Daily Market Lookup

• The yen rose on Thursday as concerns over the economic fallout from the escalating U.S.-China trade war and the looming prospect of a no-deal Brexit drove investors into assets perceived as less risky. The Japanese currency also gained against the Australian dollar and New Zealand dollar, which hit a four-year low as business sentiment weakened. The latest round of trade war tariff hikes takes effect on Sunday, with Washington set to levy an extra 5% tariff - announced by President Donald Trump on Twitter last week - on $300 billion in Chinese imports. Retailers across the U.S. warned on Wednesday of price hikes and braced for job losses as a result. Investors were also watching the inverted U.S. Treasury yield curve, in which long-dated yields are lower that short-dated ones, commonly considered a sign of future recession. The British pound was holding steady at 1.2206, as the most serious U.K. political crisis in decades deepened after Prime Minister Boris Johnson decided to suspend Britain's parliament for more than a month before Brexit The move will limit the time opponents have to derail a disorderly Brexit but also increases the chance that Johnson could face a vote of no-confidence in his government, and possibly an election. Concerns about Brexit are already taking a toll on Europe, with the recent export slump in Germany driven mainly by weaker sales to Britain rather than the broader trade war.
• The European Central bank has in the past gone too far in seeking to meet market expectations and should be prepared to disappoint the market sometimes, outgoing ECB policymaker Ewald Nowotny said in a newspaper interview published on Thursday. Nowotny’s remarks echoed comments on Tuesday by ECB Vice President Luis de Guindos, who said the central bank must be critical of market expectations and base its decisions on macroeconomic data. The ECB has all but promised a stimulus package for its Sept. 12 policy meeting and market expectations have been growing. Investors are already pricing in several rate cuts for the coming year and a fresh round of bond purchases. He did not elaborate on what kind of disappointment he had in mind. Rate setters have also been divided about whether to redefine the ECB’s policy goal of an inflation rate of just under 2%. Outgoing ECB President Mario Draghi said in July that extending that to both sides of 2% was considered at that month’s meeting, and that there would be no cap at that level. But some of his colleagues seemed to disagree, arguing any discussion about symmetry should go together with a review of the targeted inflation rate or even be part of a broader discussion about the ECB’s policy strategy. Nowotny said he favours inflation targeting along the lines of what the Czech, Israeli or Swedish central banks do — aiming for 2% plus or minus one percentage point.
• A risk-off mood bolstered the safe-haven yen on Thursday, with record lows on U.S 30-year Treasury yields holding back the dollar as investors turned bleak on the prospect of a trade-war breakthrough any time soon. The sterling was flat, nursing losses incurred on Wednesday when fears of a no-deal Brexit surged in response to British Prime Minister Boris Johnson's move to suspend parliament in a bid to limit debate ahead of the Oct. 31 Brexit deadline. China's onshore spot yuan eased slightly, to be weaker for an 11th straight session, although a firmer-than-expected central bank fixing helped stem deeper losses. Against a basket of currencies (DXY) the dollar was steady around 98.190. Dominating investor concerns is the inverted U.S. Treasury yield curve, in which long-dated yields are lower that short-dated ones, commonly considered a sign of future recession. Sentiment in the currency market is also likely to be weighed by the Sino-U.S. trade dispute, which remains far from unresolved. Retailers across the U.S. warned on Wednesday of price hikes and braced for job losses as a result, while on Thursday Korea outlined its most aggressive spending plan in a decade to buttress its weakening economy.
• Oil prices fell on Thursday for the first time in three days after San Francisco Federal Reserve President Mary Daly sounded a note of concern about the strength of U.S. economy. Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, along with the potential hit to oil demand, are keeping prices in check. Daly said on Thursday she believes the U.S. economy has "strong" momentum, but uncertainty and a global growth slowdown are having an impact. Daly was speaking to reporters after a speech in Wellington, New Zealand and said she was in "watch and see" mode in assessing the need for another U.S. interest-rate cut. U.S. President Donald Trump said on Monday he believed China was sincere about wanting to reach a trade deal, but concerns arose on Tuesday after China's foreign ministry declined to confirm a telephone call between the two countries on trade. The market shrugged of a big drop in U.S. inventories, which fell last week by 10 million barrels, compared with analysts' expectations for a decrease of 2.1 million barrels, the Energy Information Administration said. U.S. gasoline stocks fell by 2.1 million barrels, compared with analysts' expectations in a Reuters poll for a 388,000-barrel drop. Distillate stockpiles , which include diesel and heating oil, fell by 2.1 million barrels, versus expectations for a 918,000-barrel increase, the EIA data showed. The crude drawdown confirms "that OPEC supply cuts are effectively working by depleting U.S. reserves," said Stephen Innes, managing partner at Valour Markets. The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers have been restraining supply for most of the period since Jan. 1, 2017. The alliance, known as "OPEC+", in July renewed the pact until March 2020. U.S. weekly crude production also rose 200,000 barrels per day to a new record at 12.5 million bpd in the week to Aug. 23. Morgan Stanley (NYSE:MS) has lowered its oil price forecasts for the rest of the year citing a weaker economic outlook, faltering demand and higher shale output that could offset OPEC's efforts to support the market.

Gold – XAU

Gold on Wednesday made its intraday high of US$1546.84/oz and low of US$1531.79/oz. Gold down by 0.206% at US$1539.07/oz.

Technicals in Focus:

In daily charts, prices are above 20DMA (1506) and breakage below will call for 1400. MACD is above zero line and histograms are decreasing trend and it will bring downward stance in the upcoming sessions. RSI is in overbought region and more upside is expected before it gets stretched. Stochastic Oscillator is in overbought territory and giving negative crossover to confirm bearish stance for intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above; buy above 1539-1500 with risk below 1500, targeting 1550-1562-1570. Sell below 1550-1570 keeping stop loss closing above 1570, targeting 1539-1526-1516 and 1500-1489.

Silver - XAG

Silver on Wednesday made its intraday high of US$18.49/oz and low of US$18.05/oz. Silver settled up by 1.024% at US$18.33/oz.

Technicals in Focus:

On daily charts, silver is sustaining above 50DMA (15.70), breakage below will lead to 15.20. MACD is above zero line and histograms are increasing trend and it will bring bullish stance in the upcoming sessions. RSI is in overbought region, indicating buy signal for now. The Stochastic Oscillator is in overbought region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above, buy above 18.50-15.90 targeting 18.60-18.90 and 19.50-20.00-20.50; stop breakage below 15.90. Sell below 18.60-20.50 with stop loss above 20.50; targeting 18.50-17.90-17.50 and 16.80-16.50.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US$56.57/bbl, intraday low of US$55.22/bbl and settled up by 0.395% to close at US$55.80/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 100DMA i.e. 55.88 which is a resistance level and breakage above will call for 59.60. MACD is above zero line and histograms are in decreasing mode will bring bearish stance in the upcoming sessions. The Stochastic Oscillator is in oversold region and giving negative crossover for confirmation of bearish stance; while the RSI is in oversold region and more downside can be expected.

Trading Strategy: Neutral

Based on the charts and explanations above; sell below 56.00-58.75 with stop loss at 58.75; targeting 55.40-54.90-54.50 and 53.60-52.80. Buy above 55.40-52.80 with risk daily closing below 52.80 and targeting 56.00-56.50-57.40 and 58.00-58.75.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.1072/EUR, high of US$1.1097/EUR and settled the day down by 0.116% to close at US$1.1076/EUR.

Technicals in Focus:

On daily charts, prices are sustaining below 100DMA (1.1293), which become immediate resistance level, break above will target 1.1320-1.1350. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in overbought territory and giving negative crossovers to signal for bearish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider.

Trading Strategy: Neutral to Buy

Buy above 1.1100-1.0850 with risk below 1.0850, targeting 1.1160-1.1200 and 1.1250-1.1290. Sell below 1.1150-1.1350 targeting 1.1130-1.1090 and 1.1005-1.0980 with stop-loss at daily closing above 1.1350.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.2155/GBP, high of US$1.2289/GBP and settled the day down by 0.668% to close at US$1.2204/GBP.

Technicals in Focus:

On daily charts, prices are sustaining above 200DMA (1.2960) is become major support level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in oversold territory and giving positive crossover to confirm bearish stance. MACD is above zero line but histograms are increasing lead to downward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.2250-1.2410 with targets at 1.2190-1.2160-1.2100and 1.2065-1.2010-1.1980 stop-loss should be below 1.2410. Buy above 1.2190-1.2010 with targets 1.2250-1.2300 and 1.2350-1.2410 with stop loss closing below 1.2010.

USD/JPY

USD/JPY on Monday made intra‐day low of JPY104.44/USD and made an intraday high of JPY106.41/USD and settled the day up by 1.105% at JPY106.12/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 50DMA (107.84), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in oversold territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 106.50-108.20 with risk above 108.20 targeting 106.10-105.80-105.00 and 104.50-104.00. Long positions above 106.10-104.00 with targets of 106.50-107.00 and 107.60-108.00-109.05 with stop below 106.00.