12/09/2014: Dollar bulls looking to regain control in front of US consumer data

Market Overview

Wall Street markets recovered some early jitters to close the session basically flat on the day. The earlier weakness was driven by the disappointing weekly jobless claims, but the bulls managed to claw back the losses into the close as the outlook began to look forward to today’s consumer data which has tended to be a positive driver in recent months. The Asian markets traded basically flat, held back by a lack of steer from the US and a disappointing set of Chinese data on money supply and financing. The European indices are expected to open slightly higher following the late rebound on Wall Street, however with Russian sanctions and the Scottish independence vote still weighing on traders’ minds it could be a sluggish morning.

The dollar has regained a little of its strength once more in forex trading today after a day of consolidation yesterday. Greenback performance is especially strong against a weak Aussie dollar. Market activity this morning could also be quite muted due to a dearth of announcements in Europe, so traders will be looking forward to the US Retail Sales data which comes out at 13:30BST. The expectation is that it will improve to +0.6% on the month. Then after that, the University of Michigan consumer sentiment is released at 14:55BST, which is expected to improve slightly to 83.3 (from 82.5).

Chart of the Day – Silver

The precious metals are under significant downside pressure. The silver price has now been in a downtrend for 9 weeks and yesterday broke below the key support at $18.60 on an intraday basis. Although the weakness has been seen again today there is yet to be a close below this key support so it cannot be a confirmed break. However, a confirmed break would re-opens the crucial support at $18.19 which is a the June 2013 low which is a multi-year low. The moving averages are all falling in negative sequence, while momentum indicators are all in bearish configuration and although the RSI is now stretched below 30, any rallies should be seen as a chance to sell. The downtrend resistance currently comes in around $19.25 so there is scope for a technical rally, but with the sell-off accelerating rallies are failing at ever lower levels, if there is a confirmed break of $18.60 then weakness towards $18.19 can be expected.

Silver   12092014

EUR/USD

After all the consistent selling pressure and bearishness of the past few weeks, the euro has entered into something of a flat-zone. The sideways consolidation has lasted throughout the week with a trading range of just over 100 pips. The prospect of a base pattern is still there, needing a move above $1.2960 to suggest improvement and a break above the rally high at $1.2986 to confirm the base. However the sideways meandering suggests an uncertain outlook and a market that is waiting for the next catalyst. Across the course of the 4 month bear run for the euro, these consolidations have all resolved to the downside, and with daily momentum indicators still not showing any real signs of a reversal, this remains the most likely. Intraday support comes at $1.2880 and $1.2856.

EURUSD   12092014

GBP/USD

I spoke yesterday about the “Morning Doji Star” candlestick 3 day bullish reversal and yesterday’s continued recovery backed up that assertion. Monday’s gap lower that I still believe could have been an exhaustion gap still remains very slightly open at $1.6282, despite an overnight rebound to $1.6277. However this is a barrier to gains as this coincides with not one but two different Fibonacci retracements. The 38.2% Fib of the $1.6615/$1.6050 is at $1.6277 and there is also the 38.2% Fib of the huge bull run from $1.4812/$1.7191 which comes in at $1.6280. This would suggest that if there was an upside break above $1.6282 which would fill the gap then the bulls would certainly be backing this recovery and open the next upside target at $1.6350. The bulls need to hold above $1.6180 to sustain the recovery momentum.

GBPUSD   12092014

USD/JPY

The incredible advance of Dollar/Yen is just not stopping. The pair has now posted a higher high on the past 11 days as the bulls just continue to plough on. There is still no real resistance until 110.65 so there is little reason to suspect the bull run will not continue. All momentum indicators remain incredibly positive and show no loss of upside impetus despite the sequence that has been put together. The RSI is still well over 80, however the last time it was up at these levels was the January 2013 bull run that showed incredible staying power.

USDJPY   12092014

Gold

The $1240 support has now been decisively breached. Aside from minor supports at $1231.36 and $1218.44 there is little really now to prevent a full retracement back to the crucial December 2013 low at $1184.50. The strength of the selling pressure is also now becoming a real concern for the gold bugs. The move has now accelerate below the bottom of the downtrend channel as momentum indicators have moved into an extremely weak configuration. The overnight price action would suggest that the old support of $1240.60 is now an initial basis of resistance. With the RSI now back at below 28 the idea position would be to sell into a technical rally. The first real resistance comes in between $1260/$1280.

Gold   12092014

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