the $30-level to hit a new 12-year low on Friday, as ongoing concerns over a global supply glut continued to drag down prices.
Oversupply issue will be exacerbated further once Iran returns to the global oil market after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up exports by around 500,000 barrels. The surge in Iranian shipments is viewed as bearish for crude, which has fallen approximately 75% from its peak of $115 two summers ago, amid a glut of oversupply on markets worldwide.
Prices showed little reaction after industry research group Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. decreased by one to 515 last week. Despite the declining rig count, U.S. production levels remain near record-high levels.
In the week ahead, investors will focus on Tuesday EIA’s monthly report on global oil supply and demand, and on Wednesday API’s weekly report on U.S. oil supplies.
Pivot: 30Support: 28.2 27.8 27Resistance: 30 31.6 32.2Scenario 1: short positions below 30 with targets @ 28.2 & 27.8 in extension.Scenario 2: above 30 look for further upside with 31.6 & 32.2 as targets.Comment: as long as 30 is resistance, likely decline to 28.2.
S&P 500
U.S. stocks were lower after the close on Friday, as losses in the Technology, Oil & Gas and Basic Materials sectors led shares lower.
At the close in NYSE, the Dow Jones Industrial Average lost 2.39% to hit a new 3-months low, while the S&P 500 index lost 2.16%, and the NASDAQ Composite index lost 2.74%.
In the coming week, investors will be awaiting U.S. data on building permits, housing starts, consumer price inflation, manufacturing activity in the Philadelphia region, existing home sales and the weekly report on initial jobless claims, for further information on the strength of the American economy.
Pivot: 1935 Support: 1855 1820 1790 Resistance: 1935 1962 1989 Scenario 1: short positions below 1935 with targets @ 1855 & 1820 in extension. Scenario 2: above 1935 look for further upside with 1962 & 1989 as targets. Comment: the RSI is mixed with a bearish bias.