- In another economic setback, over 1 million Americans filed their first jobless claims last week, making that just 1 week in 20 it has been less than 1 million. The US dollar gave back some of its gains achieved on Wednesday following its strongest session in two months.
- Australia’s business activity fell back into a decline according to their PMI reads. With both the service and manufacturing sector contracting below 50 it denotes further headwinds for growth whilst VIC remain in lockdown.
- RBNZ state the earliest negative rates could be implemented is “early next year” and is contingent on the health of the economy.
- Japan’s manufacturing PMI contracted for a 16th consecutive month.
Up next: Calendar Highlights
Flash PMI’s are the main theme today. PMI’s are a trader’s favourite as they are a forward-looking indicator (predictive) to growth. They can therefore provide more volatility than other indicators if they deviate widely from expectations.
Take note that the Reuters poll suggests European and US flash PMI’s are due to expand (over 50 is expansion, below 50 is contraction). Given we just saw Australian PMI’s contract again, be on guard for downside surprises. If so, expect volatility and a risk-off toe to ensue, particularly if US PMI’s go below 50.
Keep an eye on:
- EUR pairs, DAX (DE30), CAC (FR30),
- USD pairs, Nasdaq (USTEC), S&P500 (US500) Dow Jones (US30), WTI, XAUUSD
EUR/JPY D1: Trend Remains Bullish Despite Minor New Low
We have made adjustments to yesterday’s analysis, and the timeframe has been switched from H4 to D1.
Whilst trend is still bullish, price action is still within a corrective phase and a minor new low occurred yesterday before bullish momentum returned. The H4 bullish trendline had also been breached.
However, a spinning top doji formed on the daily chart which could mark a potential swing low.
- A break above 125.80 (doji high) assumes bullish continuation
- A break below 125.08 (doji low) could see it re-test 124.29 support
Keep an eye on European and US PMI data today. If both come in stronger than expected it could instil a risk-on tone and help send EUR/JPY higher. Yet weak data from Europe and US could send this lower amidst a risk-off environment.
GBP/NZD H4: Bullish Bias Above 2.0000
The daily chart saw enjoyed its most bullish session in three months yesterday and closed above key resistance (2.0121). Given it has broken above the psychological round number ‘2’ with a strong trend, the bias remains bullish.
- Prices are currently consolidating near the highs in a pennant formation. Bulls could take a break of yesterday’s high as a sign of bullish continuation. However, given the size of yesterday’s daily range, perhaps a pullback would be appreciated.
- If prices retrace, look for evidence of support above 2.0122 support as this could mark a new ‘higher low’
- Whilst the trend remains bullish above the 1.9855 low, we’d take a break below 2.0000 as a reason to step aside.
GBP/AUD D1: Seeking A Break Above 1.8408
Bullish momentum has returned to see that price action has broken out of the bullish flag highlighted on Wednesday. In fact, yesterday was its most bullish session in one month.
Traders who are not already long may want to wait for a break above the 1.8407 high before assuming trend continuation.
- A clear break above 1.8408 assumes bullish trend continuation and puts an inverted H&S pattern into play (1.9128 target).
- The bull flag projects an interim target around 1.8842.
- If resistance holds and prices go back with the flag area, that setup is invalidated, the bull-flag pattern is invalidated.
- However, whilst prices hold above the 38.2% Fibonacci level (this week’s low) then the inverted head and shoulders pattern still shows potential.
S&P500 (US500) – 3,400 Is Pivotal:
There’s not a huge amount to analyses here. The S&P 500 is just below record highs around the 3,400 area, and risk sentiment is key to which side of 3,400 the S&P500 closes on today.
At the futures open the index fell and found support at 3388.28, which may provide bulls intraday opportunities to trade it back towards the highs.
However, if it drifts towards 3,400 before the US open then bears may be tempted to fade into any rallies. That said, one can only guess how many stops may reside above the record highs which, if triggered, could send the S&P500 sharply higher.
Keep a close eye o risk sentiment of other markets (AUD/JPY, gold, Indices etc) to get a better feel about how likely this is to break or roll over as we head into the weekend.
CAD/JPY: Technically the setup is still valid as it holds above 79.86 support, but yesterday’s Rikshaw man Doji is underwhelming for the bull-camp. Keep an eye on CA retail sales tonight. Ultimately a weak CA retail print coupled with risk-on a tone (stronger than expected PMI data) could help CAD/JPY higher, whilst a risk-off tone and stronger-than expected CA retail sales could send this lower. 79.86 support remains the line in the sand.
JP225: An intraday break below support failed to hold, resulting in a bullish hammer on the daily chart bac above support. Momentum is currently bullish in the early Asia session so our bias remains to the upside.
US30: Similar to the Nikkei, as it has posted a bullish hammer (with a bullish close) so we continue to monitor its potential to break higher out of a bullish continuation patter (flag).