The greenback is pulling back to the 111.50 area on Thursday’s US trading session, retreating from 7-month highs right above 112.00. The pair gives away ground, after having rallied for six consecutive days, amid mixed US data and month-end closing movements.
The greenback seems to be consolidating gains after having surged to multi-month highs against its main rivals. In the bigger picture, however, the USD/JPY remains biased higher, buoyed by the widening yield curve differential between the US and Japan with the Federal Reserve expected to start tapering its bond-buying program before the end of the year.
On the macroeconomic front, the US calendar has shown mixed readings. The weekly jobless claims have posted their third consecutive increase, with 362,000 new claims in the week of September 25, which might have dented US dollar strength.
On the positive side, the US Gross Domestic Product expanded at a 6.7% pace in the second quarter, a tick up from the 6.6% increment previously estimated.
The ongoing USD reversal is likely to be short-lived, according to Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, who sees the pair biased towards 114.55: “USD/JPY has eroded the July high at 111.66 and is well-placed to challenge the more important 112.23/50 zone, which represents highs since 2019. This may take a couple of attempts to clear, but above here will introduce scope to 114.55 the October 2018 high.”
I haven’t tracked down the details about China panic buying on energy but if they’re that desperate for natural gas, they will have no problem burning fuel oil for heat or switching to diesel for power.
Sweden recently closed two nuclear reactors and now there’s problems with the electricity supply.
So Sweden has been forced to fire up a oil power plant that burns 20,000 barrels of oil per day. But Sweden is only a country of 10 million — there are 1.3 billion in China and as many in India and Europe who could be facing the same problem.
The AUD/USD gained momentum during the American session and jumped to 0.7255, hitting a fresh daily high boosted by a correction of the US dollar across the board.
The DXY is falling 0.20%, posting the first decline after rising during four consecutive days. The index peaked at 94.50, earlier on Thursday, the highest in a year and then pulled back to 94.15.
The greenback weakened even as US stocks are mixed and despite steady US bond yields. The US 10-year yield stands at 1.53% and the Dow Jones falls by 0.34% while the Nasdaq rises by 0.38%.
Economic data from the US showed Q2 GDP rising at 6.7% (revised from 6.6%) and initial jobless claims rising for the third consecutive week to 362K against expectations of a decline to 335K. Fed Chair Powell is speaking again at the Congress. He expects some relief on inflation during the first half of next year.
From a technical perspective, the rebound in AUD/USD so far looks like a correction but if it manages to hold above 0.7220, the bearish pressure seems alleviated. The next resistance is seen at 0.7280 and then comes the 0.7315 key level.
When markets dip, buyers appear – that has been the logic for stocks for many years, and now it appears to become relevant for gold. The precious metal tumbled as yields soared in response to the Federal Reserve’s signal of tapering its bond-buying scheme. However, end-of-quarter flows resulted in a quick recovery,
How is XAU/USD technically positioned after these erratic moves?
The Technical Confluences Detector is showing that the yellow metal faces some resistance at $1,757, which is the convergence of the Fibonacci 38.2% one week and the Bollinger Band 4h-Upper.
The critical cap is at $1,777, which is where the Fibonacci 61.8% one-month and the BB one-day Middle meet up.
Some support awaits at $1,742, which is the confluence of the Fibonacci 38.2% one-month and the previous 1h-high.
Further down, $1,737 is a juncture of lines including the previous weekly low and the Fibonacci 61.8% one day.
The Confluence Detector finds exciting opportunities using Technical Confluences. The TC is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.Full Article
So China is hitting the panic button on energy. I assume this is referring to natural gas, since China has been selling off oil inventories. It could also refer to coal.
Asian gas prices are even higher than in Europe.
Here’s how the European gas benchmark looks today:
USD/CAD is down through yesterday’s lows in a 91 pips drop to 1.2662.
In the bigger picture context with oil, gas and commodities strong, it makes sense to see some Canadian dollar strength. The loonie was caught in the vortex of US dollar buying yesterday but with the dollar coming off the boil, it’s leading the reversal.
Overall though these are some choppy waters as we count down to month end. We’re minutes away from the London fix and now USD/JPY is dropping.
In an open letter Wednesday to heads of state attending
the United Nations General Assembly, the International Chamber of
Shipping (ICS) and other industry groups warned of a “global transport
system collapse” if governments do not restore freedom of movement to
transport workers and give them priority to receive vaccines recognized
by the World Health Organization.
Seafarers haven’t been allowed shore leave for 18 months and some haven’t left a ship in 18 months. Cross-border truck drivers are also facing a nightmare of testing and quarantine problems.
Compulsory quarantines when disembarking and on arrival in their home
countries can mean that pilots and seafarers spend a month of their
vacation time stuck in a hotel room before they’re able to see their
Naturally, many of these people are walking away from the industry.
The most-notable thing that Powell said yesterday is that supply chain issues are getting worse. Nearly 20% of the trans-pacific shipping fleet is at anchor outside US or Chinese ports at the moment because they can’t unload.
In the UK, the problem has been compounded by Brexit. The energy industry released statements today saying there is plenty of oil in storage and at refineries, the problem is wholly that there aren’t enough truck drivers to distributed it. That’s been compounded by panic buying leading to a bigger call on supply.
Now there is a report from the UK National Pig Association that says more than 120,000 pigs are backing up on UK farms due to the labour crisis. They could be culled instead of slaughtered and processed because of the lack of workers are slaughterhouses.
The USDCAD has made a break back to the downside after the 2nd break of the day below the 200 hour MA, led buyers to turn to sellers.
The price has scooted lower and in the process has moved to test the 100 hour MA at 1.26784. The low just reached 1.26738. A move below would increase the bearish momentum.
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EUR/USD is trading below 1.16 key support. That should be attractive for momentum players, and economists at TD Securities reckon the near-term bias is to the downside with 1.15 the next key level.
“For EUR/USD, the breach of 1.16 represents a key technical pivot. We noted that this is neckline support of a soft-from head and shoulders pattern from the summer 2020 melt-up.”
“The ECB has clear calendar limitations to policy sequencing. If it wants to show fidelity to its Strategy Review, it must finish PEPP and APP first before it can even hike. Meanwhile, the Fed has already signaled it will move on taper.”
“Given the real yield outlook, we reckon that the break of 1.16 will be significant for momentum players. Next support comes in at 1.15.”Full Article