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Market Brief
Today is the last day of this month and the economic calendar is super quiet for Tier-1 market moving scheduled news. In the overnight session the Chinese official NBS Manufacturing PMI for China slightly fell to 50.1 in August from a reading of 50.4 in July. Market analysts had predicted a fall but were expecting a reading of 50.2. Reasons for the fall are commonplace across the world with Delta variant disruptions, inflated material cost, but also a move to reduce carbon emissions by the authorities. As the market received the data the AUDUSD dipped but at the London open the Australian dollar is relatively strong against its peers.
The euro was one of the strongest currencies yesterday and is holding on to some of that relative strength today but there has been a clear move towards the Antipodean pairs. New Zealand economic data was from the ANZ Business Outlook survey which states that inflation pressures remain intense, employment intentions look robust, and the lockdown impact is really tough. The RBNZ are expecting confidence to fall but are modelling a rapid bounce-back. Firms who are not reliant on tourism and hospitality have decent balance sheets and should weather the storm.
Australia is extending lockdowns with Victoria State premier calling it too soon to open up and that they are waiting for a lower number of cases. From when there is a re-opening it will not be a full Freedom Day but a modest change. Australia’s capital city Canberra will remain in lockdown until at least September 17th.
Later on in the US session there will be Canadian GDP month-on-month along with US Chicago PMI and US Consumer Confidence data. This morning the focus may turn to the German unemployment change due at 10:00 BST and then the Euro Area Flash CPI estimates.
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The daily EURUSD chart does appear to be wedging to go higher and price action is now above the 50-day exponential moving average (ema) with an upper dynamic resistance coming from the 200-day ema a possible target. The MACD is pointing higher and has had positive divergence to price adding to the bullish theme. Yesterday the euro was stronger against the very weak Swiss franc.
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The impulsive move higher and the close above the 50-day ema has carried on into today’s trading and again the 200-day ema looks like a great target and I’ll be expecting an acceleration higher above the previous swing high.
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Gold is also continuing to move higher as the US dollar weakens following the markets dovish conclusion to the Fed Chair Powell speech from last Friday. Yesterday I pointed out a couple of levels of possible support based on previous swing highs and old resistance. The 30-minute chart shows that bullish momentum returned on the test of the swing high and now $1809 is a good base level to keep an eye on.
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The US dollar index is at an important support level. The daily 50 ema has begun to flatten off and the 20 ema is curling down. Both are still above the 200 daily ema so long-term momentum is to the upside, but a break of the 50 and the nearby swing low would result in a collapse to at least the 200 if not further.
The ActivTrader sentiment indicator for the US dollar index is showing that the majority of traders are bearish the greenback which for a contrarian like me makes a move higher more likely.
