It turned out to be a fairly cautious day of trading for the broad marketplace including the USD on Monday. Without any major economic releases yesterday and two big economic risk events on the horizon, trading remained relatively tamed. The USD did lose a bit of ground to the EUR but held serve against both the GBP and JPY. The CB Leading Index figure was released and produced a number of 0.6%, which was below the estimate of 0.8%. Today the Richmond Manufacturing Index and the HPI data will be published and these reports will likely be met by silence. Trading will continue to focus on the upcoming FOMC meeting results tomorrow and the G-20 summit which will be begin on Thursday.
The USD has found some stability the last three trading sessions, but it does continue to move along the weaker side of its range against the EUR. The U.S. stock market has grown more consolidated the past month of trading after racking up large gains in the late spring and early summer. Interestingly, Wall Street has held onto these gains and the big question is becoming which direction the equity markets will take next. Many investors entered stocks based on the optimism that stability has been found, but what might drive Wall Street next are earnings reports. The Federal Reserve�s FOMC Statement tomorrow may be enough to stir sentiment. Investors will be keen to see what the Fed says about stimulus and its strategies compared to what it has undertaken thus far. Movement in the USD may remain rather muted today if investors continue to play the waiting game, which could allow traders the opportunity to take advantage of ranges.
EUR
The EUR bounced back on Monday against the USD moving to the stronger part of its range. There was no economic data from the European Union of consequence yesterday. Today the Italian Unemployment Rate will be released but like the data in the U.S. today, this report will be met by relative silence. The focal point for EUR investors will be the combination of the PMI reports on schedule tomorrow from both France and German and the FOMC Statement from the States. Worthy of note is the upcoming election that will be held in Germany this coming Sunday. Investors cannot be faulted for remaining cautious until they see the results from this vote, which will have a large impact on the future of Europe�s biggest economy and the European Union as a whole. Having touched high water marks again yesterday against the USD, EUR traders may continue to test the upside.
GBP
The Sterling languished in quiet trading on Monday as the market appeared content to idle. There was no major economic data from the U.K. yesterday and there will there none today. Tomorrow the MPC Meeting Minutes bulletin will be issued and investors will read the results closely to see if details are provided about the Bank of England�s insight for the prospects of the U.K. economy long term. Also the BBA Mortgage Approval data will be published tomorrow. After suffering a few poor trading sessions and seeing its value drop, the GBP did find some footing yesterday but the question is which direction the next push will send the Sterling. We may see another day of cautious trading for the Sterling before tomorrow�s risk events unfurl.
JPY
With Japan in the midst of a holiday and its banks closed yesterday and today, the JPY may continue to find itself locked in a rather tight range. Volume from Asian traders was low on Monday and the JPY remained quiet. Gold also found itself moving in a rather consolidated range as it moved in a fairly well practiced manner. The combination of certain Asian markets being on holiday and the FOMC Statement that is due only tomorrow afternoon from the States will likely make for a rather tranquil day.
Equities Consolidate As Traders Look For Direction
SPX/USD:
It seems that the American equity market began its rally more on the basis of a fundamental catalyst, and the technical�s have take us to where we are today. As the market begins to consolidate around 1060, we are waiting to see if the current set of fundamentals will catch up, and send us back down to more sustainable levels. However, from a technical standpoint, the market is still strong, and seems to be holding relatively well. Notice the small candles forming here during this consolidation stage. Be on the lookout for a continuation of the up move Support 1064.3, 1061.2, 1058.5, 1051.9, 1035 Resistance: 1074.77, 1097.6, 1133.5, 1209.1.
XAU/USD:
Gold showed some weakness the last couple of days, but take a look at the one hour chart. We can see how the buying came in around the 995.40 area. Notice the highlighted buying tails. The market has found nice support around this area and begins to move higher. These are good indicators for an impending up move. The market consolidates and then begins to pick up steam, sending us comfortably over the $1000 mark. Support 1009.3, 1005.1, 995.40, 982.4 Resistance 1012.2, 1017.75, 1024.
GBP/USD:
The pound is starting to amaze me. It really loves trading within the range that it created more than two months ago! We came near resistance of 1.6113 yesterday and showed significant strength. While the US dollar weakened the Pound finally began to trade up again. We are looking for a continuation of the up move today and are expecting a continuation of range trading. Support 1.6284, 1.6156, 1.6133 1.6113, 1.5982, 1.580 Resistance, 1.6375, 1.6454, 1.6587, 1.6741, 1.7042
EUR/USD:
A great up step formation on the EURO one hour chart. Once the market found support we see how strong the market became. This is also due to the weakness that came about in the US Dollar. The greenback is looking like it will continue to decline today. Traders came in strong, pushed the market up, we followed this by some nice consolidation, after which another powerful move up to the next level, and so on and so forth. I like this trade pattern, and use it to get into low risk, high probability trades. Support 1.4719, 1.4670, 1.4642, 1.4610, 1.4560 Resistance 1.4759, 1.4790, 1.4826, 1.4866, 1.4908, 1.4979
