04, January 2017

US dollar and oil expand losses as markets correct but stocks set to rally

Europe


Today, European markets are traded in different directions amid sharply declined oil and US dollar corrective mood. Positive European statistics data continue to be published. However, there is a source of negativity in Europe, suddenly found today the retail sector. Deutsche Bank analysts expect a decrease in consumer demand in 2017 and a decline in consumer retail sales. As a result major European retailer Next dropped -11%, other retailers are also trading lower, Marks & Spencer Group PLC fell by -5.2% and Burberry Group PLC lost 1.9%. On the other hand composite Eurozone PMI according to Markit, in December is 54.4, while the forecast was 53.9. The data indicates the average acceleration in the Eurozone manufacturing sector.


America


Yesterday, US stock markets closed in the green, after positive economic data publication. Statistics confirmed the positive expectations for US PMI, as the index of business activity in the manufacturing sector rose to 54.7% in December, from 53.2% in November. The index exceeded expectations and reached the highest level over the past two years. Increased construction costs is a good sign also, the data came at 0.9% in November, which was above expectations.
US manufacturing sector continues to show signs of sustained growth, amid surge in new orders. This is reflected in the general trends of the global world economy. Manufacturing in the euro zone is growing at the fastest pace in five years, as China's manufacturing growth has stabilized.
Today US futures are traded in the green zone. Industrial DOW is approaching important level of 20 000 point. Later today, the focus of US traders will be on minutes from the latest Federal Reserve meeting and monthly car sales data.


Oil


Yesterday Brent oil market updated 2016 highs and marked the maximum of 2017 as the price was fixed at $ 58.43 levels. However, market failed to consolidate at these levels - the US session triggered sharp correction. Strong support level 56.45 failed to hold back the market. Our forecast for the short-term gain to $ 60 did not materialize - players moved to fix profits, and sellers seized the initiative. The nearest support is around $ 55.50. However, stronger support level for Brent is around $ 54.40.


Forex


Today, in FOREX market the US dollar moved to a correction after yesterday's impressive gain on the "thin" market. It is worth noting that the market has leveled last New Year's weakness of the US currency and returned to the maximum levels before New Year holidays. This coincided with an increase in US government bonds yields - 10 year US Treasuries yields added 5 basis points. Due to this pair Eur / Usd tested 2016 lows, Eur 1.0340. USD / JPY pair finally reached our target level JPY118.60. Further gains looks problematic. After significant growth and strong psychological level ahead the profit-taking is expected followed by correction. This correction is taking place today. Eur / Usd pair retreated from yesterday's lows and is trading around Eur 1.0440 which is first resistance level. The next resistance at Eur1.0520 area. We expect that somewhere at those levels sellers will rush back into the game and take the initiative. On the other hand, we do not expect a quick passage of the annual minimum of 2016 (Eur 1.0355). USD / JPY has found the support around JPY117.30-JPY117.60 levels, corrected from JPY118.60.The trading volume in the FOREX are gradually beginning to gain momentum.