Fundamentals:
Markets continue pushing forward, with risk-assets making gains and the US Dollar losing ground against almost every major currency. Remember, this is important as it relates to Dollar-denominated assets like oil and gold, which also continue to move higher. The Euro has now made a daily close higher than that of the previous day for 20 consecutive trading sessions. Needless to say, this is highly uncommon. The G7 is scheduled to meet later this week and it has been rumored that some of these currency factors will be addressed during that meeting.
For data releases, German factory orders and the US ADP employment report will be most significant. With this information, traders will be able to better assess the strength of the recovery efforts in Germany and the likelihood of a strong reading in Friday’s US Non-farm Payrolls report.
German factory orders dropped 2.2% in July, and the global slowdown in trade does not bode well for a major rebound in this number. The US ADP employment report is data often referenced by traders as a way of determining the net change in employment within the country as a whole.
On Tuesday, US equities closed over 2% higher on the back of dovish central bank comments, and the stronger than expected number in ISM non-manufacturing data. ISM reported this number is expanding at 53.2, where the previous month’s print was 51.5. New orders reached 54.9 from 52.4 previously and the employment component slightly managed to show expansion at 50.2.
Technicals:
Commodities:
Oil has hit resistance at $83 without any type of significant rejection. For the moment, the market has stalled here but the lack of pullback should be discouraging to bears. Hourly RSI is bullish but very close to overbought territory. At this point, is would be very surprising if the $83 level did not break convincingly. $87 is the next level of resistance, followed by $105. Support comes in at $82.30 and $81.20.
Gold is following the other Dollar-denominated assets higher and is still printing all-time highs at the time of writing. The Daily RSI indicator has reached 85, a level that has not been seen since last November. Those entering long positions now are probably late to the party but since the indicators have not rolled over, we have probably not seen the end of the current bull wave. Support comes in at $1265.
Currencies:
In USD/JPY, prices continue the steep descent, coming close to near-term support at 82.85. Prices have not reached the low 80s like this since 1994, so focusing on shorter-term charts is the best option available to traders in identifying the most likely direction going forward.
Monday did see a break back above resistance at 83.60, which gives the pair some sense of encouragement after the steady decline seen over the past two weeks. Strong risk remains for corrective moves upward but the overall bias does not shift to positive until resistance at 86.00 is surpassed. Selling into rallies near this level, or buying dips near 80.00 is the preferred strategy.
Stocks:
The S & P 500 pushed through the stops that rested at the 1153 level mentioned yesterday.
We have passed the 61.8% retracement of the fall from 1220, so our bias is upward with the next resistance level coming in at 1175. Strong support is now seen at 1130, and this level would need to be breached in order to turn bearish.