Midday Market Outlook 20 Jan
The Russian Rouble Fell to its lowest level ever against the US Dollar earlier today, on the back of the continuing rout in the crude markets with crude oil making new 13 year lows every few hours. Earlier in the week, the IMF downgraded its 2016 forecast for the Russian Economy to a 1% contraction in the GDP, on the back of the energy market collapse which accounts for more than 50% of the Russian government’s revenues.
The Canadian Dollar fell to a 13 year low against the US Dollar on the back of the rout in crude oil and in commodity markets generally. This comes at a time when the Canadian Stock Markets are falling to 4 year lows, having found no relief from the Canadian Central bank’s decision to hold interest rates steady earlier today.
The MSCI World Index is currently at an almost 3 year low, having hit its lowest level since July 2013. The index is a representative basket of the world’s equity markets combined. Having fallen close to 10% in January 2016 alone, the index is suffering reverses that are similar to those seen during the 2008/09 recession.
The Institute of International Finance reported that the global investors and institutions pulled out $735 billion dollar in 2015 from Emerging Markets, and 90% of these outflows were from China. The IIF predicted investors may pull out another $348 billion from developing countries this year. Tumbling Commodity markets,weakening equity markets coupled with weakening currencies,and slowing growth rates may provoke investors to pull out money from emerging markets.
EURUSD started today with a flourish after putting in a bottom @1.0858 yesterday. Currently it is trying to break the 1.1000 hurdle from where it has been rejected four times in the last one month. This time EURUSD is looking highly promising as EURUSD has run up higher this time by creating a series of higher lows. Also a nice ‘Reverse Head & Shoulders’ pattern is formed on the H4 chart which is a major trend reversal pattern. A sustained move above 1.1000 would open up the possibility of having a fresh rally in EURUSD. Conversely, if it fails to break 1.1000 again then the consolidation period will extend further. Intraday bias in EUR/USD is bullish today.
Buy above 1.1050 with a Stop Loss @1.0890 and Take Profit @1.1180.
GBPUSD started a strong sell off yesterday after the BOE’s Governor Mark Carney’s speech in London as the dovish tone of that speech ejected the possibility of an interest rate hike in the near future. Today it has been trading sideways so far. Currently it is at the bottom of a downward channel on the hourly chart . It has also formed a double bottom there which may be a sign of trying to put in a short term bottom. Intraday bias in GBPUSD is neutral today.
Sell if it breaks below 1.4150 with a Strop Loss @1.4150 and Take Profit 1.4020.
USDJPY tumbled yesterday after being rejected by the 118.00 resistance. Today it hit the bottom of downward sloping channel by a big red bar on the hourly chart and pulled back strongly from there which created a nice pin bar on the H4 chart. So there is a possibility of a short term correction of recent fall in USDJPY. However, it still is in bearish territory. A sustained move under 116.50 may initiate the continuation of strong bearish trend. Intraday bias is strongly bearish in USDJPY.
Sell USDJPY below 116.50 with Stop loss @117.40 and Take Profit @115.80.
Crude Oil is vacillating up and down today. With the Crude Oil inventories report coming in during the US session today more erratic moves are expected in the market. The intraday bias in oil remains bearish. A break below 28.40 would open up the way to another round of tumbles.
Trade Suggestion :
Sell below 28.40 with a Stop Loss above 30.30 and Take Profit of 27.20.
XAUUSD has been up by 0.94% so far. Currently it is attempting to breach the previous high 1097.46. A sustained move above 1097.00 would spur the current bullish momentum. Intraday bias in XAUUSD is bullish.
Buy above 1098 with Stop Loss @1089.90 and Take Profit @1107.50.
XAGUSD has been in a consolidation for last one month. It has formed three stages of ranging market. Today it has climbed up higher with Gold. Currently it is attempting to breach 14.16 level at the top of tight range. If it succeeds to break above 14.16 then it will be on its way to attempt an attack at the next immediate trendline resistance at 14.35. It is suggested to stay away from trading XAGUSD until it breaks out of this ranging market because in recent times it has been staging erratic volatile moves in both directions .
Copper is in a well established downward channel on daily chart. Yesterday it tested and was rejected by the previous support level 2.012 level(now a strong overhead resistance) which it had breached on 11th January. So short term resistance has formed @2.012 level. Intraday bias in Copper is strongly bearish. It is expected to continue the bearish trend. A sustained move below 1.950 may accelerate the current selloff. Conversely, if it succeeds to break above 2.012 level that would lead to a short term upward correction.
Sell below 1.950 with a Stop Loss above 1.9920 and Take Profit @1.905.