Market Outlook

Our daily market outlook articles help you stay up to date with the latest news and analysis on leading currencies, indices and commodities across European, US and Asian markets.

View More

US Dollar Softens at Resistance as Dow, S&P Attempt to Stabilize

Price action and Macro.

Connect via:

US Dollar Talking Points:

- The US Dollar is softening after another test of the key resistance level at 96.04. This was looked at in yesterday’s webinar, as this 50% marker of the 2017-2018 bearish trend helped to hold the highs on two separate occasions earlier in October. This resistance test comes after an earlier-week breach of support, and the big question is whether this bullish move might have the legs to continue as we trade deeper into Q4. The answer to that question will likely emanate out of Brussels, and Rome as the continued tango around the Italian budget brings the potential for greater volatility in the remainder of this year.

- US stocks are continuing to try to re-gain footing after holding above support for this week. Yesterday brought another gust of selling, but bears stopped short of a re-test of last week’s lows, and this keeps the door open for strategies of strength in US stocks. For bearish equity plays, the DAX remains a viable option as the index remains near fresh 18-month lows that were established last week.

- DailyFX Forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

US Dollar Pulls Back from Key Resistance at October Highs

The US Dollar is pulling back from a key resistance level this morning after what’s become a really strong week. It didn’t start out that way, however, as Tuesday brought upon a test through support at 95.00 that was followed by a very visible showing from bulls that’s only now started to calm. The resistance level that’s helping to cap the morning’s highs was looked at in yesterday’s webinar, and this comes in at 96.04, which is the 50% marker of the 2017-2018 bearish move in DXY. This is also the same price that’s helped to hold resistance in the US Dollar for the past three weeks, as can be seen from the weekly chart below:

US Dollar Weekly Price Chart

us dollar usd weekly price chart

Chart prepared by James Stanley

The big question around the Dollar for next week is whether the currency can finally pose a lasting push through this resistance. There was a similar such instance in August, and this is when the Dollar was pushing higher on the back of risk aversion themes as worries were growing around European banks’ exposure to Turkey. But, as markets stepped back from the ledge, so did the US Dollar, and prices fell for much of the remainder of Q3.

But, given the increased focus around the European Commission and the Italian budget, the potential for greater risk aversion is there, and that could compel another topside push through resistance.

Next week’s economic calendar brings an item of interest in that regards, as the Thursday ECB meeting is the high point, and this is when markets will get to hear from ECB President Mr. Mario Draghi on a number of issues. This, of course, is on top of the unpredictable headline-driven volatility that will likely continue to emanate out of Brussels and Rome. Also of interest is a Wednesday rate decision at the Bank of Canada with a strong expectation for a 25 basis point rate hike.

DailyFX Economic Calendar: High-Impact Events for the Week of October 22nd, 2018

DailyFX Economic Calendar

Chart prepared by James Stanley

US Dollar Ranging So Far in Q4

Three weeks into Q4 and the net of price action in the US Dollar has been a range. After opening the quarter near the 95.00 level, with a quick support check as Q3 came to a close and again after Q4 opened, DXY pushed up to the 96.04 level and failed to push through on two separate occasions. Then after another revisit to 95.00, punctuated by the Tuesday test-below, buyers have come back to prod prices right back up to resistance at 96.04.

US Dollar Two-Hour Price Chart: Q4 Range Resistance Re-Test

us dollar two hour price chart usd

Chart prepared by James Stanley

EUR/USD Digs into Support as Sellers Slow Down

This was a key point in yesterday’s webinar, but EUR/USD is testing what’s become a stubborn area of support. The price of 1.1448 is the 50% marker of the 2017-2018 bullish move in the pair, and this price helped to hold the lows after a test earlier in the month. This can be a tough area for fresh shorts to trigger outside of any new bearish drivers in the pair, and markets will likely need another gust of risk aversion if this support is to be taken-out ahead of this week’s close.

EUR/USD Four-Hour Price Chart

eurusd eur/usd two hour price chart

Chart prepared by James Stanley

US Equities Continue to Try to Re-Gain Footing

Yesterday brought another gust of risk aversion to US stocks. But sellers didn’t quite pack the same punch that they did last week when equities rushed down to fresh near-term lows. Yesterday’s hit stopped short of a re-test of those levels from last week, and so far for this week price action has produced a spinning top on the weekly time frame.

Dow Jones Weekly Price Chart

Dow Jones Weekly Price Chart DJIA DIA

Chart prepared by James Stanley

On a shorter-term basis, that potential for a return of bullish price action remains, and a down-side break through a confluent area of support could usher in bigger-picture bearish themes. So, at the very least, this offers an area for stop placement in which the trader can bail out of the position as signs of turbulence show.

Dow Jones Daily Price Chart

Please add a description for the image.

Chart prepared by James Stanley

S&P Cauterizes Support at 78.6% Retracement of Q3 Bullish Move

The S&P 500 is putting in a similar effort of stabilization this week, with Wednesday resistance posting at the 50% marker of the Q3 bullish move after a build of support had come-in off of the 78.6% Fibonacci retracement. A top-side break back-above the 50% marker, or this week’s high re-opens the door to bullish continuation strategies on the index; but given the pace of the pullback compared to the Dow Jones above, traders would likely want to focus bullish equity strategies in the Dow given that last week’s pullback was a bit more shallow and the basis for support appears to offer more optimal construction.

SPX500 Daily Price Chart

SPX 500 Daily Price Chart spy

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX




Yen, Franc and US Dollar Fall in Cheery Markets. Will This Last?

Fundamental analysis, economic and market themes.

Connect via:

TALKING POINTS – YEN, US DOLLAR, FRANC, AUSSIE DOLLAR, STOCKS

  • Yen, Franc, US Dollar fall as commodity currencies rise in risk-on trade
  • FTSE 100, S&P 500 futures hint at upbeat mood through the week-end
  • Rebound in risk appetite unlikely to be lasting as marquee fears remain

Corrective flows defined G10 FX price action in Asia Pacific trading hours. The Japanese Yen, Swiss Franc and US Dollar – all beneficiaries of yesterday’s risk-off push – traded broadly lower. At the opposite end of the sentiment spectrum, the Australian, Canadian and New Zealand Dollars traded higher.

A lull in top-tier scheduled event risk seems to be allowing investors a bit of room to rebalance exposure ahead of the week-end. A sharp rebound in Chinese share prices probably helped. The benchmark CSI 300 index is on pace to add over 2 percent after hitting the lowest level in almost three years.

Sentiment trends are likely to remain at the forefront. Benchmark FTSE 100 and S&P 500 index futures are pointing higher before the opening bell in London and New York, hinting that the risk-on bias aims to prevail through the closing bell on Wall Street.

RISK APPETITE RECOVERY UNLIKELY TO LAST

Critically, none of the headwinds souring investors’ mood in recent sessions have been diminished. Italy remains on course for a clash with EU authorities, a Brexit deal is still elusive and the ascent of anti-establishment political leaders across the world is fueling broad-based uncertainty.

Rising borrowing costs are encouraging the move toward de-risking. The Federal Reserve looks firmly committed to press on with steep interest rate hikes all the while balance sheet reduction gathers steam. This is amplified by the unwinding of ECB QE.

Put simply, the markets are becoming increasingly challenging even as the cost of making a mistake increases. Traders are likely to be more defensive against this backdrop. That hints at further gains for the Yen, Franc and US Dollar at the expense of stocks as well as cycle-linked commodities and currencies.

See our forecasts for currencies, commodities and equities to learn what will drive prices in Q4!

ASIA PACIFIC TRADING SESSION

Asia Pacific Trade Economic Calendar

EUROPEAN TRADING SESSION

European Trade Economic Calendar

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter




Italy Budget Woes Strike Euro Prices Again, Yen May Resume Gains

Classic technical analysis, macro and economic themes.

Connect via:

Asia Pacific Market Open – Italy Budget Woes, EUR/USD, China GDP, AUD/USD, USD/JPY

  • Italy budget fears sunk the Euro as the Italian-German bond yield spread widened
  • US Dollar appreciated as the global stock selloff resumed post the FOMC minutes
  • AUD may fall as Yen gains on China GDP slowdown, Asia stocks are also at risk

We recently released our 4Q forecasts for equities in the DailyFX Trading Guides page

As expected, the decline in market mood from Asia trade as the Shanghai Composite dropped about 2 percent echoed into European and US equities on Thursday. This seemed to be after the FOMC minutes reiterated hawkish commentary, reigniting rate hike bets. The S&P 500 declined 1.44%, clocking in its worst performance in a day in exactly one week.

Understandably, the US Dollar resumed its appreciation as it climbed to its highest since October 4th. This was also fueled by Euro weakness as Italian budget woes struck again. Earlier in the day, Italian Deputy Premier Matteo Salvini noted that their budget proposal will not be changed. Then later in the day, EU’s Pierre Moscovici said that Italy’s budget deficit can’t stay at 2.4%, conflicting with Salvini’s wishes.

Not surprisingly, the spread between Italian and German government bond yields widened which reflected the rising risk associated with investing in the former nation as opposed to the latter. European stocks indexes declined, with the Euro Stoxx 50 down about 1 percent. The anti-risk Japanese Yen also benefited from the deterioration in sentiment.

Italian-German Bond Yield Spread Widens

Italy Budget Woes Strike Euro Prices Again, Yen May Resume Gains

Friday’s Asia Pacific trading session may see weakness in stocks echo into local shares, perhaps driving the Japanese Yen higher. JPY also faces Japanese CPI data. However, given that the BoJ is unlikely to shift its monetary policy setting any time soon, its impact is likely to be overshadowed by developments in risk trends and external forces.

That is the third quarter Chinese GDP data which could have both immediate and longer lasting consequences for market mood. The economy is anticipated slow to its weakest in almost a decade, following the path of a general pullback in global growth excluding the United States. This may send the Australian Dollar lower and potentially be a catalyst for the next major market selloff.

We will be covering Chinese GDP live as well as how the Australian Dollar reacts. To sign up for the event, click the link below!

Chinese GDP report live webinar coverage (Begins 10/19 at 01:45 GMT)

What Else to Expect Ahead?

Australian Dollar Technical Outlook

New Zealand Dollar Fundamental Outlook

US Trading Session

Italy Budget Woes Strike Euro Prices Again, Yen May Resume Gains

Asia Pacific Trading Session

Italy Budget Woes Strike Euro Prices Again, Yen May Resume Gains

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter




Advertisement
Advertisement
Advertisement