There has been some support coming in for the safe havens such as the yen, gold and Treasury yields after a period of correction and that means that today’s session will be very interesting to see if this will mark a sustained turnaround in sentiment. With a sharp turnaround for strength on the Japanese yen following an interview with Bank of Japan’s Governor Kuroda which appeared to rule out so called “helicopter money” there has been a change in sentiment. Despite the fact that Kuroda’s interview with BBC Radio 4 was recorded a month ago and pre-Brexit, the markets still took it as a chance to take profit on the huge run higher on Dollar/Yen. It will be interesting to see If the yen can gain traction off this move now. There has also been another interesting (if ultimately non-event) of a central bank in wait and see mode, from the European Central Bank. The euro was choppy and lacked direction as the ECB followed the line of the Bank of England in wanting to see more data before making a decision on whether to loosen monetary policy further in response to Brexit.
Wall Street closed lower (S&P 500 down 0.4% whilst Asian markets have been weaker across the board (Nikkei down 1.1%) and European markets are also mildly weaker today. The forex markets are muted with little real direction, whilst commodities are also mildly softer with gold off less than $5 and oil around half a percent lower.
Traders will be looking at the flash Manufacturing PMIs today, with the Eurozone data released early in the session and the US flash Manufacturing PMI at 1445BST (51.6 expected which is slightly up from 51.4 last month). There is also Canadian CPI inflation at 1330BST with the headline reading of 1.4% YoY exp (core at 2.0% exp).
Chart of the Day – USD/CHF
The bulls continue to struggle to gains a solid footing in a move that would drive the pair back towards parity again. The recent high at 0.9900 has been tested for the past two sessions, both of which have seen the briefest of pokes above the resistance only to fail into the close. Yesterday’s candle subsequently fell into the close to form the first bearish candle in five sessions and questions once more whether the bulls have it in them for the push above 0.9900. The momentum indicators on the daily chart are relatively positive although there are signs of a bit of fatigue on the RSI and Stochastics near term. The early weakness today suggests that the bulls may not be quite ready and a near term dip threatens. The hourly chart shows the hourly indicators close to turning corrective and a decisive move below 0.9840 today would open a test of 0.9810. it would need a closing break above 0.9900 which would open 0.9955resistance which was the May highs. The lack of decisiveness in the momentum suggests that this remains a medium term range play.
The euro remains under pressure and the ECB monetary policy announcement and press conference from yesterday has done little to shift the outlook. For an ECB day the candle was remarkable in the lack of volatility and actually closed mildly higher on the day. However the market continues to trade below the $1.1050 long term pivot and whilst this is happening the outlook will remain negative. The momentum indicators reflect this with the RSI, MACD lines and Stochastics all suggesting that the little rallies such as the one that is currently underway, should be seen as another chance to sell. The downside may not be precipitous but there can be expected to be further weakness and a test of the $1.0980 lows and then $1.0909 which was the post-Brexit reaction low. The hourly chart shows that yesterday’s session has left resistance at $1.1058 and subsequently $1.1083 which was the traded high from this week. Hourly technicals have now unwound and are back to levels that generally see the bears resume control.
Following on from a strong rebound candle on Wednesday, yesterday’s trading was somewhat subdued and formed a session that suggests we are in a wait and see mode for now. Mild gains on the day have consolidated the recovery and the momentum indicators retain a neutrally configured outlook, albeit one that I continue to see suggests that near term rallies are a chance for a medium term selling opportunity. The Stochastics are the most responsive indicator and are starting to tick higher again in a recovery, but the RSI continues to struggle below 50 and the MACD lines are below neutral. The hourly chart reflects the uncertain outlook, whilst there is now resistance building at $1.3275 which could still be another lower high below $1.3310. A move below the minor support from yesterday’s low at $1.3155 would now re-open the selling pressure to test the initial pivot support at $1.3130 and then the reaction low at $1.3060.
After almost two weeks of strong recovery, finally a technical sell signal has been posted on Dollar/Yen. After an intraday sell-off on the airing of an interview with the BoJ’s Kuroda in which he played down the option of “helicopter money” the yen strengthened and a bearish engulfing was formed (but only just). This bearish turnaround in sentiment has resulted in a bearish crossover on the Stochastics, the RSI turning lower from around 60 and the MACD lines staring to wane in the recovery around neutral. I have been looking for there to be another lower high within the band 103.60/106.80 for the past week and although the intraday move to 107.47 was a high outside the band this still looks to be a viable sell signal. We should wait for confirmation (another bear candle today would help but also confirmation on the Stochastics would be good too) before putting significant downside targets on. The hourly chart shows consolidation in the past 18 hours above 105.40 and another drop below there would add to the downside pressure. The hourly chart would turn corrective again below 104.60. There is initial resistance again around 106.30/106.50.
As with the yen regaining ground yesterday, another safe haven that bounced was gold. The rebound was enough to form an almost mirror image of Wednesday’s bearish candle as the rebound added back $15. The impact has been to calm the momentum indicators a touch, although there is still a corrective aspect to the near term outlook. The hourly chart shows once again that the resistance around $1335 continues to play a strong role near term in holding back the bulls from traction in a recovery. Additionally, hourly momentum has rolled over once more. This choppy phase of trading seems to be coming as there are some key crossroads being tested across several markets and it is an uncertain period for gold. However, I am still of the belief that a retreat to the $1306 breakout is a very good support area and would be a good opportunity to buy. There is further resistance at $1346.70.
The contract rollover pulled the price of WTI back higher for a gap open yesterday but the traded moves show the formation of a strong bearish candle and a move that encouraged the sellers back in once more. The impact on the technicals shows that momentum indicators retain their bearish configuration and the resistance around $45.83 (yesterday’s high was at $49.06 prior to the intraday sell-off, but the main basis of resistance remains with $45.83) is the top pattern neckline which remains intact. The resistance at $46.33 is subsequently growing whilst $46.93 remains key. The big decline as the session went on shows that WTI is now retest the support band between $44.50/$45.00 and a downside break would re-open the low at $43.70 from Wednesday which now protects the May low at $43.03. Rallies are still a chance to sell near term.