Overnight Headlines
*USD surged higher, close to 93 on the DXY
*US stocks ended a mixed bag, S&P500 dipped, Nasdaq rose
*Gold collapsed through $1780 support to the lowest level in five weeks
*UK retails sales fell -0.9% vs +0.5% expected
USD hit its highest level in nearly three weeks on China jitters and persistent global growth concerns. A decent beat on US retail sales also helped. The DXY is currently trading at the top of the recent range. Similarly, EUR/USD is near the recent low from Monday at 1.1770. GBP is clinging onto the 1.38 support level, but AUD continued lower towards 0.73. USD/CHF is now at July highs at 0.9274.
US equities were mixed with the Dow and S&P500 climbing back from their intraday lows but closing modestly lower. The Nasdaq was the outperformer, up 0.13%. This comes ahead of a seasonally weak period of trading in September. Materials were the worst performer as industrial metals softened. Asian markets are also mixed as the Evergrande story lurches towards a conclusion. European futures are higher with US futures marginally in the green.
Market Thoughts – USD not directionless!
We wrote yesterday that the dollar looked steady and fairly rangebound, with traders in wait-and-see mode ahead of next week’s Fed meeting. But yesterday’s move higher surprised. US retail sales also boosted the greenback, though headline sales were not as strong as the control group (which excludes autos, gas and food).
Today sees the market focus on the inflation expectations component of the University of Michigan sentiment survey. This forms part of the Fed’s survey determining its outlook so could play a part in influencing what happens next Wednesday. For what its worth, the latest Reuters economist poll has nearly three-quarters of them converging on a November taper announcement.
Chart of the Day – USD/CHF worth watching
This pair shot higher yesterday with the swissie the worst performing major currency on the week and month. Prices had been hovering around the 0.92 level but are now trading near resistance at the 0.9274 July high. Prices are not overbought on the daily RSI so we could edge up towards the figure. The 2019-2020 downtrend lies above at 0.9342 and will offer major resistance. Initial support comes in around 0.92 where we would be back in the range.
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