Markets were light in volume with the UK being on the bank holiday and end-of-month flows may have had something to do with the ranges within the US session. Oil is still higher as we get closer to the OPEC+ meeting and the Swissy has been under some real pressure from its peers all day.
Market Wrap
The Swiss franc has been weak all day and the Chinese yuan has maintained its relative strength against the other major currencies. With London on a bank holiday today the largest moves came at the start of the US session as traders returned to their desk after a weekend of digesting the Jackson Hole speech from Fed Chair Powell. The Canadian dollar has risen today on the back of some good macro data from Canada and the rising oil prices. Canada recorded its second consecutive rise in its current account surplus at levels not seen for over a decade.
With the SNB ready to intervene in the markets to depreciate the franc days like today when the euro is particularly strong and the franc is across the board weaker, I feel there is a good opportunity for the SNB to get the biggest bang for their bucks. We often see big breakout moves and today was no different. The retail traders on the ActivTrader platform are biased to the long side and in this instance, I must agree with them.
They have been rewarded today with the franc being persistently weak and the EURCHF classic retest of a breakout level was a great opportunity to get long. The long target should be the swing high from around the 13th of August 2021 at the 1.08399 level or just above.
The EURUSD itself benefited from the sell-off in the US dollar last week and the 1.8000 was a great target then. It has now become very resistant and seemingly the bulls will need more reasons to get long. If there is to be more downside in the future, I have my eye on a potential falling wedge pattern, which should terminate at the next touch of the lower bound trend line before breaking higher, of if we can get above the daily 50-period ema, the breakout could be next and then a test of the daily 200-period ema would be my target TP1 before going on to 1.2100. European sentiment data today also weighed on the single currency as economic sentiment for the Euro Area dropped for the first time in 7 months. Whilst German inflation has now reached 27-year highs at 3.9%.
The US dollar index moved less than I expected and maybe it is down to the EURUSD trading at 1.1800. Just above the current price action is old support which if that becomes tested resistance the next level down should be $92.50 at least. Ultimately, I am looking for reasons to get short long term, down to the June FOMC lows.
The TLT 20-year bond ETF has been rising since the Friday speech from Jackson Hole where Fed Chair Powell failed to state whether the FOMC was going to start tapering asset purchases and made no mention of the economy being able to adjust positively to a rate hike cycle. The demand for pristine collateral like the US treasuries should keep this ETF rising for longer.
The S&P500 has carried on much in the same manner as it ended Friday and rose to the TP2 level that I posted on Friday. QE forever continues and this is almost enough to give investors reason to stick with the yields they get from rising stock prices in these indices but there are also record amounts of fiscal spending moving into the markets which must go somewhere. The indices are continuing to push all-time highs ever higher with the Nasdaq adding nearly another 1% today. This comes on the back of today’s bad news from pending home sales from the USA, which is down 8.5% year-over-year and is the second consecutive bad reading. Two data points don’t make a trend but it’s a far cry from April’s spike high.
On Wednesday the OPEC+ convene where consensus is for the current plan to remain. Hurricane Ida was causing devastation across the northern Gulf of Mexico and oil infrastructure and drilling were in lockdown. Most if not all Gulf oil production was suspended ahead of the weekend as Ida was declared a hurricane, however by the time it reached land the storm had lost some of its ferocity.
Gold has broken out of a descending channel has now successfully broken higher again from some overhead resistance, is proceeding to test the old resistance for support, and could be about to head higher again.