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Written by: Edward Moya | OANDA
US stocks are lower as the global macro backdrop just got very gloomy. It started with disappointing Chinese trade data, then Moody’s cut the credit rating for 10 small and midsize banks, and then UPS lowered their guidance on weakening demand and higher costs from a new labor contract.
Stocks are down, but it is not too ugly as Wall Street is starting to become very confident that global economic weakness will do the trick in getting inflation back to the Fed’s 2% target. Rate hike odds continue to edge lower for the September and November FOMC meetings, but the rate cuts for 2024 keep growing.
FX
Commodity currencies across the board tumbled after China’s trade data signaled the global economy is in trouble over the short-term. A steadily improving Chinese economic recovery has not occurred as the domestic economy remains very weak. This economic report posted some of the weakest data points since early in the pandemic.
The Australian dollar is maintaining a clear bearish trajectory that has been in place over the past two weeks, since the double-top pattern formed around the 0.6895 level. Supporting this bearish technical bias are the downward sloping trendlines that continue to be respected since early last decade. The fundamentals were supposed to be turning around now but that won’t happen as the world’s second largest economy struggles to gain any momentum.
Adding to China’s woes is the struggling property sector, which should keep the pressure to deliver more stimulus. Banking sector fears are back again and if Country Garden, the biggest privately owned developer in China goes down, that could trigger a crisis in confidence for the property sector.
In the event that AUD/USD sees further downside that breaks below the 0.6450 level, a continuation of the downward trend could initially target 0.6402, with key residing at the 0.6370 level. If risk appetite stabilizes and the Australian currency rebounds, major resistance resides at the 0.6700 level.
Oil
Crude prices tumbled as risk aversion runs wild on abysmal China trade data and as US banking worries percolate. A strong dollar roared back, as global growth concerns dragged down all commodities. For energy traders, this was an easy sell last night as China’s crude imports hit the weakest levels since January. Adding to the bearishness was the 34% plunge of India’s oil imports from Saudi Arabia.
The oil market was supposed to easily remain tight throughout the rest of the year, but that was based on a steadily improving economic recovery from China. WTI crude has had a nice run up since late June, so profit-taking could become more aggressive if prices fall below the $80 level.
Gold
Gold is trying to act like a safe-haven again. Gold is slightly lower on disappointing Chinese trade data, pressure with the US banks, and mixed earnings. Despite broad dollar strength, gold is holding nicely considering all the selling that is hitting the other commodities. If the global economic outlook deteriorates further, gold should catch a bid here. Gold has major support around the $1950 level, with upside resistance residing at the $1992 level.
Bitcoin
Bitcoin appears to be lifeless despite several market moving headlines. Risk aversion from weakening global growth concerns is not dragging Bitcoin down. Perhaps some traders remain upbeat, especially after PayPal launched a US dollar-backed stablecoin. Bitcoin seems content hanging around the $29,000 level until we get a meaningful regulatory update.
Related: The Real Pivot Favors International Economic Growth
Transcript:
US stocks are lower as the global macro backdrop just got very gloomy. It started with disappointing Chinese trade data, then Moody’s cut the credit rating for 10 small and midsize banks, and then UPS lowered their guidance on weakening demand and higher costs from a new labor contract. . .
Stocks are down, but it is not too ugly as Wall Street is starting to become very confident that global economic weakness will do the trick in getting inflation back to the Fed’s 2% target. Rate hike odds continue to edge lower for the September and November FOMC meetings, but the rate cuts for 2024 keep growing.
FX
Commodity currencies across the board tumbled after China’s trade data signaled the global economy is in trouble over the short-term. A steadily improving Chinese economic recovery has not occurred as the domestic economy remains very weak. This economic report posted some of the weakest data points since early in the pandemic.
The Australian dollar is maintaining a clear bearish trajectory that has been in place over the past two weeks, since the double-top pattern formed around the 0.6895 level. Supporting this bearish technical bias are the downward sloping trendlines that continue to be respected since early last decade. The fundamentals were supposed to be turning around now but that won’t happen as the world’s second largest economy struggles to gain any momentum.
Adding to China’s woes is the struggling property sector, which should keep the pressure to deliver more stimulus. Banking sector fears are back again and if Country Garden, the biggest privately owned developer in China goes down, that could trigger a crisis in confidence for the property sector.
In the event that AUD/USD sees further downside that breaks below the 0.6450 level, a continuation of the downward trend could initially target 0.6402, with key residing at the 0.6370 level. If risk appetite stabilizes and the Australian currency rebounds, major resistance resides at the 0.6700 level.
Oil
Crude prices tumbled as risk aversion runs wild on abysmal China trade data and as US banking worries percolate. A strong dollar roared back, as global growth concerns dragged down all commodities. For energy traders, this was an easy sell last night as China’s crude imports hit the weakest levels since January. Adding to the bearishness was the 34% plunge of India’s oil imports from Saudi Arabia.
The oil market was supposed to easily remain tight throughout the rest of the year, but that was based on a steadily improving economic recovery from China. WTI crude has had a nice run up since late June, so profit-taking could become more aggressive if prices fall below the $80 level.
Gold
Gold is trying to act like a safe-haven again. Gold is slightly lower on disappointing Chinese trade data, pressure with the US banks, and mixed earnings. Despite broad dollar strength, gold is holding nicely considering all the selling that is hitting the other commodities. If the global economic outlook deteriorates further, gold should catch a bid here. Gold has major support around the $1950 level, with upside resistance residing at the $1992 level.
Bitcoin
Bitcoin appears to be lifeless despite several market moving headlines. Risk aversion from weakening global growth concerns is not dragging Bitcoin down. Perhaps some traders remain upbeat, especially after PayPal launched a US dollar-backed stablecoin. Bitcoin seems content hanging around the $29,000 level until we get a meaningful regulatory update.
Related: The Real Pivot Favors International Economic Growth