Asian shares retreated on Monday along with oil prices while the U.S dollar held on to its strength against a basket of major currencies. The greenback extended its gains following strong data on U.S retail sales and producer prices for September, that was released on Friday that reinforced expectations of a December interest rate hike by the Federal Reserve.
Also contributing towards supporting the U.S dollar index to seven-month highs, were U.S Treasury yields, that were at over-four-month highs after Federal Reserve Chair Janet Yellen suggested the Fed may allow inflation to exceed its 2 percent target. Higher U.S. bond yields attract more foreign investors, consequently pushing demand for the U.S dollar up.
Fed Vice Chair and FOMC member Stanley Fischer is due to deliver a speech today after the release of September industrial output data, while the earnings season will continue with big names including the U.S’ second largest lender by assets Bank of America Corporation and New York-based technology company International Business Machines Corporation reporting third quarter results today.
Oil prices dropped early on Monday, weighed by rising rig count in the United States. Coming on top of record OPEC-output that triggered renewed fears of global glut, a closely watched report by oil services provider Baker Hughes on Friday showed four oil drilling rigs were added in the week to October 14. This marked the 16th consecutive week of a rise in the oil rig count, which indicates increasing production within the US too.
Elsewhere, Bank of Japan Governor Haruhiko Kuroda said on Monday that the central bank will adjust monetary policy as needed to achieve its 2 percent inflation target. In its monetary policy meeting last month, the BOJ announced a shift in its focus towards interest rates, instead of expanding the monetary base further, after years of massive money printing and asset purchases, which have failed to pull the economy out of stagnation.
The New Zealand dollar has been on a rally against the Euro for almost a week. The pair has breached the support at 1.55500 on Friday and may make a breakout below the upward sloping support trendline connecting the higher lows. Signaling further down moves, the short-term MA20 has crossed over the long-term MA50 from above. RSI that dipped as low as 31.62 and ADX index that has reached 38.44 consolidated the downside.
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After a period of time moving sideways between the support at 130.000 and the resistance at 132.300, the pair fell out of the range and sustains its down moves. The British Pound has been weighed down by the short-term MA20 and has stayed within the bearish territory for two weeks, as can be seen in the RSI indicator window. The continuation of the downtrend may bring the pair to as low as 125.300.
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AUDUSD peeked out of 23.6% retracement on Friday but failed to sustain the bullish sentiment to push the pair higher. The Aussie pulled back below this level but bottomed out around 0.75800 and is approaching the 23.6% handle again. RSI is moving sideways above the 50 line, indicating a strong bull in the market. The pair is expected to breach the 23.6% resistance with support from two MAs.
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Gold proved to be resilient against the support at 38.2% Fibonacci retracement. The metal did fell below this level twice before but buyers jumped in to buy the dips every time to support the price back up to its range. The price action has crossed over the short-term MA20 and the gold market has entered the bullish zone, as indicated by the RSI chart. Gold may reach the upper boundary at 1265.00 in case the upside extends.
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U.S WTI has been fluctuating widely since it hit the four-month highs at around 51.60. The commodity may resume its downtrend after some corrective moves which brought the pair back to above the 50.00 level, as the short-term MA20 has crossed over the long-term MA50 above. RSI index remains below 50 line and is pointing downwards to the oversold zone, suggesting further declines.
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U.S Nasdaq 100 index has had a choppy trading session last Friday. The price action could not break out of the range between 4750.00 and 4840.00 and had to pull back after hitting the upper boundary. The level at 4840.00 also witnessed a failed attempt of the index to surpass the long-term MA50. A reversal into the downtrend has been confirmed by the stochastic chart where the %K line penetrated the %D line from above.
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