The nerves of the market calmed a bit after the People’s Bank of China set its daily reference rate at 7.0039 Yuan per USD. Albeit the rate is higher than the previous fixing of 6.9996 USD/CNY, it still is lower than market expectations which provided some support for the Chinese currency and calmed the nerves of the market somewhat. Analysts noted that despite the China wanting to prevent panic currently, it also seems less committed in keeping the Renminbi steady, after the recent break down of the US-Sino negotiations. The exchange rate has become a reference point, after the depreciation of the Chinese currency on Monday, sparked discussions about a possible full-blown currency war. Such a development could have a severe impact on the global economy as it could be sending it to a recession. It would be indicative that yesterday three central banks (New Zealand, India and Thailand) proceeded to lower interest rates more than market expectations in an effort to support their respective economies. We could see safe havens calm down for now, while at the same time the Aussie and other commodity currencies could find support. AUD/USD rose yesterday, breaking the 0.6740 (S1) resistance line (now turned to support). For our bearish outlook to change for the pair, we would require a clear breaking of the downward trendline incepted since the 19th of July. Should the bears retain control over the pair’s direction, we could see it breaking the 0.6740 (S1) support line and aim for the 0.6675 (S2) support level. Should the bulls take over, we could see the pair breaking the 0.6800 (R1) resistance line and aim for the 0.6860 (R2) resistance level.
Oil prices regain some of yesterday’s losses
Oil prices retreat yesterday as worries for the demand of the black gold increased and the EIA crude oil inventories reached a surplus after eight straight releases of drawdowns. During the Asian session though oil futures jumped more than 1 USD per barrel, recovering some ground. Analysts tend to note that the rise in oil demand may also be caused by the US dollar loosing some steam and easing some of the pressure on oil prices. Meanwhile, Bloomberg in a report stated that Saudi Arabia may be in talks with other oil producers to take action so as to halt the oil price slide. We would not be surprised to see some oil producers voluntarily weakening their production levels so as to support prices in the near future. For the time being trade war talk could continue to exercise pressure on oil prices, while any further production cuts by the Saudis could support them. WTI prices initially dropped yesterday, yet later on regained traction and during today’s Asian session, tested the 52.75 (R1) resistance line. We maintain a bearish outlook for the pair technically, as the downward trendline incepted since the 31st of July remains intact. Should the commodity’s find fresh buying orders along its path, we could see it breaking the 52.75 (R1) resistance line, the prementioned downward trendline and aim for the 54.20 (R2) resistance level. Should WTI come under the selling interest of the market, we could see it breaking the 51.35 (S1) support line and aim for the 50.00 (S2) support barrier.
Other economic highlights, today and early tomorrow
Today during the American session today we get Canada’s new housing price index for June and from the US the number of initial jobless claims. In tomorrow’s Asian session, we get Japan’s preliminary GDP growth rate for Q2 and China’s PPI and CPI rates for July on a year on year basis. Also during tomorrow’s Asians session RBA’s quarterly monetary policy statement is due out. Please note that RBA’s governor will be speaking before the House of Representatives’ Standing Committee on Economics, Canberra. So, reasonably there could be more volatility than usually for AUD pairs.
AUD/USD H4
Support: 0.6740 (S1), 0.6675 (S2), 0.6610 (S3)
Resistance: 0.6800 (R1), 0.6860 (R2), 0.6925 (R3)
WTI H4
Support: 51.35 (S1), 50.00 (S2), 48.40 (S3)
Resistance: 52.75 (R1), 54.20 (R2), 55.85 (R3)
