Forex Updates by Solid ECN

[Solid ECN]

EURUSD​

PMI indexes in Europe mostly performed weaker than preliminary readings. In countries that reported data for the first time today, the readings were also worse than expected. Those are services PMI readings from European countries:​

• Spain: 49.3 (expected 51.5; previous: 52.8)​
• Italy: 49.8 (expected: 50.3; previous: 51.5)​
• France (fin.): 46 (expected: 46.7; previous: 47.1)​
• Germany (fin.): 47.3 (expected: 47.3; previous: 52.3)​
• EMU (fin): 47.9 (expected: 48.3; previous: 50.9)​
• Eurozone composite drops to 46.7 with 47 points expected.​

We have the lowest reading since 2020. HCOB writes in a commentary that the eurozone did not fall into recession in the first half of the year, but the second half of the year comes into big question. The services sector, which had been a stabilizing force for the economy for many months, now appears to be a strong drag, and the industrial sector is likely to decline further. HCOB forecasts -0.1% change in GDP for Q3 in EMU.

EURUSD continues its declines and is currently testing the 1.0750 levels.​

 

[Solid ECN]

Bank of Canada Expected to Keep rates unchanged tomorrow​

USDCAD enjoyed strong gains between June 2021 and October 2022, gaining over 15% over the period. However, the advance was halted in the final quarter of 2022 and the pair has traded largely sideways since. Recent USD strengthening allowed the pair to bounce off 10-month lows in the 1.3100 area and climb towards the upper limit of the trading range at 1.3650. An attempt to break above this zone was made today but so far, bulls failed to deliver a breakout. Decision from Bank of Canada tomorrow could be crucial for whether the pair breaks above this zone or pulls back from it. Should we see a strong hint that incoming data doesn't support rate hikes at future meetings, CAD may find itself under pressure with USDCAD potentially breaking above 1.3650 area.

 

[Solid ECN]

UK GDP Below Expectations, GBPUSD Ticks Lower!​

The UK's Gross Domestic Product (GDP) data, which measures the size of the economy, didn't grow at all over the past year (0.0%), which was less than what was predicted (0.4%). It was also less than the growth seen in the previous period (0.9%). Over a three-month period, the GDP grew by 0.2%, which was also less than the forecasted 0.3% but equal to the previous period's growth. In July, the economy actually shrank by 0.5%, which was more than the predicted shrinkage of 0.2% and a reversal from the previous month's growth of 0.5%.

This shrinkage in July is attributed to poor weather affecting spending and strikes in the public sector. This makes it increasingly likely that the UK might experience a recession this year.

As for Industrial Production, specifically manufacturing, there was a decrease of 0.8% in a month, which is actually better than the predicted decrease of 1%. However, it's a significant drop from the previous month's increase of 2.4%. Over a year, manufacturing grew by 3.0%, slightly less than the previous year's growth of 3.1%. The overall industrial production over a year grew by 0.4%, which was as predicted but less than the previous year's growth of 0.7%.

In summary, the UK's economic activity is weaker than expected based on GDP readings, and while manufacturing production was slightly better than anticipated, it still shows a downward trend. This resulted in a sudden drop in the value of GBPUSD (British Pound to US Dollar exchange rate) after this data was published.​

 

[Solid ECN]

BOS's Dilemma: Balancing Economy and Inflation​

The UK's currency, the British Pound, is falling against the US dollar today. This is due to weaker than expected economic growth data for July and a drop in industrial production. The economy shrank by 0.5% in July, the biggest fall since December 2022. All parts of the economy were affected, with the service sector seeing the biggest drop. This was unexpected, especially as this is usually a time when tourism boosts the economy.

The Bank of England (BoE) is in a tough spot right now. The economy is showing signs of slowing down because of high interest rates. At the same time, average earnings, including bonuses, have gone up from 8.4% to 8.5%. This increase in wages adds to inflationary pressure. Despite already high inflation, this could lead to further interest rate hikes. Experts are predicting another increase of 0.25% at the BoE meeting next week on September 21st.​

 

[Solid ECN]

EURUSD - Chart of the Day​

The European Central Bank (ECB) will make a decision today at 1:15 PM BST, and this could cause some changes in the value of the Euro compared to the US Dollar. The markets are unsure about what ECB's head, Christine Lagarde, will decide. The ECB might keep the interest rates the same at 4.25%.

At the same time, the US will release some economic data at 1:30 PM BST. This includes information about retail sales, inflation, and changes in the number of people without jobs. This could give us more insight into the US job market.

If the ECB keeps the rates the same, it might cause the Euro to decrease in value compared to the Dollar. This could be because people are speculating that the ECB might stop increasing rates due to the weaker economy in the Eurozone. The Eurozone economy might have been affected by the previous nine rate increases. On the other hand, if the ECB increases the rates, the Euro might increase in value compared to the Dollar. This could mean that the ECB doesn't think the economy is weak enough to stop fighting inflation and start stimulating demand. However, the value of the Euro could also be affected by the US Federal Reserve's decision next week.

It's important to note that the economy in Europe is weaker than in the US, which is clear in the industrial sector. So, any increase in the value of the Euro might be due to speculation, and any worsening data could stop further increases. This is as long as the US data continues to be stronger than Europe's. Christine Lagarde will start a conference at 1:45 PM BST.

Looking at the Euro-Dollar chart, we can see that the value of the Euro is decreasing. This trend could only change if the value increases significantly to 1.08. Until then, there might be resistance at 1.078, which is where the value started decreasing in September. If the value decreases below the averages of 200, 100, and 50 days, which are all around 1.073, it might suggest that the Euro will continue to decrease to 1.06, which would be the lowest value this year.​

 

[Solid ECN]

US30 - Chart of the Day​

As we will learn a number of macro data from the US economy today and today, we have 'Freaky Friday' so elevated volatility among Wall Street indices may continue. Although the share of industrial companies in the Dow Jones Industrial Average (US30) is quite limited these days, it is still substantial (including Boeing, Honewyell and General Electric) - it is today that we will learn data from US industry. The industrial production reading at 2:15 PM BST may show whether consumer and business demand is indeed strong enough to stimulate production, and data on consumer sentiment and inflation expectations will complete the picture of overall prosperity in the U.S. economy.

In the results of the rollover in the options and derivatives market, today's volatility on US30 may accelerate - and if investors' new positioning will be in line with the current upward trendline there are chances for a strong session on Wall Street. A Bank of America survey indicated a record $26.4 billion in inflows into US equity market this week, the vast majority of which ($18.7 billion) flowed into large-cap companies. Analysts pointed out that the market consensus is reassuring of a successful scenario for the stock market - a soft landing of the economy in the United States.

Looking at the Dow Jones (US30) contracts, we see that they are quite close to historical highs, and it is possible that the bulls will eventually reach record levels above 36,000 points. The upward trend line is maintained, and the index has not approached the SMA 200 (red line) since September 2022, demand reacted quickly in the 23.6 Fibonacci retracement zone at 32,400 points. So far, the current week has been exceptionally successful for the Dow Jones, as illustrated by the green candle with a large body. Seasonally, September has often proved to be a suitable time for stock accumulation for the last, usually successful 'Christmas quarter.' Bulls are hoping that this will also be the case this time.​

 

[Solid ECN]

CHN.Cash - Chart of the Day​

Today, Chinese stock markets are falling sharply, with CHN.cash down almost 1%. Economic data is weaker than expected. Excluding oil, exports from Singapore, the world's biggest port, dropped 3.8% month over month, which is worse than the 4.2% growth predicted and the previous 3.2% drop. This shows that some economic indicators are weakening for a longer period. China, which depends a lot on demand from Western countries, especially the US, could suffer greatly if demand from developed economies decreases, for instance, due to a recession. The fact that fewer goods are leaving China each month might indicate a wider problem. How a declining Chinese market affects global fund managers' portfolios is a big question because China's economic weakness is somewhat separate from other 'emerging markets'.

Another risk factor was the nearly 20% drop in Evergrande shares at the start of the Chinese session. Although they recovered their losses, it raised wider concerns about China's real estate sector. Country Garden, which is financially troubled, faced two major challenges: the initial deadline for interest payments on more than $50 million in dollar bonds and the end of a creditor vote on a proposal to extend repayment of debt in yuan. While property sales in China increased month over month in August, other key indicators like new housing starts, total construction area and real estate investment continued to fall. Data from the 70 biggest cities show that property prices fell in most cities.

Looking at the CHN.cash chart, we see that supply is maintaining the overall downward trend line and became active again last time at 7000 points. The rebound lost momentum at 6700 and now sellers are back in control again, who may want to test the 61.8 Fibonacci retracement of the upward wave from fall 2022 at 6000 points again. Alternatively, if this support breaks downwards it could lead to a test of 6750 points, which are near 5750 points - 61.6 Fibo retracement. To break the current trend, buyers would have to push the index above the SMA200, which is now at 6672 points.​

 

[Solid ECN]

Bitcoin is testing its highest levels since August 31 ahead of the FOMC decision.​

Today, we're seeing a general recovery in the cryptocurrency market. Interestingly, there aren't major changes happening in the foreign exchange market, especially with the dollar. In recent times, we've noticed that Bitcoin's performance is often linked to other assets like Wall Street indices or gold. Even though US100 contracts are having a weaker day today, Bitcoin is on the rise, which is also in line with an increase in gold prices. This could be due to the upcoming Federal Reserve meeting that might signal the end of interest rate increases. In the past, Bitcoin has benefited from a weaker dollar, which was partly due to reduced expectations of a rate hike. If the Federal Reserve adopts a cautious approach now, Bitcoin might break through the 28,000 mark and attempt to reach 30,000 USD. After that, the next target would be 32,000 USD, which is the highest level since May 2022.

 

[Solid ECN]

Understanding the Impact of Rising Oil Prices on the Global Economy​

The price of oil is going up, and people think it might stay high for a while. Some people think it won't go over $100 per barrel, but others aren't so sure. The price has already hit a 10-month high of $95 per barrel.

Countries like Saudi Arabia and Russia have been producing less oil, which means there's less oil available worldwide. This has helped push up the price.

Higher oil prices can lead to higher prices for other things too, because oil is used in many industries. This could lead to inflation, which is when prices go up across the board. People are worried about this because it could slow down economic growth. The stock market has been reacting to these changes. Some parts of the market might benefit from higher oil prices, while others might struggle.

Investors are trying to protect themselves from the risks of higher oil prices and potential market volatility. They're using certain types of securities to do this. Some investors are still positive about the energy sector and are investing more in it. The changes in the oil market are having big effects on the global economy and financial markets, so investors and policymakers need to keep a close eye on things.​

 

[Solid ECN]

USDCAD Technical Analysis​

Inflation rates have increased due to a rise in gasoline prices. The inflation rate for the year ending in August was 4.0%, up from 3.3% in July. This was slightly higher than what economists predicted, which was 3.8%. From July to August, inflation increased by 0.4%, which was a bit more than the expected 0.3%, but less than July's 0.6%.

Core inflation, which excludes volatile items like food and energy, also increased to 3.3% from 3.2% in July, but it was less than the expected 3.5%. On a monthly basis, core inflation decreased to 0.1% from 0.5%.

Despite these changes, it's still expected that the Bank of Canada (BoC) will not change interest rates at their next meeting. However, the chances of a rate increase have gone up to about 43%. But with unemployment rates rising since May and signs of slower economic growth, a rate hike is still not likely.

The USDCAD currency pair has recently experienced a bounce from the support area at 1.338. This upward movement suggests that bullish traders might be gearing up to test the resistance level at 1.35. However, it’s important to note that the overall trend appears to be bearish.

The bearish outlook remains valid as long as the pair continues to trade within the daily downward channel. This means that despite the recent bounce, we could still see a continuation of the downward trend.​

 

[Solid ECN]

EURUSD Technical Analysis​

The euro has been moving sideways and has had trouble getting past the 1.0700 mark. People are waiting for the FOMC statement today. The cost of living in the Eurozone has dropped a little, from 5.3% to 5.2%, which might mean inflation is slowing down. This could make the euro weaker. People think the Fed will stop increasing interest rates in September, but some believe there might be one more increase this year. This is helping the dollar.

The EURUSD is trading above a level that it's been below for a long time; if it goes above 1.0700, that's a good sign for the euro. The MAACD and RSI indicators suggest the trend might be changing.

The levels to watch are:​

• Resistance (where it might have trouble going higher): 1.0700, 1.0760.​
• Support (where it might bounce back up): 1.0640, 1.0540.​

 

[Solid ECN]

GBPUSD Analysis​

The GBPUSD, also known as Cable, dropped to its lowest level since May 26 on Tuesday. This was due to the UK's inflation rate in August being lower than expected.

The yearly CPI (Consumer Price Index) fell to 6.7%, which is the lowest it's been since February 2022. This was a drop from 6.8% in July and was lower than the predicted increase of 7.0%. The core inflation rate, which doesn't include fluctuating components, also fell to 6.2% in August. This was lower than the predicted 6.8% and the 6.9% from the previous month.

Even though inflation is still high (more than three times the target of 2%), the data from August gives some hope. It also gives some relief to the Bank of England, which was expected to raise interest rates for the 15th time in a row at a policy meeting on Thursday. Now, there's a 50-50 chance that they might not raise rates this time.

However, there's still a risk of inflation increasing again. This is because oil and food prices are still going up, which keeps adding to inflation and might lead to more policy tightening.

The daily chart shows a bearish trend. However, the price is nearing a key short-term support level at 1.2307 (the lowest point on May 25), and this could slow down the downward trend because the market is oversold.

Any increase in price is likely to be limited by the broken 200-day moving average (1.2432) to keep the overall downward trend intact. If the price falls below the 1.2307 level, it could lead to a deeper correction of the larger uptrend from 1.0348 to 1.3141 and could potentially reach 1.2074 and 1.2000 (a key psychological level).

On the other hand, if the price consistently stays above the 200-day moving average, it could signal a stronger correction. A rise above the important 1.2500 level could indicate a possible trend reversal.

The market is waiting for the Federal Reserve's decision (expected later today and likely to remain unchanged) and a more important decision from the Bank of England on Thursday. The British pound could face more downward pressure if the Bank of England decides not to raise interest rates this time. However, if the central bank decides to raise rates again and maintains a hawkish stance, it could boost the currency.

Resistance levels: 1.2432; 1.2482; 1.2504; 1.2522.
Support levels: 1.2332; 1.2307; 1.2274; 1.2190.​

 

[Solid ECN]

Intraday Crude Oil Prices Dip Amid US Rate Hike Expectations​

Crude oil prices are experiencing a downward trend in today's trading session. This decline is largely due to the anticipation of a US rate hike, which has overshadowed the tight supply outlook. The recent dynamic rally has also triggered some profit-taking on the instrument.

US EIA Data Influences Energy Markets

Energy markets are responding to the latest data from the U.S. Energy Information Administration (EIA). The data revealed a decrease in oil inventories by 2.14 million barrels. ANZ analysts highlighted in their report that the unexpected drop in inventories encouraged investors to secure profits following a 10% increase since the start of the month.

Brent Crude and OIL Quotes Show Decline

Today's session sees Brent crude down by nearly 1%, while OIL quotes indicate a decline of approximately 2% after the most recent futures contract rollover.

**Potential Short-lived Decline Amid Tight Global Supply Concerns**

Despite the current decline, it's possible that this could be a temporary dip. There are ongoing concerns in the market about a tight global supply in Q4. Crude inventories at Cushing, the supply hub for WTI, are at their lowest since July 2022. Additionally, production cuts continue to be implemented by OPEC and its affiliated economies.

BRENT Crude Oil Prices Eyeing Support Level

Following the futures rollover, BRENT crude oil prices are moving towards a support level established by a consolidation zone near the $90 per barrel mark.​

 

[Solid ECN]

USD 100 - Chart of the day​

With the BoJ's decision, the cycle of publishing monetary decisions of major central banks this week comes to an end. The markets reacted volatile to them, but overall, the indices recorded losses on a weekly basis. The relatively hawkish Fed and its published new dot-plot indicated the possibility of one more hike this year and the postponement of the first-rate cuts. The overtones of this conference broadly affected sentiment around the US100 index and TNOTE.

The US100 index has been recording declines, which have reached, from the perspective of technical analysis, important support zones set by the 100-day exponential moving average (purple curve), which, it is worth mentioning, have not been tested for nearly 6 months. Moreover, the declines themselves are directly driven by the selloffs observed in the debt market, which has historically shown a correlation with the listings of technology companies.

 

[Solid ECN]

US30 - Chart of the day​

Investor confidence in the US stock market has been declining since the latter half of the third quarter. This is partly due to the Federal Reserve's aggressive stance and Chairman Powell's statements, which have led to a rise in bond yields. In fact, 10-year treasury yields have hit a 16-year high of 4.54%. If the economy remains stable, these yields could continue to rise.

The stock market, including the Dow Jones Industrial Average (DJIIA or US30), is losing value as the risk-free rate increases and the economic growth outlook becomes uncertain. Major institutions like S&P and the Conference Board predict a slowdown in US GDP growth in 2024.

There are also concerns about China's real estate market, particularly the default of Evergrande, and potential political crises in the US over the federal budget. A government shutdown, which has happened 18 times since 1977, could slow economic growth and delay the release of economic data. Credit rating agency Moody's warns that such events could lead to a downgrade of the US credit rating.

Looking at the US30 chart, the price is close to the 200-day Simple Moving Average (SMA200) level, which is around 33,932 points. The price has also fallen below the 100-day Simple Moving Average (SMA100) for the first time since May. If the price doesn't rebound, it could test the 23.6% Fibonacci retracement of the March 2020 upward wave at 32,400 points. Historically, the price's behavior around the SMA100 and SMA200 has often indicated buying opportunities or periods of weakness.​

 

[Solid ECN]

Tesla​

Tesla (TSLA.US) and other European automakers that import from China into the EU will be part of an investigation into whether the electric vehicle industry receives unfair subsidies, the Financial Times reported, citing Valdis Dombrovskis, the EU's executive vice president.

The EU is "open to competition" in the electric vehicle sector, the official added, but "competition must be fair," adding that other countries have already imposed tariffs on electric vehicles from China. The investigation will cover all companies (not just Chinese) that receive subsidies on the production side.

This situation for Tesla (TSLA.US) itself could prove problematic, as nearly 20% of all the brand's electric vehicles sold in Europe are manufactured in China, including at a factory in Shanghai.​

 

[Solid ECN]

EURUSD​

Several economic reports from the United States were released at 3:00 pm BST today. The most anticipated was the Conference Board report, which was projected to show a slight decline compared to August. However, the actual report revealed a more significant drop than expected, from 106.1 to 103.0.

In addition to the Conference Board data, investors also received the Richmond Fed index for September and new home sales data for August. The Richmond Fed index was a pleasant surprise, while the new home sales data was slightly lower than anticipated.

- **Conference Board consumer confidence index for September**: 103.0, lower than the expected 105.5 (previous figure was 106.1)
- **New home sales for August**: 675k, lower than the expected 700k (previous figure was 714k)
- **Richmond Fed index for September**: +5, significantly better than the expected -6 (previous figure was -7)

Following the release of this data, the USD experienced a slight decline. However, the market reaction was minimal, with EURUSD increasing by approximately 0.05% in the initial minutes of trading, while USDJPY fell by around 0.1%. The stock markets largely disregarded the data.​

 

[Solid ECN]

Gold - Chart of the Day​

GOLD quotations continue the dynamic downward momentum initiated earlier this week. Bullion, for that matter, is responding directly to declines in the EURUSD and weakness in US debt securities, which, in the case of TNOTE, broke out to new lows.

These movements largely reacted to the rise in expectations for one more potential Fed hike. Now, market sentiment has further deteriorated as a result of the sell-off in equity and derivatives markets, which have been dominated over the past week by increasing exposure to short positions. It is worth remembering, however, that since the last FOMC decision, the valuation of the implied interest rate has begun to fall, which not a little reduces the overtones of hawkish comments from bankers.

Gold has broken out below the support set by the 200-day EMA (orange curve) and is currently slightly below the $1,900 per ounce barrier. The previously mentioned levels could be the most important zones to watch if we were to see a rebound on this instrument. On the other hand, the most important support zone at the moment is the $1885 zone, where the local minimums of August are located.​

 

[Solid ECN]

USDJPY Technical Analysis​

The Japanese yen remains weak against most currencies, including the USD, EUR, and CAD. Coupled with the strengthening dollar, the USDJPY rate is entering higher territories and is currently approaching the historical high of 151.7. Leading representatives of the Japanese government and the Central Bank have repeatedly indicated that the yen is currently too weak.

Today, Japanese Finance Minister Shunichi Suzuki again warned against speculative trading of the yen, which is approaching an 11-month low with USDJPY close to the 150 level. Although the minister did not confirm any plans regarding interest rate control or intervention, he leaves all options open to address excessive currency volatility.

However, an open question remains regarding an agreement with the US government concerning BoJ intervention, which would likely be necessary before any significant actions. For this reason, many analysts argue that the bar for intervention is set higher this time than the last and beyond market current expectations.

Looking at the USDJPY chart, we see that the rate is approaching its historical peak and the psychological level of 150. However, comparing the USDJPY rate to the dollar index, one can notice that reaching the current levels is not only due to the strengthening dollar but also a greater depreciation of the yen compared to October 2022. Currently, the dollar remains 7.5% lower than its peak last year.​

 

[Solid ECN]

The EURUSD awaits more negative targets​

The EURUSD pair settles around 1.0500 barrier, waiting to get negative motive that assist to push the price to resume the expected bearish trend for the upcoming period, which targets 1.0440 as a next negative station.

The EMA50 continues to support the bearish wave within the bearish channel that appears on the chart, noting that breaching 1.0545 will stop the expected decline and lead the price to achieve some intraday bullish correction.

The expected trading range for today is between 1.0420 support and 1.0570 resistance. The expected trend for today: Bearish​