Financial market research and analysis

The safe haven assets are in demand as the trading week started with a renewed nuclear threat from North Korea. North Korea successfully tested a hydrogen bomb that could be loaded onto an ICBM, increasing its nuclear threat on the US.

The Swiss franc and the yen gained. The USDJPY advanced to 109.93 in Tokyo, as the Japanese monetary base expanded at a faster speed in August. The North Korean nuclear threat dented the appetite pre-110.00 mark. Nikkei (-0.93%) and Topix (-0.99%) fell due risk-off trades. Korean defense stocks rallied.

Gold gap opened above $1’330. The combination of risk-off and the broad-based USD depreciation pushed the price of an ounce to $1’339, the highest level in almost a year. However, the 30-day relative strength index (75.9) indicates that the yellow metal stepped into the overbought market. A downside correction is possible and immediate offers are seen pre-$1’340/$1’345. Short-term support could be found at $1315/1317 (area including 50-100-hour moving average) and $1’307 (minor 23.6% retrace on July – September rally).


Rising anxiety among euro-buyers

The EURUSD opened in the positive territory due to the broad USD depreciation. However, there is a rising anxiety among euro buyers before the European Central Bank’s (ECB) Thursday meeting. The strong euro could result in a more cautious and more dovish-than-priced ECB verdict. The ECB is now expected to wait until October to announce the future of its asset purchases program.

According to Bloomberg news, officials may not have a complete plan until December. Hence, the downside euro risks escalate. Put options could be exercised at 1.1850 at today’s expiry, call options should give support at 1.1800. Top sellers are presumed between 1.1900/1.1950.

The DAX (-0.67%) and the CAC (-0.61%) opened in the red due to the deterioration in the global risk appetite.


FTSE down, GBP ranged on Brexit deadlock

Cable is rangebound between its 50-100-day moving averages (1.2980 – 1.2918). Brexit uncertainties keep the pound market under pressure. Brexit Secretary David Davis denied news that the UK will pay 50 billion pounds to leave the EU. The truth is the EU officials do not want to move forward with the negotiations before agreeing on a divorce bill.

A negative breakout against the greenback could extend to 1.2890 (minor 23.6% retrace) and 1.2851 (Aug 30 low). A positive attempt could exhaust before 1.3020 (Fib 50% on August decline).

The FTSE 100 (-0.19%) opened downbeat as risk-off trades dominated on Monday morning. Energy (+0.30%) and mining stocks (+0.76%) outperformed in London.

The WTI crude traded above the 100-day moving average ($47.50) and the upside correction could extend to $48.00 (Fibonacci 50% on August decline) and $48.55 (major 61.8% retrace) as the US refineries resume their operations after Hurricane Harvey.


USD gives back gains on soft NFP

The US dollar made a soft start in Asia, after Friday’s nonfarm payrolls (NFP) surprised on the downside. The US economy added 156’000 new nonfarm jobs in August versus 180’000 expected by analysts. Last month’s figure has been revised down to 189’000 from 209’000. The unemployment rate increased to 4.4% from 4.3% and the average earnings improved less-than-expected.

The US stocks gained on Friday, as soft labour data revived dovish Federal Reserve (Fed) speculations. According to Mohamed El-Erian, the NFP data will ‘embolden those who fear the low inflation demon and are calling for a delay in further rate hikes and an extremely measured reduction in the balance sheet, but it will also fuel concerns about a looser-for-longer policy stance fueling excessive financial risk-taking by the private sector and increasing the threat of future financial instability’.

The US stock traders don’t seem massively concerned about the future risks just yet. The VIX index retreated to 10%, a three-week low.

The US futures edged lower in Asia. The Dow Jones mini September futures retreated by 52 points, S&P500 mini and NASDAQ 100 mini September futures erased 8.50 and 26.75 points respectively. The US and Canada will be closed due to Labour Day bank holiday.


AUDUSD: 0.80 provides resistance pre-RBA

The Aussie is the leading loser against the greenback. The AUDUSD fell to 0.7935 as the Australian company profits fell by 4.5% in the second quarter, from +6.0% a quarter earlier. North Korea’s bomb test weighed on the risk sentiment. The 0.80 resistance is expected to remain tight before the Reserve Bank of Australia’s (RBA) policy verdict due tomorrow.

The RBA is expected to maintain the cash rate unchanged at 1.50% and the accompanying statement will likely remain cautious despite the recent rise in commodity prices. High household debt and strong AUD are risks to the economic recovery.


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