The U.S dollar continued to strengthen against most of its peers, extending gains after the Institute for Supply Management (ISM) said on Monday that the purchasing managers index for the manufacturing sector rose to 51.5 in September from 49.4 the prior month. The gauge assesses confidence among mangers regarding manufacturing sector activity. The reading pointed to an expansion last month after shrinking in August.
In an interview on Bloomberg Television on Monday, Federal Reserve Bank of Cleveland President Loretta Mester stated that the case for a rate hike this year remained compelling and she expected that the target range for the benchmark federal funds rate would be raised as soon as November. Markets are not pricing too much of a change next month as the meeting is too close to the U.S. presidential elections.
Besides Fed Cleveland President Mester, New York Fed President William Dudley also spoke on Monday. Speaking at a private conference at the New York Fed, President Dudley expressed fears that the Fed would not have as much policy room as it did during the period of financial crisis to support the economy if the U.S fell into recession in the next few years. Hence, the central bank should be cautious about raising interest rates.
Australia’s central bank, led by new Governor Philip Lowe, kept the benchmark rate unchanged at a record-low of 1.5 percent at its monetary policy meeting earlier today. The bank cited an unexpected rebound in commodity prices as a boost to the economy, helping it to grow at an above-average pace. Additionally, the housing boom in Australia is an area of rising concern and the real estate sector is in a situation that may not be suitable for further cuts, especially when the unemployment rate is falling and international trading conditions are favourable for Australia.
USDCHF has been stuck in a range between the support at 0.96511 (which is also the 23.6% retracement level) and the resistance at 0.97400 since September 22nd. The pair rose above the two moving averages on Friday and the MA’s have now become dynamic supports for the market. The price action is likely to make a breakout through the current range. As can be seen in the ADX chart, the ADX index has surged above 20, confirming a new uptrend after a period of moving sideways.
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AUDUSD is struggling around the 0.76730 level but is generally receiving support from the short-term MA20. The Aussie is expected to soar higher as the relative strength index continues to stay above the 50-line which separates the bullish territory from the bearish territory. Both MA’s are currently placed below the price action and underpinning the market currently. The pair may test the high from Thursday at 0.77095.
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EURCAD has been moving sideways to lower since the start of the new month. The pair is currently under downward pressure from the two MAs which are placed above the price action and the downward sloping trendline that connects lower highs since September 27th. Both the MA’s are currently placed above the price action.With the RSI indicating bearish sentiment, the pair is anticipated to fall further to the 23.6% level.
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Silver was moving sideways under the long-term MA50 in the first half of yesterday’s trading day and eventually failed to breach this resistance. Furthermore, silver fell out of the recent range between 19.265 and 18.960 to hit major support at 18.765. This is a major support zone that had contained the prices in mid-September. As the market has entered the oversold zone, buyers stepped in and pushed the price back up, which can be seen in long lower shadow in recent candles. Silver may have found a bottom and is likely to pull back.
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Copper has broken below the two MA’s which have now turned into new points of resistance after the price action crossed over from above yesterday. A sharp decline on Monday sent the market into the bearish zone, trimming the rally that reigned in the second half of September. The commodity may fall deeper with the support at 2.1640 within sight. A weak reading on the RSI is confirming the downward momentum.
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The Dow has been trading in a shrinking range for a month now, which has caused the RSI index to swing back and forth around the average line. The pair failed at the upper boundary of the recent range yesterday and fell back. The market may attempt a test of the lower boundary today, in case the retreat from yesterday continues. The %K line and %D line are heading downwards, suggesting a continuation of the downtrend.
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