UK inflation was apparently cause for celebration yesterday as at came in at 1.9% in June, just 0.1% below the Bank of England’s long term target of 2% and much higher than the 1.6% analysts were expecting. The news lifted Sterling immediately and other factors, later in the day, would see the currency test new highs against the Dollar. The reaction was a result of the logical thinking that Mark Carney will need to apply monetary policy quite soon if inflation is on an upward path, in order to counter any unnecessary rises in the cost of living, as monetary policy action (rate rises) by the Bank take a few months to affect the rate of inflation.
Later on in the day it was the turn of Janet Yellen to give the market some direction. Her opening remarks to the Senate at her bi-annual address were a defence of keeping interest rates at historic lows, forcing the Dollar lower and allowing Sterling to touch those record highs. Later on in her testimony she did leave the door open for rate hikes coming earlier than expected, by reaffirming that the labour market is intrinsically linked to the Fed’s actions and that if this continues to push forward quickly, then the Fed may act. Utterly confused, the market ended the day with a stronger Dollar than it started but US stock markets only very slightly lower as they pin their hopes on a labour market that stays in the blocks.
Also from the US we heard that they won’t be lifting changing their energy export ban. The head of the Energy and Commerce Committee said yesterday that they need time to assess whether to lift the ban on exporting US produced crude oil and that this will take at least until early next year. There was talk that this would happen in response to Russia’s role in Ukrainian unrest, as a way to inflict a significant amount of pain to the Russian economy, but unless the president writes another executive order, it looks like Putin is off the hook again.
More noise from the reserve Bank of Australia yesterday, following their Mondaynight interest rate announcement (where they kept rates on hold). John Edward, who sits alongside governor Glenn Stevens, said that the currency is overvalued, particularly given the fall in commodity prices, but that they may have to wait for the Federal Reserve to act before they see a significant reduction in its value. When asked if the economy was being ‘held hostage’ by Federal Reserve policy, he answered ‘it may be’. He also said that their economy has seen a pick up in housing construction and general investment in non-mining related activities and that inflation is under control – so we probably won’t see any surprise rate cuts from the RBA as a response to the strength.
Today we see UK unemployment data early on, followed by a bit of tier two US data and a Bank of Canada interest rate decision – likely a hold at 1%. Janet Yellen continues her two day testimony, though today she talks to the House rather than the Senate and is likely to repeat a lot of what was said yesterday. Look for the Beige Book results this evening, which could be a market mover.
Intraday Forex Technical Levels
EUR/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 1.3575 with targets @ 1.351 & 1.3475 in extension.
If pair goes nuts: Above 1.3575 look for further upside with 1.362 & 1.365 as targets.
What’s up on the forex dance floor: The RSI is capped by a declining trend line.
Supports and resistances:
1.365
1.362
1.3575
1.3533 Last
1.351
1.3475
1.345
GBP/USD Intraday: turning down.
Invest Diva likes: Short positions below 1.715 with targets @ 1.709 & 1.7055 in extension.
If pair goes nuts: Above 1.715 look for further upside with 1.718 & 1.722 as targets.
What’s up on the forex dance floor: As long as 1.715 is resistance, expect a return to 1.709.
Supports and resistances:
1.722
1.718
1.715
1.7123 Last
1.709
1.7055
1.7
USD/JPY Intraday: the upside prevails.
Invest Diva likes: Long positions above 101.45 with targets @ 101.85 & 102.05 in extension.
If pair goes nuts: Below 101.45 look for further downside with 101.2 & 101.05 as targets.
What’s up on the forex dance floor: The RSI is bullish and calls for further upside. The pair is trading in a bullish channel.
Supports and resistances:
102.25
102.05
101.85
101.76 Last
101.45
101.2
101.05
USD/CHF Intraday: bullish bias above 0.895.
Invest Diva likes: Long positions above 0.895 with targets @ 0.8985 & 0.9 in extension.
If pair goes nuts: Below 0.895 look for further downside with 0.891 & 0.8895 as targets.
What’s up on the forex dance floor: The RSI is bullish and calls for further upside.
Supports and resistances:
0.9015
0.9
0.8985
0.8981 Last
0.895
0.891
0.8895
NZD/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 0.8745 with targets @ 0.8675 & 0.865 in extension.
If pair goes nuts: Above 0.8745 look for further upside with 0.8785 & 0.8815 as targets.
What’s up on the forex dance floor: Technically the RSI is below its neutrality area at 50.
Supports and resistances:
0.8815
0.8785
0.8745
0.8709 Last
0.8675
0.865
0.863
AUD/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 0.941 with targets @ 0.9325 & 0.929 in extension.
If pair goes nuts: Above 0.941 look for further upside with 0.9455 & 0.9485 as targets.
What’s up on the forex dance floor: As long as the resistance at 0.941 is not surpassed, the risk of the break below 0.9325 remains high.
Supports and resistances:
0.9485
0.9455
0.941
0.9349 Last
0.9325
0.929
0.9255
USD/CAD Intraday: the upside prevails
Invest Diva likes: Long positions above 1.0695 with targets @ 1.078 & 1.0825 in extension.
If pair goes nuts: Below 1.0695 look for further downside with 1.0655 & 1.0625 as targets.
What’s up on the forex dance floor: The RSI is mixed with a bullish bias.
Supports and resistances:
1.0855
1.0825
1.078
1.0768 Last
1.0695
1.0655
1.0625
US Index Levels
S&P500
Short positions below 1978 with targets @ 1959 & 1953 in extension.
Alternative scenario: Above 1978 look for further upside with 1984 & 1986 as targets.
Dow Jones
Short positions below 17050 with targets @ 16930 & 16885 in extension.
Alternative scenario: Above 17050 look for further upside with 17090 & 17130 as targets.
Nasdaq 100
Short positions below 3935 with targets @ 3879 & 3865 in extension.
Alternative scenario: Above 3935 look for further upside with 3961 & 3981 as targets.
Russell 2000
Short positions below 1170 with targets @ 1140 & 1125 in extension.
Alternative scenario: Above 1170 look for further upside with 1194 & 1211 as targets.
Precious Metals
Gold
Gold has pushed above a key declining trend line drawn from the top of October 2012 and above the key 1333 resistance area turning the outlook clearly bullish
– a bearish trend line on the daily RSI is broken
– both the 20-day and the 50-day moving average are turning up increasing upward momentum
– Thus a bounce towards 1390 and 1434 is expected in coming days – Alternatively, a break below 1285 would turn the outlook bearish again and would call for a drop towards 1240 at least
Silver
Silver has broken above a key declining trend line which has been in place since April 2011
– This breakout is a significant bullish development and calls for a strong up move
– Both the 20-day and the 50-day moving average are rising and maintain upward momentum
– Therefore, as long as 19.70 is a support, a new bullish run towards 22.17 or even 23.05 in extension is likely – Alternatively, the break below 19.70 would negate this bullish stance and would call for a drop to 18.70 at least
