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EUR/USD, USD/CAD Set Up for USD-Weakness

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US Dollar, EUR/USD, USD/CAD Price Outlook Talking Points:

  • This week’s macro-economic calendar is a bit quieter than last week. US earnings season gets started, and this will likely be the major focus for the week ahead.
  • Expectations are geared-up for a rate cut out of the Fed later this month, and last week’s Humphrey Hawkins testimony from Chair Powell pointed in this direction. Will the Fed deliver?
  • DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

US Dollar Drops On Powell Testimony

This week’s economic calendar slows down a bit from the Central Bank heavy outlay from last week. A series of Fed speakers spoke on the topic of US monetary policy, with the predominant focus being paid to Chair Powell’s Humphrey Hawkins testimony on Wednesday and Thursday. The Chair took a noticeably dovish tone in the prepared remarks and ensuing testimony, and this helped to drive US equities up to fresh all-time-highs as the S&P 500 jumped above the psychological 3k level.

S&P 500 Daily Price Chart

Chart prepared by James Stanley

This presents an interesting scenario for the Fed’s rate decision later this month. Last week also brought the release of inflation data out of the US, and core inflation remains above the Fed’s target of 2%. This follows jobs data from the week prior that also showed with strength, indicating that neither inflation nor employment are in dire spots at the moment. But – the Fed chair was still dovish last week, and that begs the question as to whether he/they see something that isn’t yet visible in the data and, further, how much softness might the Fed bring to monetary policy in the coming months.

Markets are very much geared up for a rate cut out of the Fed at the meeting that concludes on July 31. There’s a 27.6% chance of 50 basis points of cuts at that meeting, with the remaining 72.4% probability looking for 25 basis points. Suffice it to say, if the bank doesn’t cut rates at all, there will likely be massive disappointment that could bring those equity trends into question. Thickening the drama, markets are going to have to wait until September for updated forecasts out of the bank, as the Summary of Economic projections released in June indicated the expectation for only 25 basis points of softening in the second-half of this year.

FOMC Rate Expectations for July 31 Rate Decision

Please add a description for the image.

Chart prepared by James Stanley, data from CME Fedwatch

For its part, the US Dollar moved back into a bearish backdrop around last week’s Powell commentary. The month of June was a change-of-pace in the Greenback, as the strength from the prior nine months was flipped on its head. Prices in DXY broke below a rising wedge formation, which will often be approached with the aim of bearish reversals. That theme of USD-weakness hung around until the end of Q2, but as the door opened into July prices bounced, and prices rallied all the way into last week.

With sellers making a marked reappearance, can USD bears continue to push for the next couple of weeks as that rate decision nears? Underneath current price action are two nearby areas of support potential. At 96.47 is the 23.6% retracement of the 2011-2017 major move; and below that in the zone that runs from 95.86-96.03 is a confluent zone of Fibonacci levels that currently marks the three-month-lows in the currency after helping to arrest the June decline a few weeks ago.

US Dollar Daily Price Chart

us dollar daily price chart

Chart prepared by James Stanley

EURUSD Holds Higher-Low Support, Carries Short-Squeeze Potential

The month of June was likely at least a little surprising around the Euro. While the currency remains mired by a series of bearish factors, June brought strength, particularly in EUR/USD as another newer theme took-over. This allowed for EUR/USD to jump up to fresh three-month-highs as longer-term short positions were squeezed; and if the theme of USD-weakness can stick around, there may be scope for more. I had looked into EUR/USD on Friday of last week as the pair was testing another zone of support; and that scenario remains workable into this week as prices have thus far held that level.

EUR/USD Four-Hour Price Chart

eurusd eur/usd price chart

Chart prepared by James Stanley

USDCAD Closes in on 1.3000 Psychological Level

Perhaps a bit cleaner from a fundamental perspective, USD/CAD could present short-side interest. When the Fed started to take a dovish tilt in the month of June, the Canadian economy printed red-hot inflation numbers showing at 2.4%. So, as the US Dollar was dropping, the Canadian Dollar was surging on the back of this better-than-expected data; and that helped the pair to stick to an aggressive short-side run that broke-below a symmetrical wedge formation.

The pair is starting the week with an aggressive push down to the 1.3000 psychological level that hasn’t yet been traded at in the year of 2019. Below that, additional support potential exists around the 1.2928 area on the chart, and for traders that would like to wait for a pullback, resistance could be sought out around prior support of 1.3065.

USD/CAD Four-Hour Price Chart

usdcad four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

https://www.dailyfx.com/authors/bio/James_Stanley

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Dow Versus Gold Bull Trends Amid Trade War, Recession Fears

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Gold Prices Target 2019 High as Fed Sets Course to Cut Interest Rates

Fresh data prints coming out of the US may do little to curb gold prices as the Federal Reserve appears to be on a preset course to reduce the benchmark interest rate.

Crude Oil Prices May Oscillate Between Iran Risks, China GDP

Crude oil prices may find themselves oscillating between political risk in Iran and weak economic data, which might create selling pressure in the cycle-linked commodity.

Australian Dollar Faces Busy Week, But Probably No Game Changer

From RBA minutes through to employment data and Chinese growth numbers, this won’t be a quiet time for Australian Dollar watchers.

Dow Jones, Nasdaq 100, S&P 500, DAX 30 Fundamental Forecast

Earnings season has arrived, and the Dow Jones, Nasdaq 100 and S&P 500 will pay close attention the country’s largest stocks and their quarterly performances.

US Dollar May Rise as Worried Markets Search For Safe Harbor

The US Dollar may rise as investors’ focus shifts from the likelihood of Fed rate cuts to the reasons for them, souring sentiment and boosting demand for haven assets.

SPX



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Crude Oil Prices Weaken on Barry Downgrade, Eye EIA Drilling Data

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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices lower as tropical storm Barry weakens, IEA warns of glut
  • Incoming EIA drilling productivity data might add to oversupply concerns
  • Gold prices look to Citigroup Q2 earnings report for risk sentiment cues

Crude oil prices drifted lower as tropical storm Barry weakened to a “depression”, triggering reports that long-lasting disruptions in US energy infrastructure will be avoided. Pressure was probably compounded by an IEA report warning that surplus in the oil market has unexpectedly returned despite OPEC-driven production cuts. Supply was said to outstrip demand by 900k barrels per day in the first half of 2019.

Gold prices edged up, erasing most of the prior session’s downswing but holding firmly within the choppy price band prevailing since the beginning of the month (see chart below). The move tracked inversely of similarly-looking pullbacks in bond yields and the US Dollar. Taken together, this price action probably reflects the markets’ digestion of last Wednesday’s Fed policy guidance update.

CRUDE OIL AT RISK IF EIA DRILLING DATA STOKES OVERSUPPLY FEARS

Oil traders now turn to the monthly EIA Drilling Productivity report for further evidence of oversupply (recently large outflows from inventories notwithstanding), which might nudge prices lower. Official weekly data puts output at 12.3 million barrels per day, within a hair of the record high. Implied global demand readings have idled in a steady range for over a year (though they’ve risen within it recently).

Gold prices are edging lower in Asia Pacific trade as upbeat Chinese economic data stokes risk appetite and drives yields higher. S&P 500 futures are trading close to flat however, warning that the risk-on push may not have scope for follow-through. Traders may be treading cautiously ahead of the second-quarter earnings report from Citigroup, which may opine ominously on the impact of the ongoing global slowdown.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are coiling up in a narrowing congestion range below resistance clustered around the August 2013 high at 1433.85. A break upward sets the stage for a test above the $1500/oz figure. Alternatively, any foray downward faces a formidable support block running down from 1375.15 through 1346.75.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are struggling to make good on a break of trend resistance set from late April, idling at resistance in the 60.04-84 area. A break higher from here initially targets the 63.59-64.43 congestion zone. A series of back-to-back support levels extending down through 54.84 caps the downside for now.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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July High on Radar Ahead of New Zealand CPI

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New Zealand Dollar Talking Points

NZDUSD appears to be on track to test the monthly-high (0.6727) despite the weakening outlook for the Asia/Pacific region as the exchange rate extends the series of higher highs and lows from the previous week.

NZDUSD Rate Forecast: July High on Radar Ahead of New Zealand CPI

NZDUSD extends the rebound from the previous week even though China’s Gross Domestic Product (GDP) report shows the growth rate narrowing to 6.2% from 6.4% per annum in the first quarter of 2019 to mark the slowest pace of growth since record keeping began in 1992.

It remains to be seen if the Reserve Bank of New Zealand (RBNZ) will continue to insulate the economy as the central bank warns that “the global economic outlook has weakened,” and Governor Adrian Orr and Co. may continue to reduce the official cash rate (OCR) over the coming months as officials insist “a lower OCR may be needed over time.”

With that said, the RBNZ may continue to endorse a dovish forward guidance at the next meeting on August 7 as “members agreed that more support from monetary policy was likely to be necessary,” with the broader outlook for NZDUSD still tilted to the downside as the exchange rate snaps the upward trend carried over from 2018.

Image of DailyFX economic calendar

However, updates to New Zealand’s Consumer Price Index (CPI) may keep NZDUSD afloat as the headline reading is anticipated to increase to 1.7% from 1.5% in the first quarter of 2019, and signs of sticky price growth may curb bets for an imminent RBNZ rate cut as “inflation is expected to rise to the 2 percent mid-point of our target range, and employment to remain near its maximum sustainable level.

In turn, the failed attempt to test the 2019-low (0.6482) raises the risk for a larger rebound in NZDUSD as it breaks out of the range-bound price action from May, with the exchange rate extending the series of higher highs and lows from the previous week.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

NZD/USD Rate Daily Chart

Image of nzdusd daily chart

  • NZDUSD may continue to retrace the decline from the April-high (0.6837) as the Fibonacci overlap around 0.6490 (50% expansion) to 0.6520 (100% expansion) offers support, with the topside targets still on the radar as the exchange rate extends the series of higher highs and lows from the previous week.
  • Need a break/close above the former-support zone around 0.6710 (61.8% expansion) to 0.6740 (23.6% expansion) to bring the 0.6780 (100% expansion) to 0.6790 (50% expansion) area on the radar, with the next region of interest coming in around 0.6820 (23.6% retracement) to 0.6870 (78.6% expansion).
  • Will keep a close eye on the Relative Strength Index (RSI) as it continues to track the upward trend from earlier this year, with a move above 70 raising the risk for a larger advance in the exchange rate as the bullish momentum gathers pace.

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.



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USD May Rise Versus SGD, INR as China Slows to Weakest Since 1992

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ASEAN Fundamental Outlook

  • SGD falls with Singapore growth, INR weakens on higher fiscal deficit?
  • China GDP growth may slow to 1992 low, IDR eyes Bank of Indonesia
  • USD may catch haven bid against ASEAN FX if local conditions worsen

Trade all the major global economic data live and interactive at the DailyFX Webinars. We’d love to have you along.

USD ASEAN Week Recap

The US Dollar underperformed against its major and most of its ASEAN counterparts this past week. Dovish testimony from Fed Chair Jerome Powell to Congress and the latest FOMC meeting minutes helped prepare markets for the highly-anticipated rate cut later this month. This is despite better-than-expected local CPI and PPI data which helped to cool some concerns about muted inflationary pressures.

A notable exception was the Indian Rupee which depreciated despite better-than-expected headline inflation data. Prices in India rose 3.18% y/y in June versus 3.13% anticipated which was the fastest pace since October 2018. What seemed to drive selling pressure in the currency was Subhash Chandra Garg – India’s Economic Affairs Secretary – who said that the fiscal deficit target for 2020 was higher at 3.55%.

Meanwhile, the Singapore Dollar briefly depreciated after Singapore’s economy unexpectedly contracted by the most since 2012, raising concerns over the outlook for domestic inflation. In Indonesia the Rupiah saw strength after President Jokowi announced plans for corporate tax cuts. This likely cooled Bank of Indonesia rate cut bets, though keep in mind that they are heavily intervening to guard IDR.

The Malaysian Ringgit focused on external developments more so than closer to home. The USD/MYR was little changed as the Central Bank of Malaysia left rates unchanged this past week. While Bank Negara Malaysia anticipates inflation to rise in the coming months as the impact of consumption taxes from 2018 lapses, they also mentioned that growth is subject to risks from worsening trade tensions.

China GDP and Bank of Indonesia Rate Decision

Ahead, top-tier scheduled event risk for the ASEAN region is second quarter growth data for China’s economy. Last week, we saw imports from the world’s second-largest economy contract over 7 percent in USD terms. This is more than the 4.6% estimated decline anticipated by economists and speaks to rising concerns about domestic demand in an economy that is shifting towards a consumer-oriented powerhouse.

Data results in China are still tending to disappoint relative to economists’ expectations according to Citigroup. This opens the door to a softer print in second quarter GDP which is already estimated to slow to 6.2% y/y from 6.4%. That is the weakest pace of expansion since at least 1992, and this could dampen growth prospects for some of its trading partners nearby such as Singapore, which is already struggling.

The Philippines, Malaysia, Indonesia and Singapore all have China as part of their top 5 trading partners. The former two countries have already cut interest rates at least once this year to help support economic activity. Something to keep in mind is that prospects of cheaper credit from the United States can alleviate financial pressure in emerging markets for the time being which may help counter frets over weak Chinese growth.

Later in the week, the Bank of Indonesia is expected to reduce its 7-day reverse repo rate from 6.00% to 5.75%. Though as mentioned earlier, corporate tax cuts could lessen the haste for policymakers to keep reducing rates. But what arguably matters the most for the Indonesian Rupiah is commentary on their FX target, which is 14,000 – 14,400 per USD this year. USD/IDR is hovering precariously at the lower bound.

External Event Risk

As we saw this past week, relatively supportive US inflation data was not enough to deter aggressive easing bets from the Federal Reserve. According to Fed fund futures, there is still a roughly 20 percent chance of a 50 basis point cut at the end of this month. As such, absent significant surprises in upcoming local retail sales and sentiment data, the US Dollar may focus more on central bank commentary and risk trends.

Chair Jerome Powell is scheduled to speak at the Bank of France with commentary from policymakers spread out throughout the week. Markets will be closely watching for how aggressive the central bank may resort to easing in the months ahead. Keep in mind that 3 cuts by year-end are almost fully priced in by markets, even with inflation not too far off from the central bank’s target (core PCE is at 1.6% vs. 2.0%)

As such, if economic conditions continue to deteriorate in the world’s largest economy amidst the backdrop of trade wars and weak global growth, the US Dollar could catch a haven bid. The earnings season begins with banks reporting and they could fret about lower profit margins if interest rates fall too much. Concerns over trade wars may also be mentioned, which could dampen sentiment.

FX Trading Resources

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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Gold Prices Target 2019 High as Fed Sets Course to Cut Interest Rates

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Gold Price Talking Points

Fresh data prints coming out of the US economy may do little to curb the near-term advance in the price of gold as the Federal Reserve appears to be on a preset course to reduce the benchmark interest rate.

Fundamental Forecast for Gold: Bullish

Gold prices look poised to test the 2019-high ($1439) following the semi-annual testimony with Federal Reserve Chairman Jerome Powellprepares US lawmakers for an imminent shift in monetary policy.

The prepared remarks suggest the Federal Open Market Committee (FOMC) will respond to the shift in trade policy as Chairman Powell warns that “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.”

Moreover, it seems as though the FOMC will continue to adjust the forward guidance over the coming months as President Donald Trump tweets “China is letting us down,” and the ongoing tensions may push the Fed to reverse the four rate hikes from 2018 as the “apparent progress on trade turned to greater uncertainty.”

FED

With that said, updates to the US Retail Sales report is likely to have a limited impact on the monetary policy outlook even though private sector spending is expected to increase 0.2% in June as Fed Fund futures continue to highlight a 100% probability for at least a 25bp rate cut on July 31.

It remains to be seen if the Federal Reserve will implement a rate easing cycle as St. Louis Fed President James Bullard, a 2019-voting member on the FOMC, endorses an “insurance cut,” but the preset course for monetary policy may ultimately hinder the central bank’s flexibility as the US economy shows little signs of a looming recession.

In turn, gold prices may continue to benefit from the current environment amid the threat of a policy error, and the price of bullion may exhibit a more bullish behavior over the remainder of the year as market participants look for an alternative to fiat currencies.

Gold Price Daily Chart

XAUUSD

The broader outlook for gold is no longer mired by a head-and-shoulders formation as both price and the Relative Strength Index (RSI) break out of the bearish trends from earlier this year.

At the same time, the recent pullback in bullion appears to have run its course as the Fibonacci overlap around $1380 (100% expansion) to $1385 (78.6% expansion) offers support but need a move back above the $1418 (100% expansion) to $1422 (23.6% expansion) region to bring the topside targets back on the radar.

First area of interest comes in around $1444 (161.8% expansion) to $1448 (38.2% retracement) followed by the $1457 (100% expansion) region.

Additional Trading Resources

For more in-depth analysis, check out the 3Q 2019 Forecast for Gold

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.



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Australian Dollar Faces Busy Week, But Probably No Game Changer

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Fundamental Australian Dollar Forecast: Neutral

  • AUD/USD gained on a more dovish Fed, but its own low interest rates still weigh on it
  • There are signs that those back to back RBA rate cuts aren’t helping much
  • This week will bring more clues

Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page

The Australian Dollar market was focused like all others on the Federal Reserve last week, but the currency was unable to capitalize much on apparently intact prospects for lower US interest rates.

The Aussie remains quite close to its lows for the year against the Greenback, having itself endured the first back-to-back monthly rate cuts from the Reserve Bank of Australia since 2012. One problem is that this action doesn’t seem to be having the desired effect. Westpac’s consumer confidence index hit a two-year low in July, despite those rate cuts, the passage of a huge tax cut through parliament and signs of stabilization in the key housing markets of Sydney and Melbourne.

The coming week will bring three obvious scheduled points of economic interest. Investors will get a look at the minutes of that last RBA policy meeting. As a trading opportunity this could go either way, annoyingly. For sure a rate cut was delivered but the central bank has been notably cautious about the likely boost provided by lower rates now, given that consumers have been dealing with a series of record-low borrowing costs since 2012. If there’s more musing of this sort the Aussie might get some support.

Thursday will bring official employment statistics, with continued strength here very likely to please Aussie bulls. This metric has always been key to RBA thinking, naturally, but the central bank has placed special emphasis on it in the last couple of months. Ongoing strength in job creation will likely see rate cut bets pared.

Official Chinese Gross Domestic Product figures for the fourth quarter are also due, so Monday could see the Australian Dollar in its sometime role as foreign exchange’s favorite liquid China proxy. This might be less good news for the bulls as trade friction with the US is expected to bite. Annualized growth is expected to be around 6.2%. That would be a thirty-year low. Still, that forecast has been in the market for sometime and may very well already be in the price too.

Given all of the above and the fact that overall focus is likely to remain firmly on how the market thinks about US monetary policy at any given time, next week looks as it if could see plenty of movement in AUDUSD, but perhaps not enough in either direction to change the game.

Therefore, it’s got to be a neutral call overall, but with no break likely yet in the pair’s overall downward bias.

AUDUSD

Australian Dollar Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

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Pullback to Support, Can Bulls Hold?

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WTI Crude Oil Price Talking Points:

  • WTI crude oil prices caught a boost this week as production from the Gulf of Mexico cut back on the heels of the brewing Tropical Storm Barry.
  • Oil prices had previously held on to a bearish tonality; and price action didn’t re-cross above the 60-level until yesterday. The big question now is how aggressively this storm might further constrain production; or whether the bearish theme might come back in.
  • DailyFX Forecasts are published on a variety of markets such as Gold, the US Dollar or the Euro and are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Crude Oil Prices Bounce

Crude oil prices have continued to show recovery so far in Q3, and this follows a bearish first couple of days to the fresh quarter after sellers posed a reaction at a very key resistance level. That resistance zone runs around the 60 psychological level; and this came into play in the last week of June while helping to hold the highs through the July open. After a quick bearish move stopped short of crossing the 56 level, buyers came back, helping to elicit a topside push back-above that vaulted area of 60 on the charts and soon creating a fresh seven-week-high.

Yesterday’s fresh seven-week-high has so far taken pause at a Fibonacci level of interest, as the price of 60.89 is the 23.6% retracement of the December-April major move.

WTI Crude Oil Four-Hour Price Chart

Chart prepared by James Stanley

Strength Driven by Supply Fears with Brewing Storm in the Gulf of Mexico

At the source of this recent bullish move has been a threatening weather formation brewing in the Gulf of Mexico. This week saw producers in the area cut production by more than one million barrels per day, or more than 53% of their output as Tropical Storm Barry bears down on the Louisiana coast. The storm is expected to make landfall on Saturday, which could further constrain production through next week, and this presents somewhat of a wild card to oil traders as it’s not yet possible to know just how much further disruption may be in the cards. Prospects for continued topside in crude oil prices appears to be at least somewhat linked to how aggressively this storm comes in.

From a technical perspective – the big question is whether that prior zone of resistance around the 60-handle can hold as support. This zone runs from the Fibonacci level at 59.64 up to the 60 level, and a hold of support here through next week’s open could keep the door open for short-term bullish strategies targeting the confluent zone that runs from 62.84-63.10.

WTI Crude Oil Eight Hour Price Chart

wti crude oil eight hour price chart

Chart prepared by James Stanley

Crude Oil – Bearish Strategies

Ahead of the July ramp, crude oil prices continued to trade with a bearish overtone. Even an extension of production cuts combined with a flare of geopolitical tensions between the US and Iran were unable to push prices above the 60-handle. It wasn’t until news of the brewing storm came into play that bulls got back in-charge to push prices up to a fresh high.

This presents a fairly interesting backdrop for short-side swing setups, particularly if the damage from the oncoming storm passes without creating much further complication with Gulf production. Today’s non-completed daily bar is showing as a doji following two days of strength; and given that this doji comes in with respect of the Fibonacci resistance looked at above, the door can remain open for bearish setups in crude oil. For additional confirmation, traders can look for a bearish move on Monday, which could create an evening star pattern on the chart. Prices pushing back-below the 59.64 level after next week’s open will help to fill that formation in; and that can re-open the door to short-side targets around the 57.50 and 55 levels on the chart.

WTI Crude Oil Daily Price Chart

wti crude oil daily price chart

Chart prepared by James Stanley

To read more:

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— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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Gold Prices May Struggle if US PPI Helps Cool Fed Rate Cut Bets

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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices retreat into familiar range as US CPI tops expectations
  • Crude oil prices digesting gains, chart setup hints uptrend resuming
  • Commodities may struggle if US PPI data cools Fed rate cut bets

Gold prices pulled back, erasing over half of Wednesday’s Fed-inspired rally, after US CPI data unexpectedly showed that core inflation accelerated in June. Cooled rate cut bets and sent bond yields higher alongside the US Dollar, tarnishing the appeal of non-interest-bearing and anti-fiat assets. Crude oil prices marked time, digesting yesterday’s rise to a seven-week high.

US PPI DATA MAY LIMIT SCOPE FOR GOLD, CRUDE OIL PRICE GAINS

Bellwether S&P 500 futures are pointing higher in late Asia Pacific trade, hinting at a risk-on bias as both yields and the Greenback pull back anew. That might be supportive for commodities if momentum is sustained. Follow-through may be cut short if incoming US PPI dataechoes yesterday’s CPI results however and inspires another rethink of Fed easing prospects.

Get the latest gold and crude oil forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices continue to oscillate in a choppy range below resistance clustered around the August 2013 high at 1433.85. An upside breakout opens the way for a foray above the $1500/oz figure. A dense support bloc extends down from 1375.15 through 1346.75, leaving sellers’ work cut out for them if a downside reversal is attempted in earnest.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices have stalled at resistance in the 60.04-84 zone after breaking trend line resistance set from late April. The setup hints the uptrend late-December 2018 lows has resumed. A push higher from here targets the 63.59-64.43 congestion area. A series of back-to-back support levels runs down through 54.84, with a turn back below that opening the door to retest the $50/bbl figure.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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USDCAD Rate Risks Bearish Behavior as Fed and BoC Take Different Paths

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Canadian Dollar Talking Points

USDCAD trades near the yearly-low (1.3037) even though the Bank of Canada (BoC) endorses a wait-and-see approach for monetary policy, and recent price action keeps the downside targets on the radar as the exchange rate fails to break out of the monthly opening range.

USDCAD Rate Risks Bearish Behavior as Fed and BoC Take Different Paths

The recent rebound in USDCAD has flopped ahead of the monthly-high (1.3145) as Federal Reserve Chairman Jerome Powell strikes a dovish tone in front of US lawmakers, and the exchange rate may exhibit a more bearish behavior over the coming days as the Federal Open Market Committee (FOMC) appears to be on track to implement a rate cut on July 31.

In contrast, the BoC may stick to the sidelines throughout 2019 as “growth in the second quarter appears to be stronger than predicted,” and the central bank may stick to the same script at the next meeting on September 4 as “recent data show the Canadian economy is returning to potential growth.

It seems as though the BoC will take a different path compared to the FOMCwith the US slowing to a pace near its potential,” and the diverging paths for monetary policy may fuel a further shift in USDCAD behavior as the exchange rate snaps the upward trend from earlier this year.

Keep in mind, updates to Canada’s Consumer Price Index (CPI) may rattle the recent strength in the Canadian Dollar as the gauge is expected to narrow to 1.9% from 2.4% per annum in May, but a one-off downtick in the headline reading for inflation may do little to alter the monetary policy outlook as Governor Stephen Poloz and Co. insist that “CPI inflation will likely dip this year because of the dynamics of gasoline prices and some other temporary factors.

In turn, USDCAD stands at a risk of exhibiting a more bearish behavior over the remainder of the year, with recent price action bringing the downside targets back on the radar as the rebound from earlier this week fails to take out the monthly-high (1.3145).

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

USD/CAD Rate Daily Chart

Image of usdcad daily chart

  • The broader outlook for USDCAD is no longer constructive as the advance from the April-low (1.3274) stalls ahead of the 2019-high (1.3665), with the break of trendline support raising the risk for a further decline in the exchange rate.
  • The break of the February-low (1.3068) suggests there’s a broader shift in USDCAD behavior, but the failed attempt to break/close below the 1.3030 (50% expansion) region may generate range bound conditions amid the lack of momentum to hold above the Fibonacci overlap around 1.3120 (61.8% retracement) to 1.3130 (61.0% retracement).
  • A break/close below the 1.3030 (50% expansion) region brings the 1.2970 (78.6% retracement) to 1.2980 (61.8% retracement) region on the radar, with the next area of interest coming in around 1.2830 (38.2% retracement).

Additional Trading Resources

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.



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