Major market averages continued to advance during the past five days, following better-than-expected corporate results and hopes for stimulus injections from China. In short-term the technical picture remains strongly positive as DAX and CAC 40 indices have both reached four month highs, while the U.S. S&P 500 passed above the psychological 1400. In Europe, the earnings season is weaker compare to the U.S., but better results from big names like Nestle and Novo Nordisk helped to maintain the positive mood. On Wall Street more than 70% of the companies which reported their quarterly results have beaten the expectations, which suggest better economic environment. However, on macro level the situation doesn’t look that positive.
In the past few days China reported weaker than expected economic data including – industrial production, retail sales, trade surplus, imports and even exports. Initially the market participants reacted positively hoping for more stimulus, but after the extremely lower-than-expected export data some fears started to spread over the markets worldwide. China’s July exports expand with 1% on annual basis missing the estimates for 8% increase and much lower than the last year expand by 11.3%. Meanwhile German imports and exports shrink with bigger pace than what analyst estimate, which combined with the unexpected declining industrial production make the global macroeconomic picture even worse.
However, the US economy is in a better position than the Eurozone’s economy. After all, the US private sector is far more dynamic. The US economy is still growing by 1.5% – 2% and looks set to continue for the time being. Therefore, it would appear less necessary for the Fed to further loosen monetary policy than the ECB, which is suppressing EUR/USD. Looking more closely at the short term, this week the financial markets showed their disappointment in both the Fed, and the ECB. The Fed had been expected to implement more measures for stimulating the economy, but the central bank has indicated that it will only do so if the US economy slides further. In conclusion the near future seems brighter for the U.S. currency and companies, but in long-term the macro picture is still uncertain.
On the commodity markets crude oil is losing its weekly gains following the weak Chinese data. Uncertainty over the euro, the global economy and the strong dollar are also playing a role in this decline. Meanwhile the gold maintains its very short range trading just above 1600 and its very likely to continue this behavior through the next week.
Despite the positive spike to 1.24 since late July, binary EUR/USD options remain in negative trend over the long-term. Main target on the downside is still the psychological 1.20. Break below it will open enough space to profit from put/touch down options. For the coming days first support is expected around 1.2160, followed by the key 1.20. On the opposite direction first resistance is seen at1.2440, followed by the June’s top at 1.2747.
Binary GBP/USD options were trading in very short range between 156-1.57. The 200-day SMA is falling to 1.5720, which could put pressure upon the sterling and send it lower to 1.55. Below the latter, key support is seen at 1.54, followed by 1.53 and 1.5235. On the upside direction break above 1.58 will have potential to send the pair higher towards the psychological 1.60.
Binary USD/JPY is moving in extremely short range, but the overall picture is still negative considering that the price is below the 200-day SMA. For the coming days first support remains at the lower bound of the range at 78.00, followed by the five-month low at 77.70. On the opposite direction first resistance is expected at 78.77, followed by 79.15 which coincide with the 200-day SMA. Higher, 80.10 is seen as strong resistance level, followed by 80.50.
The Australian dollar is in very strong upside trend since June, breaking above 1.0500. Next week binary investors should expect attack to 1.0600, which for now seems to be very strong resistance. On the opposite direction first support is expected around the 200-day SMA which is currently at 1.0280. Lower supports are seen at 1.0100, followed by the parity level.
Gold has little changed in the past week. It is still above the long-term support levels at $1,500-$1,525 and continues to fluctuate within a short-term triangle. In this case gold could break out to the both sides. However on the long term chart descending triangle suggests downside break. Investors could increase profits from trading the 1550-1650 range. On the upside first resistance is seen at 1635, followed by 1670. Conversely first support is expected around 1580, followed by 1550 and the crucial 1525.
The index extended its positive movement since June, reaching new three-month high at 1407. In the coming days new decline is expected to receive first support at the previous resistance at 1390, followed by 1375 and 1325, which coincides with the 200-day SMA. On the upside the target is on the multi-year top at 1422, which is expected to cause strong ressitance.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.