Technical levels to watch
With so much going on in the market, it is a good idea to have an understanding of key levels that the market is focused on:
Fundamental situation in short:
We have discussed the weakness in Australia and New Zealand, rates at 1.0% and both central banks have expressed that there is a strong probability of more rate cuts to come.
China, growth is clearly slowing and the currency is weakening, trading at 7.10. Hong Kong is becoming more and more of a troubling situation.
In the U.S., the market is expecting rate cuts , with one in September priced in. Again remember, employment is very low, but inflation will be the excuse!
Canada: weak employment report for July, New home prices fell and the entire yield curve is below the overnight rate!
The UK GDP was negative for Q2. Industrial production and construction output were lower than expected and the GBP keeps falling.
The Eurozone, with Italy providing political challenges, we are seeing pressure on Italian bonds, driving yields up and stock market lower.
Singapore retail sales were down by almost 10% in June.
Commodities are struggling in the current environment with Steel, Iron ore, copper, cocoa, oil all trading lower the past few weeks.
Equities: Holding highs in the U.S. on the hope that the Fed will save the day. Rates cuts are priced in, stocks are still holding.
We think that there is a strong risk that this level holds and we will see lower prices into the year end.
Oil: We think the trading will remain in range between $55 and $65 on Brent crude, with struggle between global political tensions and lower demand due to weaker economic growth.
The USD is holding firm and has become a high yielder. With China, the ECB and other smaller Central banks cutting rates and looking at other possible was to stimulate, the USD seems destined to hold current levels, if not trade stronger. Interesting to see how long President Trump will tolerate this situation.
The Euro is struggling for many reasons, with the weaker German economy, uncertainty around Italy, changing political decision makers in key countries and at the ECB, along with negative bond and bank rates all weighing on the Euro.
GBP: may well be oversold and attempt a bounce, but we don’t see much upside between now and October unless there is a dramatic change of course in the Brexit discussion.
NOK is at a level that would normally have us buying with both hands but the fear of volatility in global asset markets, keeps us on the sidelines for now. Norges Bank will meet Thursday, may give a signal.
Gold: We still see gold as a buy on dips and think with all that is going on, we have much more to go on upside.
EURNOK: Key resistance is 10.00 to 10.05 a close above brings us to uncertain territory. Would normally be a great opportunity to buy NOK.
We are nervous about the market volatility, and would look at options as a way to play a test of 9.70 level.
EURUSD: Key resistance 1.1250. We are negative to the Euro and think it is a sell on rallies market. Only worry is if the U.S. Treasury is instructed to sell USD by President Trump. We think the probability is small currently.
NOKSEK: Looks to be establishing a base at the 1.07 level. We would look to buy for a bounce up to the 1.09 level with a stop under 1.07
XAUUSD: We are very positive to Gold, would add on dips to $1,480 and $1,465 levels. Also look at gold miners ETFs.
OIL Brent: Looking for a bounce short term with support at $55.80 Resistance at $63.
S&P 500: Support at 2890 resistance at 2917 and 2939. A close today below 2940 will make us more negative to the S&P 500.
DAX: Similar to S&P, although the technical picture is more negative. Resistance at 12,030 and 12,176 support 11,480.
EU 50: Resistance 3,400, 3,411, 3,425 Support 3250 (double bottom).