Loonie with some surprises, pushing USD/CAD back below 1.3000 in the next few days?
Key Economic Events 27 – 31 August 2018
Source: Admiral Markets' Forex Calendar
Equities
DAX30 CFD
The last week of trading in August could be a quiet one, since the economic docket does not deliver any spectacular news which could drive equity price significantly higher or lower. Nevertheless, historically this is the second worst month of the year for the DAX30. August presented itself again as weak with the DAX, which is currently trading a little more than 3% lower for the month:
Source: Monthly DAX 30 Performance / Data Range: 1959 - July 2018 - Finanzen
From a technical perspective, the failed attempt to break below 12,100 points resulted in a quite weak bounce, which could interpreted as a diminishing demand against this region, and if the bears start another attempt to break this level in the upcoming days, it could be more successful. Make sure to check out Admiral Markets' most competitive conditions on the DAX30 CFD and Dow Jones CFDs. Start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours!
In combination with a consistently thin market environment, a break lower could result in a push below 12,000 points into the monthly close, with a target around the yearly lows at 11,700 points. On the upside, the picture hasn't changed compared with last week: for the picture to brighten up the bulls still need to push the DAX back above the SMA (200) on a daily time frame, and above 12,870/900 points.
US-Dollar
The US Dollar Index Future decided to take the second option, which was a featured topic in the last Admiral Markets weekly outlook. The second option was a pullback towards the breakout region around 95.00/30 points, mainly driven by the comments of US president Trump: who said that he is not happy about the rate hikes of the FED, making the US Dollar more expensive compared to its G7 FX counterparts, and this countered Trump's attempt to "make America great again" (note: a cheaper USD should naturally have a positive impact on the US economy, resulting from a positive impact on the export sector). Nevertheless, the outlook for the US Dollar remains positive, with the speculative positioning showing another (although smaller) increase in the net long position of large speculators in the Commitment of Traders Report, which has been stabilizing at the highest level within the last 15 months:
That being said, it wouldn't come as a surprise to see another attack at the region around 97.00/50 in the upcoming week of trading, mainly driven by technical factors. If the USD keeps on giving back the gains from the last weeks and months, the technical picture could potentially turn negative if the US Dollar drops below 93.00 points again. If you'd like to learn more about what has been discussed within this article in a more visual way, make sure to register for the weekly webinar "Admiral Markets' Weekly Market Outlook" with Jens Klatt, every Friday at 12pm London time! It's your opportunity to follow Jens as he explores the weekly market outlook in detail, so don't miss out!
Euro
In Admiral Markets' weekly outlook from last week it was pointed out that "[…] chances seem to be good that a re-test of the breakout region around 1.1500/1530 occurs before pushing towards the projected target region around 1.1200.[…]" And in fact, the Euro pushed higher against the US-Dollar not only towards 1.1500, but closing the week above 1.1600. While this regressive move took on further momentum thanks to the comments from Donald Trump concerning the FED and their current rate hike cycle - which he is not happy about, the overall picture for the EUR/USD remains bearish, on a daily chart at least as long as we trade below 1.1800/1850. Right now the chances seem good that the Euro will probably stabilize in the region around 1.1600 into the monthly close.
Nevertheless, Euro price action should be carefully watched. Market participants might start to anticipate a lower than expected inflation rate for the Euro-Zone being published next Friday. If numbers around EZ inflation come in below expectation (which is 2%), swap markets could see chances of an ECB rate hike in H2/2019 dropping, driving EUR/USD lower in the upcoming days with a target of around 1.1200:
Source: Sunday 26 August 2018 1pm CEST - Admiral Markets MT5 with MT5SE Add-on
Within this context, it is worth mentioning that a driver for such a push on the downside can be found in the fact that big speculators are still only slightly net-short positioned in the Commitment of Traders Report:
CAD
The Loonie surprised many over the last few days of trading, profiting from several positive economic numbers, starting with the higher than expected inflation rate on 17 August, followed by a solid data set around the retail sales numbers released last week on Wednesday. In this context, chances are still high that the BoC will at least hike rates by 25 basis points going into the end of 2018. On Thursday, numbers for the economic growth rate could deliver a sign towards such a rate hike, and potentially result in a push below 1.3000 in the USD/CAD. This could then mean that it targets the region around the May lows of around 1.2750. Such a push lower remains on the table as long as USD/CAD does not push back above 1.3180/3200:
Gold
With the Chinese Yuan Renminbi closing the last week of trading at its weekly lows below 6.8000, Gold found some support too, being pushed back above 1,200 USD. The overall outlook for Gold remains bearish from a technical perspective, but still with some attractive anti-cyclical potential for the bulls. Therefore, we have to remember that within the time span from 14 August till 7 September, over the last 20 years, and within the last 15 years (=75%), Gold traded higher with an average gain of 29.77 USD/ounce, an average loss of 14.70 USD/ounce, and a maximum drawdown of 55.24 USD/ounce. In addition, we can clearly see a potential bearish sentiment extreme in the Commitment of Traders Report, still showing the non-commercials holding a net-short position, the first since 2002:
That being said, and as long as Gold trades above 1,160 USD, Long engagements against the region of 1,195/97 USD are interesting from a risk-reward perspective, aiming for a push back towards at least 1,240 USD:
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
