Market Report: DOLLAR WEAKNESS

Good Morning,

The market’s rally was halted after 6 upside days. Lack of positive news, some profit taking and low volumes sent the markets to a mixed day, the FTSE yesterday was maintained positively, to strengthen of maximums level of a year. But now yields 0.5% to 6,830 points. The weak financial sector contributed to the red day. Other European indices are broadly flat to higher amid another very busy day of earnings season (focus on the German market with several DAX companies reporting). Asian markets narrowly mixed, volumes impacted by closure of Japanese market. RBNZ cut rates as expected and maintained easing bias, while there were no surprises from BoK hold decision.

In the US, yesterday, markets closed slightly negative. For today trading session we expect a day of transition, in a day when we will not have economic data of relevance. There is no major news on the agenda of Thursday.

DOLLAR WEAKNESS:

FX markets had another weak day for the dollar that fell vs all majors and sent metals higher. One of the more interesting themes in a relatively uneventful week thus far has been the inability of the dollar to extend the higher push that followed last Friday’s upside surprise from July payrolls. The main constraint has been the lack of a meaningful reset in Fed policy normalization expectations. Bloomberg pointed out this morning that the probability of a December tightening has actually receded slightly to 45% from post-payrolls high of 47% on Monday.

Weak productivity: Fed tightening skepticism has partly been a function of the fact that productivity unexpectedly contracted for a third straight quarter in Q2. Productivity declined 0.5% q/q annualized in Q2, while the consensus was for a 0.4% increase. Weak productivity has been driven by factors such as demographics (rapid retirements) and sluggish private investment stemming from lingering uncertainty about the business outlook. Despite the recent strength in payrolls, there are concerns that weak productivity could eventually hit the labor market.

Yesterday the OIL inventories release sent crude tumbling 3% after gasoline stockpiles fell 2.8 million barrels.

GOLD

The Gold has an inverse correlation with USD. WHEN THE USD IS RISING, GOLD FALLS.

The yellow metal flirted with a more than two-year high above the $1,370-level earlier this month before coming under pressure as last week’s robust U.S. employment report revived speculation of a U.S. interest rate hike in the coming months. Gold is up nearly 26% on the year so far, boosted by concerns over global growth and expectations of monetary stimulus.

Today we are expected a slight correction in the price of gold.

Graphics by: www.etoro.com

Alibaba

Alibaba is scheduled to announce earnings for its fiscal first quarter, which ended June 30, on Thursday before the market opens. Wall Street analysts estimate it will report a net income of $1.5 billion on revenues of $3 billion, up 48% year-over-year.

The stock yesterday closed +2.55% up, and in the pre-market is trading also up for +1.30%. We can see in the chart the trend is positive for Alibaba, the next level of resistance probably can be the 90 usd.