Currencies
EUR/USD – has reached the support just above the 1.10 level in what is now the lowest level since the end of July. We dropped 200 pips in 3 trading days, which means an easy $20 profit for those who were short, and that is only for the smallest position which requires a margin of $2.50, so that’s a nice profit of 800%!
USD/JPY – moved further up and reached the highest level since the end of July, but fell short of reaching the resistance, as some bad Chinese data has led to an increased flow to safe havens such as the JPY. Alongside this, we can see that there is some difficulty in remaining in the 104 level for now, but a USD which is remaining strong, also after the FOMC meeting minutes could change this. However, changed market sentiment, meaning more risk off, would mean that we would see a strengthening of the JPY.
GBP/USD – continued to move further down and is now trading below the 1.22 level. While the GBP was already under a lot of pressure, the flash crash of last Friday has only made matters much worse, with no support levels nearby. It is very well possible that we will test the lows reached Friday morning, although the steady and fast decline does make is interesting for those who think that the recent weakening is exaggerated and could go bargain hunting, hoping that these levels are the bottom.
USD/CAD – with oil prices on the decline again and the USD strengthening, it should come as no surprise we have been moving up and we can see that we are dealing with the resistance around the 1.33 level.
USD/ZAR – is seeing some volatility as the South African Finance Minister is dealing with a possible prosecution.
Indices
DAX 30 – saw yet another test of the downwards trend line, and while it appeared it managed to break through, this wasn’t the case. We have seen the same thing happen a few times before, but the resistance remains in place. We have opened lower as well, so we will get some more distance from the trend line.
Dollar Index – is trading at levels not seen since March, as the likelihood of a rate hike this year has climbed to the highest they have been since January. This comes after the FOMC meeting minutes showed that it really was a close call and the interest rate almost went up in September. There were already 3 who voted to raise the interest rate, and now it appears more were close to voting in favour as well, but decided to hold off for now. If there are no sudden surprises, it is hard to see the FED not raise the interest rate this year.
S&P 500 – we see a combination of 3 factors that are causing the S&P to move down. First of all, it is all but certain that the interest rate will go up, not likely in November, but December is all but certain, unless we get really bad NFP and or inflation data. Another reason is the drop in oil prices, which is causing the energy sector to move down. Lastly there was also weak data out of China this morning, which is causing some fear that a downturn in the Chinese economy would spread across the world. The nearest support can be found around the 2100 level.
Commodities
Gold – while the USD has reached the highest level in months across a wide range of currencies, we can see that gold is holding relatively firm and is didn’t come close to the lows of last week. The weak Chinese data has also supported gold and caused it to move up as there was an increased demand for safe havens.
Oil – we can say that the resistance around the 51.70 level is holding, just as it was back in June. Back then we moved all the way back to below the 40 level 2 months later. With OPEC having reached an “agreement” to limit production it remains doubtful that this will happen again, although if the agreement is breached and doesn’t materialize next month, we could be back at those levels fairly quickly. We can see that OPEC’s production has been increasing further to 33.39 mbpd in September, mainly due to increased production from the countries which have been excluded from limiting their production (Iran, Libya and Nigeria), as well as Iraq. The stronger USD is also helping to drive oil down, as well as the weaker Chinese data this morning. In addition, the API data showed an increase in the crude stock for the first time in weeks, and if this is confirmed by the EIA data we could expect to see a further drop.