The distresses across the equity markets seem to be never-ending. However, trouble in the German corporate sector isn’t exactly helping but, clearly, it’s still China’s weakness that is keeping the pressure on markets. And yet, if we can predict a turnaround in China, we can predict another bullish push in the markets.
Because copper demand is strictly tied to growth in China, as it represents 40% of copper consumption, it is crucial to figuring out what is happening with China. Since the last time we covered this topic, two things have changed. Firstly, copper ended up sliding lower. And secondly the focus has shifted from how copper will signal the end of China’s sell-off to how global indices could regain their momentum while Chinese indices are left on the sidelines.
The commodity since the beginning of the year fell more than 14.0% and is in a recovery phase since the start of October. Last week copper rallied for the 2nd straight week with a narrow range and close near the high of the week on average volume. The Stochastic is showing a slight bullish momentum although is still below the 50 mid line.
Expecting an upward move to a key level at 265.95 on a break above a weekly resistance at 249.80 (scenario 1) or a break below a weekly resistance at 241.45 could push the commodity down to 227.85 (scenario 2).
Suddenly, the health of Germany’s economy, driving force of the 19-member Eurozone, is under question, just as the slowdown in emerging markets, including China, starts to take its toll. Plus the analysts are not yet clear how the Volkswagen scandal will affect the wider German economy, but it could have a considerable impact if it damages confidence in diesel cars generally.
German finance Minister stated last week that the German government expects its economy to grow by 1.8% in real terms this year and 2016, but weakness in emerging markets poses a risk to the outlook.
The Index rose more than 3.5% since the start of the month and increased 3.4% year to date plus it’s in a bearish phase since the beginning of October. Last week, DAX30 rallied with a wide range and closed in the green near the high of the week, managing to close above the weekly resistance. Stochastic is showing an oversold market setting higher lows and price is making lower lows, signs that the downside may begin to get exhausted.
Expecting an upward move to a key level at 10,522 on a break above previous week high at 10,146.5 (scenario 1) or a bounce off a key level at 10,522 may push downward the Index to a weekly resistance at 10,054 (scenario 2).
Ger30 is a CFD written over DAX30 futures.
Commodities fell and metals traded near six-year low after August China’s Industrial Profits hit the lowest since October 2011 at -8.8% and International Monetary Fund (IMF) Chief Lagarde spoke about global lower economic growth forecast around 3.4% in 2015, weaker than in 2014. These implied a slowdown in demand for commodities, especially from China.
Copper held steady last week but weaker US jobs data fuelled concerns about growth in the world’s largest economy and persistent worries about demand in top consumer China weighed on sentiment. However production cuts by top miners put a floor under the market but trading was thin with top consumer China on holiday.
The commodity since the beginning of the year fell more than 16.5% and is in a potential phase change from a bearish to a recovery phase. Last week copper rallied with a narrow range and close near the high of the week on average volume. The Stochastic is showing a bearish momentum and is below the 50 mid line.
Expecting an upward move to a weekly resistance at 249.89 on a break above previous week high at 237.65 (scenario 1) or a break below previous week low at 222.55 could push the commodity to a Fibonacci extension at 209.19 (scenario 2).
The US Federal Reserve (Fed) yet again postponed a hike in interest rates from near zero levels even after weeks of enthusiastic speculation about whether it was about time for the central bank to announce a rate hike.
This time around the developments in China, the world’s second largest economy, appeared to have influenced the decision in favour of maintaining a status-quo on low interest rates. The central bank has two more scheduled policy meetings this year, in late October and mid-December. Most analysts now expect a rate rise to come in December at the earliest.
The updated FOMC forecasts revealed that the Fed expects Gross Domestic Product (GDP) growth for 2015 to be 2.1%, up from the 1.9% it estimated in June. However, it lowered its 2016 forecasts to 2.3% from 2.5%. The unemployment rate forecasts for 2015 and 2016 were lowered by 0.3% each to 5% and 4.8%, respectively.
The S&P500 fell more than 0.5% since the start of the month and plunged more than 4.5% year to date settling in a bearish phase. The Index went back and forward without any clear direction with a wide range during the course of last week and closed in the red near the open of the week. The stochastic is showing bearish momentum and is below the 50 mid line.
Expecting downward move to a weekly support at 1,891.50 on a break below previous week low at 1,891.50 (scenario 1) or a bounce off the weekly resistance at 1,973.0 (scenario 2).
Usa500 is a CFD written over S&P 500 futures.
The central bank of Australia (RBA) has highlighted the beneficial impact of the weakening dollar on the domestic economic sectors. It said the currency’s slide is actually helping in the transition of Australian economy to move into a new phase from the mining boom, besides accelerating exports.
Consumer price inflation in Switzerland decreased by -0.6% from a month earlier in July, compared to forecasts for a decline of-0.4%, fueling concerns over the threat of deflation.
The Swiss franc (CHF) avoided continued depreciation thanks to safe-haven demand amid disappointing factory output from China and tumbling commodity prices.
Since the start of the year the currency fell more than 14.5% and is in a bearish phase, testing the lows of the year at 0.6892. Last week the AUDCHF fell and close in the red near the low of the week with a wide range. The stochastic is showing a change in momentum from bullish to bearish and is still below the 50 mid line.
Expecting a downward move to a Fibonacci extension at 0.6812 on a break below Year low at 0.6892 (scenario 1) or a break above the weekly support at 0.7074 could throw the currency up to a key level at 0.7308 (scenario 2).
The decline in copper prices over the last year was mainly due to concerns over copper demand from China, due to recent signs of economic sluggishness.
Last week the Chinese manufacturing data tumbled to a 15-month low in July, throwing a cloud over growth in the world’s second-largest economy, accounting for nearly 40% of the world’s demand for copper. That also hit prices of many commodities which are used in manufacturing.
The commodity since the beginning of the year fell more than 15.0% and is in a strong bearish phase, closing below year low. Last week copper plunged with a wide range and close near the low of the week on average volume. The Stochastic is showing an oversold market but even with the commodity well into oversold territory, we should not fight the strong downward trend just yet.
Expecting a downward move to a Fibonacci extension at 209.19 on a break below previous week low at 235.05 (scenario 1).
China’s recent stock market meltdown could be the result of underlying economic weakness that would have serious repercussions for exporting nations, including Australia. On the economic front, a report released by the Conference Board showed that its leading economic index for Australia rose 0.2% month-over-month in May, reversing the 0.3% drop in April.
Japan’s central bank last week cut its annual growth and inflation forecasts for the world’s third-largest economy. After a two-day policy meeting, the Bank of Japan (BoJ) said Japan’s economy would expand 1.7% in the fiscal year to March 2016 while inflation would come in at 0.7%. This continues to reflect a more optimistic view than the private sector.
The AUDJPY fell 6.03% since the start of the Year and is still in bearish phase. The currency tried to rally last week but found enough selling pressure at previous week high giving most of its gains back and closed in the green near the open of the week. The 200-week moving average is in control of the price movement for now although the stochastic is showing a strong bearish momentum and is below the 50 mid line.
Expecting an upward move to a weekly key level at 94.575 (scenario 1) or even a move up to a weekly resistance at 97.17 (scenario 2) on a break above previous week high at 94.43.