Mid day market update 18 Jan

Market Outlook

US stock markets fell sharply on Friday ahead of the Martin Luther King holiday today. Dow Jones Industrial Average (DJIA) dropped 390.97 points, S&P 500 dropped 41.51 points and NASDAQ dropped 126.59 points. All the 30 members of DJIA were down on Friday. The futures on all major indices are trading in the red currently as well, with the major indices down between 0.1 and 0.2%.

The Annual Davos summit kicks off this week in Switzerland with different parts of the world coming to the table with different issues – while Europe grapples with a stagnating economy facing structural issues, with France declaring an economic emergency, the Middle East faces a test on social and economic fronts with conflicts between Iran and Saudi added to the mix of falling oil prices and increasing unemployment amongst the expanding youth population. This coupled with a slowdown in emerging markets, makes for an interesting debate on the state of world economic affairs and the roadmap from here.

The head of the Hong Kong Monetary Authority defended the three decades old peg link system after data indicated up to US$130 billion of capital outflows due to a strengthening US dollar and the weak local economy The US dollar rose to 7.7999 against the Hong Kong Dollar on Monday morning which is the highest level in four years.

Iranian President Hassan Rouhani said on Sunday “we have started selling more oil as of today”. Iran claims that they have already boosted their Oil production and ready to export by 500,000 barrels per day. Iran has the fourth largest oil reserves right now.  How this story develops will be one of the most interesting features of this year, with Iran returning to the international economy after decades of isolation, including the prospect of increasing Oil exports and the opening up of a country closed since the Islamic revolution of 1979 to western companies.

Technicals

EUR/USD

1

EUR/USD is maintaining an upward channel on the hourly chart and currently it is at the bottom of the channel. On Friday, it made an attempt to break out from the current range and to initiate a rally but faced rejection at the strong resistance level of 1.0982 and pulled back. As it is still in a upward channel and price is above SMA50 and SMA200 , the Intraday bias in EUR/USD is bullish . Today the market has low liquidity and low momentum because of the US bank holiday in observance of Martin Luther King Day .

Trade Suggestion:

Buy above 1.0905 with a Stop Loss @1.0885 and Take Profit @1.0925.

GBP/USD

2

The bearish trend in GBP/USD has gained more strength after the BOE’s decision of keeping interest rates on hold. On Friday it fell about 160 points. Today so far it is up by 43 points as a correction of Friday’s fall. Intraday bias in GBPUSD is neutral as we are expecting further correction of Friday’s fall.

Trade Suggestion:

Sell below 1.4220 with Stop Loss @ 1.4260 and Take Profit @ 1.4365. If market tests the 1.4360 level and is rejected by it then sell @1.4345 with Stop Loss @1.4360 and Take Profit @1.4260.

USDJPY

3

USD/JPY is up by 70 points today so far after the market opened with a gap down. Last Friday USD/JPY fell about 110 points because of weak US data. Market is still in a consolidation as USD/JPY pulled back strongly today from the support zone. Intraday bias in USD/JPY is neutral until it breaks down below 116.00. Again a breakout above 118.80 may initiate a new rally in USDJPY.

Trade Suggestion

Sell below 116.00 with Stop Loss @116.80 and Take Profit @114.30.

Crude Oil

4

Crude Oil made a fresh low @28.35 today after opening with a gap down @28.75 as Iran – the fourth largest Oil producer has decided to boost Oil production for exports by 500,000 barrels  a day.  After making the low it retraced back to the nearby immediate resistance @29.90 and got rejected. Intraday bias in Oil is strongly bearish as Oil is rejected by the resistance @29.90 and is falling again.

Trade Suggestion

Sell below 29.00 with Stop loss @30.20 and Take Profit @27.20.

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