MCK DAILY FINANCIAL MARKETS ANALYSIS 26.08.2024
Marios C.Kyriakou
Investment Portfolio Manager | MSc Economist | CySEC Advanced | Financial Market Analyst & Educator FX, CFDs, MQL Dev | Certified HRDA Trainer | Keynote Speaker | Founder at HCPro Academy
Canada’s retail sales dropped, BOJ ready to raise rates if growth and inflation is on track, Powell: time for change in interest rate policy, Commodities moved upwards, USD weakened, U.S. stocks slightly on the upside.
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PREVIOUS DAY REVIEW: IMPORTANT EVENTS (26.08.2024)
Canada's retail sales dropped in June as interest rates remain high. They dropped 0.3% on a monthly basis, less than last month's 0.8% decline. Analysts had forecast that in June sales would drop by 0.3% and excluding automotive and parts, they had estimated it would drop by 0.2%.
The Bank of Canada trimmed its key policy rate for the second time in a row in July, bringing it down to 4.5%, after keeping it at a more than 23-year high for a year.
Elevated levels had negatively affected consumer spending and business investments and muted economic growth despite the desired impact on inflation.
Bank of Japan Governor Kazuo Ueda on Friday reaffirmed his resolve to raise interest rates if inflation stayed on course to sustainably hit the 2% target, suggesting recent market volatility would not derail its long-term rate hike plan.
The yen and stock price moves will be key to determining the next rate hike timing but they are ready to raise rates if growth and inflation is on track
The remarks suggest the BOJ may spend more time than initially expected in considering its next rate hike, but stay on course to gradually hike borrowing costs from current still ultra-low levels.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July in landmark steps away from a decade-long radical stimulus programme.
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WINNERS VS LOSERS?
Popular Assets (26.08.2024)
EURGBP is on the top as the week starts with just 0.07% gain followed by the USD pairs (with USD as base).? Fed Chair Powell comments on Friday at the Jackson Hole conference caused further weakening of the USD, reassuring that interest rate cuts will take place. The week starts with USD now correcting from the loss, with appreciation, causing those pairs to move to the top of the week’s gainers.
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NEWS AND ECONOMIC DATA MONITORING?
Previous Trading Day: Review Analysis (23.08.2024)
Time zone EEST (GMT+3:00) Athens
During the Asian session the New Zealand Retail sales data for the last quarter was released. The figure showing the % change was reported negative at -1.20%, worse than expected. However, no major impact was recorded in the market due to the release.?
Governor Ueda said that FX moves could affect the Bank's forecasts. He stated that they will not change their stance of adjusting monetary easing if the economic price outlook is likely to be achieved. He sees financial markets in stable conditions. The July rate increase was aligned with the Bank’s economic expectations, he said but he sees upside risk for inflation. The JPY appreciated during the speech at 3:00 and 7:00 but later lost ground against the USD.
Canada’s retail sales data were reported at 15:30. A reported negative growth as expected for retail sales but there was a surprise positive figure for the Core retail sales. Mixed data this time with the figure releases not having much impact in the market at that time. The market was closely monitoring the Jackson Hole Symposium that was causing uncertainty and risk in regards to the day’s price movements and comments. The head of the US central bank was scheduled to speak 1.5 hours after this report.?
Despite the New Home Sales figure released at 17:00, showing a strong increase in sales, the USD eventually weakened further due to strong comments from Chair Powell at his Jackson Hole speech at that time supporting the view that the time had come for a change in interest rate policy. “If the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting”.
GENERAL IMPACT
Forex:?
The US Dollar index was moving sideways and around the 30-period MA with low volatility as the market was unusually inactive. It was only after 17:00 that the USD experienced a shock during the Fed’s Powell speech essentially confirming a September Fed rate cut. The index continued to drop until it found support near 100.6 with no intraday retracement due to a clear selling preference. On the 24th it is possible that the index could see the retracement only if intraday important resistance levels break.
The USDCAD at 15:30 was not affected by the retail sales news. On the chart it is clear that there is no special impact. After 17:00 the USDCAD dropped heavily due to the USD depreciation caused by Powell’s speech and comments. The drop was around 77 pips with some retracement taking place intraday near the 61.8 Fibo.
The EURUSD was moving sideways experiencing low volatility just like the dollar index before 17:00. The USD was the main driver of the pair. After 17:00 the USD depreciated heavily causing the EURUSD to jump around 85 pips before retracing to the 61.8 Fibo level quite soon as the market was quite active during that time.?
The GBPUSD experienced a similar path as the others but it seemed that the USD was gaining ground against the GBP. The pair was moving to the upside before 17:00, not significantly though but only showing that GBP was weakening. After 17:00 the USD depreciated heavily causing the jump around 110 pips. After finding resistance retracement followed back to the 61.8 Fibo.
It is clear that the officials from three of the world’s signalled they are firmly on course to lower, or continue lowering interest rates in the coming months (since some have already done so).
Crypto:
Bitcoin remained in a nearly 800 USD range. Volatility levels were higher early during the Asian session but later lowered after the start of the European session. USD weakening. An upward wedge formed during the N.American session as depicted on the chart. Possible breakout or breakdown could cause rapid movement in one direction.
Metals:?
Gold’s price was on an intraday uptrend on Friday and after the USD depreciation, after 17:00,? it jumped around 20 USD. Retarcement followed and volatility levels lowered after the price touched the 61.8 Fibo level and the 30-period MA.
Energy:?
Crude oil moved upwards overall and quite significantly for the day. After the start of the European session it broke out of the small intraday range and quickly reached the 74 USD/barrel psychological level where it experienced a brief consolidation phase. After 17:00 it continued again with an upward movement but with more slow momentum. Obviously USD weakening played a role but it seems that demand and supply are in the works currently with the media suggesting supply disruptions due to Mideast escalation fears.
US Stocks:
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The S&P500 was moving upwards but not significantly before the stock market opening and Powell’s speech. It was only after that the index experienced a shock with initially a jump of the index and soon after a reversal to the downside. It seems that the support at near 5,590 USD was strong and so another final reversal to the upside kept the index on its course above the 30-period MA. Expectations regarding future lower interest rates should keep the risk-on mood in place.
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TECHNICAL ANALYSIS REVIEW – TRADING IDEAS
US Dollar Index Chart Summary - 1H Candles
Time zone EEST (GMT+3:00) Athens
As seen from the chart, the USD was depreciating against the other currencies for a very long period and it was only on the 22nd Aust that activity in the market eased and the dollar index started to see slowdown. On the 23rd however, it experienced a sharp drop during Fed’s Powell speech when he gave strong comments about lowering interest rates. The index did not retrace yet. It could be that it will after breaking some resistance levels and the RSI forms more signals of a bullish divergence.?
EURUSD Chart Summary - 1H Candles
Time zone EEST (GMT+3:00) Athens
The EURUSD was driven mainly by the USD and how the figure releases and market expectations had an impact on the currency. The area near the level 1.101 proved to be a strong support. A triangle formation was broken with the USD heavy depreciation on the 23rd Aug driving the pair all the way up to the resistance near 1.12. Retarcement took place but there is room for more with target level 1.117.
XAUUSD (Gold) Chart Summary - 1H Candles
Time zone EEST (GMT+3:00) Athens
Since the 22nd, Gold reversed to the upside with a steady pace. It now moves away from the 2,500 psychological level and continues to break resistances. Technically I see room for more upside movement, especially now that USD weakening and confirmations from officials for lower interest rates push Gold to the upside. The only concern is that the upper band of the 50-period bollinger bands could act as strong resistance.
Crude Oil (WTI) - Chart Summary - 1H Candles
Time zone EEST (GMT+3:00) Athens
Commodities got a boost after the 22nd. It is clear that Crude oil shares a similar path as Gold since then experiencing an uptrend. Crude oil passed the critical level at near 74 USD/oz and moved to the upside. Summer is ending and at the same time fears a major spillover in fighting from the Gaza conflict into the Middle East that could disrupt regional oil supplies, drive the price further upwards.
S&P500 - Chart Summary - 1H Candles
Time zone EEST (GMT+3:00) Athens
After Powell’s speech everything changed. Strong comments for interest rate cuts in September caused a shock on Friday and the index eventually settled on an uptrend. During the week the index experienced high volatility, particularly on the 22nd, that it seems to be the data when everything turned around. Now an upward wedge is visible and the index is testing its breakout. The level 5,660 seems important and coincides with the upper band of the 50-period bollinger band indicator.
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NEWS AND ECONOMIC DATA MONITORING?
Today: Preview Analysis (24.08.2024)
Time zone EEST (GMT+3:00) Athens
No important announcements. No special scheduled releases.
The US Durable Goods orders data will be released at 15:30. This report could have an effect on the USD pairs but not expecting any major intraday shock. The expectation is that there will be 4% growth for durable goods orders? but? 0% growth in Core orders. We have seen so far that the economic situation in the U.S. is stable but the latest data for the labour market were reported quite weak. Business conditions are stable so I am not expecting very weak durable goods orders beating the expectations significantly. The USD weakened already quite a lot and correction is more likely today.
General Impact
Forex:?
EURUSD is currently stable and trading in a small range.
Crypto:
Bitcoin saw an early jump but soon reversed to the downside.?
Metals:
Gold broke the intraday resistance and moved upwards with a strong momentum.
Energy:?
Crude oil seems to be heading steadily upwards?
U.S. Stocks:
All benchmark Indices formed an upward wedge. Opportunities are expected to arise upon breakout/breakdown.?
Marios C. Kyriakou MSc – Economist, Market Analyst
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