Currencies

Support at 50% Fib retracement

July’s annual Eurozone inflation rate flash has shown a rise from 2% to 2.1%, moving above the ECB target. If inflation is seen as in tact, the thinking is that the ECB could wind back policy faster than is priced into the Euro. That would mean last week's post-ECB drop was overcooked and would be erased. Technically, prices on the daily chart are forming a base in the zone of 1.1520 – 1.1450 which is near to 50% Fibonacci retracement of the rise from the low of 1.0355 to peak of 1.2560. The mentioned zone is also the breakout zone of July 2017, hence this zone will act as a demand zone. In addition, we are witnessing a slowdown in the selling as indicated by MACD histogram on the weekly chart. The RSI (14) on the 240 minute chart has entered the oversold zone and probability of a bounce back is high.

Break above 38.2% Fib retracement

Australian Dollar is likely to get support from strong building approvals report for June and start of negotiations between US and China for resolving trade issues. Australian building approvals for the month of June grew by 6.4%, up from an upwardly-revised contraction of -2.5% in May, when markets had been looking for only a 1.1% rise. Economists are still expecting steady growth in spite of growing global trade tensions, and that highlights a more positive outlook for the Australian economy. Meanwhile, New Zealand business confidence reached a 10-year low in July, with headline confidence and firm's views of their own prospects dropping. A net 45 percent of 340 firms surveyed in the ANZ business outlook survey for July expect general business conditions to deteriorate in the coming 12 months. Under these circumstances, we expect AUD to rally against NZD.

Trend line break out

Canadian economic growth rose by 0.5% between the end of April and May, up from 0.1% previously, when markets had been looking for only a 0.3% gain. This puts Canada's economy on track to achieve annualized growth of around 3% for the second quarter overall. Statistics Canada says 19 out of 20 industrial sectors all saw growth during the month of May, with mining, quarrying and energy sectors leading the way. Services industries all did well too. Bank of Japan continued its dovish policy as it announced it would maintain “extremely low” interest rates for an extended period and declared it was strengthening the framework for continuous powerful monetary easing. CAD should continue its bullish stance against JPY. Technically, prices have given a trend-line break out and could be forming a Rising three candle stick pattern on the daily chart.

Equities

Strong trend line support

Chinese Purchasing managers' index (PMI) for China's manufacturing sector came in at 51.2 this month, slowed down from previous month but pointed to steady economic growth. China's factory and service activities are still stable and the marginal slowdown could be due to weather conditions and a slack season for some sectors. The subindex for consumer products picked up on rising disposable income. The stimulatory measures China announced recently should be supportive for real economy and equities, particularly Hong Kong stocks which are used by International investors as a proxy for the Chinese market.

Data Center Concerns Overstated

Chipmaker Intel reported robust second quarter numbers on July 26 that topped expectations on both the top and bottom lines and the management also raised full-year revenue and earnings guidance. Yet, Intel stock dropped sharply because of go-forward concerns in the data center business that the company is delaying product of a 10 nanometer chip. Investors are concerned that as the data center market shifts from the current 14 nanometer standard to 10 nanometer, Intel will consequently be left in the dust and competitors like AMD will gain share. These concerns have merit, but, Intel is delaying 10 nanometer production for a reason, they are delaying production because they think that their 14 nanometer product is good enough to effectively compete and protect majority market share. They also believe in waiting to launch 10 nanometer product until yields are at a level to optimally support volume production. Investors should also be pleased to note that Intel, which has supplied cellular modems for some of Apple's iPhones for years, might be poised to take over that whole business.

Metals

Seasonally two best months of the year

At the latest FOMC, the Fed highlighted the economy as robust, effectively signaling two more rate hikes, which resulted in gold prices tanking to $1204 levels last seen in July 2017. However, gold prices gained during the last session of the week on Non – Farm payroll data which came in softer than expected, although, this did not help the prices in not posting a fourth consecutive weekly loss. On the positive front, gold demand in India improved last week as local prices traded near a six-month low, prompting jewelers to replenish inventory, while weaker rates in Singapore saw demand pick up further there. During the coming week traders would be watching the PPI data which is a leading indicator of consumer inflation and CPI data which is likely to come in at 0.2%. Gold has entered into seasonally best two months of the year. Historical analysis reveal that during these months gold prices have gained an average of about 4.1%, with a probability of nearly 70%. In addition the daily sentiment index (DSI) for gold has fallen to 6% which is a sign of a highly oversold market. Technically, on charts gold prices found support at July 2017 low of $1204.95, from where we saw a rally.

Energies

Support at 78.6% Fibonacci retracement

WTI crude oil bulls looked very confident at the start of the week, when they lifted the price to $70.41 a barrel on Monday, July 30th. Unfortunately, their enthusiasm quickly faded, allowing the bears to cause a selloff to $67.34 as of Wednesday, August 1st. One of the possible “reasons” for the decline was the 3.8 million barrel increase in U.S. commercial crude oil inventories revealed by the latest report by the U.S. Energy Information Administration. In addition, Russia's crude output climbed nearly 150,000 b/d in July, the energy minister said Thursday, largely in line with Moscow's late-June agreement with OPEC. Russian output is now just 15,000 b/d below the record high of 11.23 million b/d set in October 2016. Technically, on daily chart prices are forming a bearish gartley harmonic pattern. The mentioned pattern is a four legged pattern, with XA leg from $72.98 to $66.30, the AB leg completed at 61.8% Fibonacci retracement of the XA leg at $70.44. The BC leg competed at 78.6% Fibonacci retracement of the AB leg at $66.93 level. At present prices are in the final CD leg which is likely to complete around$71.50 level.

Production to fall below consumption

Global production is expected to fall below consumption for the first time since 2012 as yields in major exporting countries retreat from strong levels seen the past few years. When Chinese stocks are removed from calculations, the world’s surplus of wheat measured by the number of days’ supply could be at the lowest level since 2008. And the stocks to use ratio of major exporters could be at the lowest level ever. Crops in France and the Black Sea region aren’t complete busts, but they are disappointing. Dry conditions caused more damage from Germany into the Baltics. And Australia faces potentially devastating losses from the El Nino expected to be underway soon. Facts provide fodder for bulls.

 

Source: Matrix PR