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iFOREX Daily Analysis – 25/07/2016
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The U.S. dollar rallied to a four-month high against a basket of major currencies on Friday, boosted by the diverging monetary policy outlook between the Federal Reserve and other global central banks.
A recent string of better than expected U.S. data reignited speculation that the Federal Reserve will raise interest rates before the end of the year.
Against the yen, the dollar tacked on 0.26% by late Friday and for the week the pair jumped 1.18%, the second straight weekly gain, amid growing expectations that policymakers in Japan are preparing a double-bazooka of fiscal and monetary easing in the weeks ahead.
Meanwhile, the British pound tumbled sharply, with GBP/USD down 0.92% late Friday, after the release of downbeat economic reports from the U.K. added to concerns over the outlook for Britain’s growth following the country’s decision to leave the European Union, and for the week, sterling lost 0.62% against the greenback.
In the week ahead, investors will be looking to Wednesday’s highly-anticipated Federal Reserve policy statement and also on a monetary policy announcement from the Bank of Japan on Friday, amid growing expectations for further stimulus. Traders will also be looking ahead to data on U.S., U.K. and European second quarter gross domestic product for fresh indications on the health of the global economy in wake of Britain’s shock vote last month to exit the European Union.
EUR/USD
The euro fell further on Friday after news of shooting inside a shopping center in Munich where police said there were multiple deaths and casualties stoked investor jitters and spurred selling in the single currency.
The euro fell to a one-month low of 1.0956 against the dollar on Friday, before ending down 0.45% for the day and 0.55% lower for the week.
In the week ahead, investors will be looking to Wednesday’s highly-anticipated Federal Reserve policy statement, for fresh guidance on the pace of interest rate hikes over the next several months.
Pivot: 1.1
Support: 1.095 1.0935 1.091
Resistance: 1.1 1.1035 1.105
Scenario 1: short positions below 1.1000 with targets @ 1.0950 & 1.0935 in extension.
Scenario 2: above 1.1000 look for further upside with 1.1035 & 1.1050 as targets.
Comment: the RSI is capped by a declining trend line.
Gold
Gold prices declined on Friday, ending the week close to a three-week low, as renewed expectations for a Federal Reserve rate hike later this year boosted the U.S. dollar and as investors looked to buy into rising equity markets rather than purchasing safe-haven assets.
The precious metal shed $7.60, or 0.57%, by close of trade on Friday and for the week it dipped $4.40, or 0.26%, the second weekly loss in a row.
A recent string of better than expected U.S. data reignited speculation that the Federal Reserve will raise interest rates before the end of the year. Interest rate futures are currently pricing in a 45% chance of a rate hike by December, compared with less than 20% a week ago and up from 9% at the start of this month.
Pivot: 1325
Support: 1313.3 1310 1306.5
Resistance: 1325 1330.3 1334
Scenario 1: short positions below 1325.00 with targets @ 1313.30 & 1310.00 in extension.
Scenario 2: above 1325.00 look for further upside with 1330.30 & 1334.00 as targets.
Comment: the RSI broke below a rising trend line.
WTI Oil
Oil futures ended Friday’s session at the lowest level in nearly three months, as concerns over a global supply glut intensified after data showed that the U.S. oil rig count rose for the fourth week in a row last week.
Crude oil for delivery in September fell to a daily low of $43.74 a barrel, a level not seen since May 10, before recovering to end at $44.19 by close of trade, down 56 cents, or 1.25%.
Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. last week increased by 14 to 371, the fourth straight weekly rise and the seventh increase in eight weeks. The renewed gain in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead, underlining worries over a supply glut.
Pivot: 44.95
Support: 43.7 43.38 42.96
Resistance: 44.95 45.5 46.08
Scenario 1: short positions below 44.95 with targets @ 43.70 & 43.38 in extension.
Scenario 2: above 44.95 look for further upside with 45.50 & 46.08 as targets.
Comment: the RSI is capped by a declining trend line.
US 500
U.S. stocks re-entered record territory on Friday, completing their fourth straight week of positive gains, as strong performances by a pair of telecom giants, outweighed losses from General Electric following subdued quarterly earnings from the multinational conglomerate.
The Dow Jones Industrial Average gained 0.29%, while the S&P 500 Composite index added 0.46%, as U.S. equities stayed on pace for their strongest month since March. The indices have remained in record territory for the majority of the last two weeks, as signals of slowing growth in the euro area and Japan, as well as plunging global bond yields have sent investors fleeing to safety into stocks on Wall Street. The S&P 500 ended the week at its highest closing level on record. The NASDAQ Composite index, meanwhile, rose 0.52%, moving approximately 2% from hitting a record-high.
Pivot: 2072
Support: 2072 1992 1950
Resistance: 2190 2220 2250
Scenario 1: long positions above 2072.00 with targets @ 2190.00 & 2220.00 in extension.
Scenario 2: below 2072.00 look for further downside with 1992.00 & 1950.00 as targets.
Comment: the RSI is bullish and calls for further advance.
