CFD Markets News and Forecasts — 19-08-2020

FXStreet notes that industrial metals’ backdrop looks supportive, as governments try to revive economies with more stimulus. Inventories across metals are low, and easing supply issues will not be enough to replenish them. Still, deceleration in demand recovery and resuming mine operations should pave the way for a short-term correction, per ANZ Bank.

“Data highlight the ongoing recovery in industrial activity, keeping the backdrop supportive for industrial metals. We believe a seasonal slowdown in construction activity could limit the pace of recovery.”

“Base metal inventories are mixed, with zinc and aluminium rising while nickel is flat and copper lower. Falling copper TC/RC charges suggest tightness in the concentrate market. Demand indicators, including air conditioner sales, suggest the improvement in demand is continuing, although the pace remains subdued.” 

“A weakening spot premium signals easing in copper supply tightness. Mining operations are resuming in Latin American countries, this will see the supply backdrop improving in the coming months.”

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 1.632 million barrels in the week ended August 14. Economists had forecast a decrease of 2.670 million barrels.

At the same time, gasoline stocks dropped by 3.322 million barrels, while analysts had expected a decline of 1.057 million barrels. Distillate stocks increased by 0.152 million barrels, while analysts had forecast a drop of 0.557 million barrels.

Meanwhile, oil production in the U.S. remained unchanged at 10.700 million barrels a day.

U.S. crude oil imports averaged 5.7 million barrels per day last week, up by 109,000 barrels per day from the previous week.

FXStreet notes that it turns out that the gold uptrend can last quite a long time. Nonetheless, when a correction arrives, the yellow metal could see a drop over 17%, according to Daniel Ghali, Commodity Strategist at TD Securities. Currently, gold is hovering near the lower end of its daily trading range, around the $1985 region.

“It feels good to be a gold bug. After all, it's been hard to lose money being long. In fact, the bulls are rushing to buy the yellow metal with nearly +100% of momentum signals tracked by our ChartVision indicator pointing long, leading to +93% of signals long on a 60d moving average basis. The underlying macro tailwinds are only analogous to the financial repression in the post-WWII era, which provides an incredibly compelling narrative for higher gold prices.”

“But, how long can a good thing last? It turns out, it can last for quite some time. Despite a small sample size, instances of consecutive extreme readings in momentum signals have historically averaged at 45 days, but with a wide distribution. In other words, timing a momentum overshoot is incredibly difficult.” 

“What is more clear, is what comes next, when momentum stops paying. As upside momentum subsides following extreme instances, forward returns tend to be skewed negatively, with sharp drawdowns and limited upside. A consolidation period could last for months, with subsequent drawdowns over 17%. Don't fight the trend, unless it shows a sign of weakness.” 

According to ActionForex, analysts at TD Bank Financial Group note that the Canadian consumer price inflation slowed to just 0.1% on a year-on-year (y/y) basis in July, down from 0.7% in June. The reading came in well below the consensus forecast for 0.5%.

"The slowing in the year-on-year metric was fairly widespread, but was led by air transportation prices, which went from +8.1% y/y in June to -8.6% in July. Statistics Canada reported that “airlines were offering various incentives such as reduced fees, discounts and promotions to encourage a return to travel.” Travel accommodation prices were also down steeply (-27% y/y, down from -25% in June)."

"On a seasonally adjusted basis, prices edged down by 0.1% in the month, following a 1% gain in June. Recreation, reading and education prices led the drop, down 2.3% on the month – this includes traveler accommodation noted above. On the other side of the ledger, clothing and footwear prices were up 1.8%, slowing from a 2.9% gain in June. Food price growth stalled in the month as prices for beef fell as production in the industry normalized."

"Two of three of the Bank of Canada’s core inflation measures edged lower in the month. CPI-trim fell to 1.7% (from 1.8%) and CPI-common to 1.3% (from 1.4% and the lowest reading of this measure since January 2017). CPI-median was unchanged at 1.9%."

"The impact of COVID-related shutdowns is dissipating from much of the data, but its impact can still be seen clearly in prices for air-travel and travel accommodations. These are volatile categories which have, in recent years, accelerated in the summer months, but did the opposite this year, accentuating the weakness."

Canada’s wholesale sales increase much more than forecast in June

Statistics Canada reported on Wednesday the wholesale sales surged 18.5 percent m-o-m to CAD62.06 million in June, following a revised 5.8 percent m-o-m gain in May (originally a 5.7 percent m-o-m advance). That was the biggest increase in wholesale sales on record.

Economists had forecast a 10 percent m-o-m increase for June.

According to the report, all seven subsectors recorded higher sales for the first time since November 2017. The motor vehicle and motor vehicle parts and accessories (+114.8 percent m-o-m) subsector led the growth. Excluding this subsector, wholesale sales rose 10.2 percent m-o-m.

In y-o-y terms, wholesale sales decreased 2.4 percent in June.

Meanwhile, wholesale inventories dropped 0.7 percent m-o-m in June. Inventories decreased in four of seven subsectors, accounting for 43 percent of total wholesale inventories. The inventory-to-sales ratio declined from 1.74 in May to 1.46 in June. 

U.S. stock-index futures traded flat on Wednesday, as investors awaited minutes from latest Fed's meeting (due at 18:00 GMT) while assessing solid quarterly results from Target (TGT; +8.8% in premarket trading) and Lowe’s (LOW; +2.3%) as well as prospect of pared-down stimulus from the U.S. lawmakers.

Global Stocks:

FXStreet notes that the S&P 500 Index has rallied to test its 3394 record high. Despite poor momentum, analysts at Credit Suisse continue to see scope for a move to clear new record highs, with a break above trend resistance from June at 3405 seen exposing Fibonacci resistance of 3432/36. On the flip side, support is seen at 3370, then more importantly at 3343/41.

“The S&P 500 has rallied to test and briefly see a minor new record high above 3394, but with strength capped by trend resistance from early June, today seen at 3405. With RSI momentum still not yet confirming the new high we remain cautious, but continue to give the upside the benefit of the doubt for now.”

“Above 3394 and then the trend resistance at 3405 should mark a conclusive break higher, opening the door to what remains our ‘ideal’ resistance objective at Fibonacci projection resistance at 3432/36. We look for this to ideally cap and for a consolidation/corrective phase to emerge.”

“Support is seen at 3382 initially, then 3370, below which can see a move back to the 13-day average and trend channel support at 3343/41. A close below here is needed to suggest a correction lower is finally underway, with 3326 though still needing to be removed to establish a small top.”

(company / ticker / price / change ($/%) / volume)

Statistics Canada reported on Wednesday the country’s consumer price index (CPI) edged down 0.1 percent m-o-m in July, following a 0.8 percent m-o-m gain in the previous month.

On the y-o-y basis, Canada’s inflation rate increased 0.1 percent last month after climbing 0.7 percent in June.

Economists had predicted inflation would increase 0.4 percent m-o-m and 0.5 percent y-o-y in July.

According to the report, prices rose in five of the eight major components on a year-over-year basis in July, but mostly at a slower pace than in June. Meanwhile, the cost of transport dropped (-1.0 percent y-o-y), mainly due to lower air transportation prices (-8.6 percent y-o-y), which fell for the first time on a year-over-year basis since December 2015, as airlines were offering various incentives such as reduced fees, discounts and promotions to encourage a return to travel following restrictions due to the COVID-19 pandemic. In addition, prices declined in clothing and footwear (-2.0 percent y-o-y) and recreation, education and reading (-4.0 percent y-o-y).

The closely watched the Bank of Canada's core index rose 0.7 percent y-o-y in July after a 1.1 percent gain in June. 

GBP weakened against most other major currencies in the European session on Wednesday as investors assessed an unexpected climb in British inflation in July and a report by the Financial Times (FT) that Brexit trade talks set to stall again over British truckers’ access to the EU after the end of the Brexit transition period. 

A report from the Office for National Statistics' (ONS) revealed that the UK's consumer price inflation increased unexpectedly to a four-month high in July. According to the report, the annual inflation rate jumped to 1 percent in July after a 0.6 percent gain in June. Economists had forecast a 0.6 percent increase. This was the highest reading since March. Clothing, rising prices at the petrol pump, and furniture and household goods made large upward contributions to inflation, while lower food prices partially offset the annual advance. On a monthly basis, UK's consumer prices rose 0.4 percent, after a 0.1 percent uptick in June, beating economists' forecasts of a 0.1 percent drop. 

Market participants, however, do not expect the Bank of England (BoE) to draw conclusions only from this data. At the August policy meeting, the BoE had forecast inflation to turn briefly negative in the near term, falling to -0.3 percent in August, driven by VAT cut and "Eat Out to Help Out" scheme. According to the estimates of the BoE's policymakers, inflation will fall further below the 2 percent target and average around 0.25 percent in the latter part of the year, largely reflecting the direct and indirect effects of Covid-19.

Investors also await updates on the EU-UK trade negotiations as the new round of discussions started yesterday. The Financial Times (FT) reported today that the talks are set to stall again as the UK's request for continued wide-ranging trucking access to the EU has been rejected by the European Commission. This set the stage for a clash as Brexit trade negotiations resumed this week.

FXStreet notes that bulk commodities are leveraging China’s stimulus. Steel production has been surprisingly strong and improving steel mill margins should keep the output resilient in the short-term. A depleted iron ore stockpile is the other supportive factor. Nevertheless, a slowdown in land sales suggests demand from the real estate sector may soften, according to economists at ANZ Bank.

“Infrastructure-led stimulus measures continue to boost steel and iron ore demand. China’s steel production has been robust and this has seen a strong drawdown in iron ore inventories.”

“Steel margins are rising steadily, which should support steel production in the short-term. However, we have seen a material fall in land sales, signalling demand from the real estate sector may be soft in coming “quarters.” 

Iron ore supply issues are easing in Brazil as reflected in rising exports from the country. Australian exports have been decelerating, while Indian exports rose more than 70% recently.”

FX Strategists at ING suggest that minutes from the last FOMC meeting will be in focus later today amid growing expectations that the Fed could change its inflation strategy in September. 

"US inflation expectations derived through the 5Y5Y inflation swap touched 2% yesterday – a new high in this recovery cycle. This is feeding into the current conviction view that: a) a recovery is underway (helped potentially now by the Democrats softening their position on the next round of stimulus) and b) the Federal Reserve will not touch the monetary brakes for several years."

"The driving narrative of negative US real yields devaluing the dollar and reflating financial assets will be challenged tonight when the minutes of the July 29 FOMC are released. These are in focus since expectations are growing that the Fed will shift its monetary policy strategy at the September 16 meeting – potentially adopting Average Inflation Targeting (AIT)."

"Any clues from the July minutes as to its likelihood and any insights on what it would take for the Fed to initiate Yield Curve Control could see dollar losses extend. The biggest risk over the next 24 hours is probably stretched short dollar positioning."

"A short-term correction cannot be ruled out if the switch to AIT is more an ‘evolution than a revolution’. However, we doubt any short, sharp dollar rallies are sustainable and that the dollar should stay pressured into a very contentious Presidential election in November. Expect DXY to stay soft into the minutes, DXY pressing 92.00."

U.S. weekly mortgage applications fall 3.3 percent

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. fell 3.3 percent in the week ended August 14, following a 6.8 percent surge in the previous week.

According to the report, refinance applications declined 5.3 percent, while. applications to purchase a home rose 0.8 percent.

Meanwhile, the average fixed 30-year mortgage rate increased to 3.13 percent from a record low of 3.06 percent.

“Positive economic data reported last week on retail sales, as well as a large U.S. Treasury auction, drove mortgage rates to their highest level in two weeks,” noted Joel Kan, an MBA economist. “The housing market remains a bright spot in the current economic recovery, and these results, combined with July data on housing starts and homebuilder optimism, suggest that housing supply could be increasing to better meet the strong demand for buying a home,” he added.

FXStreet reports that economists at Credit Suisse continue to look for a potentially lengthy consolidation phase in gold to emerge after the move to the core base case resistance at $2075/80 but with this phase still seen as a pause within the core longer-term bull trend. 

“Gold is seeing its expected consolidation following the move to our base case objective of $2075/80. Although we continue to see the core long-term trend higher, reinforced by falling US Real Yields and a falling USD, we suspect there is scope for a more protracted consolidation phase to unfold first.”

“At present, our bias is for a cluster of supports at $1867/37 to ideally hold further weakness, which includes the 23.6% retracement of the rally from the 2018 low. Should weakness extend, we would see scope for a deeper setback to $1765, potentially $1726. Post this phase we look for an eventual move above $2075 with resistance seen next at $2175, then $2300. Whilst we would look for a fresh consolidation at this latter level, a direct break can see potential trend resistance at $2417, with scope seen for $2700/20 over the longer-term.”

“It is worth noting that monthly RSI has reached its extreme levels seen in 2006 and 2008 adding weight to the view for a lengthier pause in the bull trend. Indeed, in the 2001/2011 bull market the two major consolidation phases (2006/2007 and 2008/2009) lasted 16 and 18-months respectively. A similar length of consolidation at this juncture though is not our base case for now.”

James Smith, Developed Markets Economist at ING, notes that higher contributions from clothing and footwear, as well as a rise in petrol prices, unexpectedly lifted UK inflation in July.

"UK inflation came in quite a bit higher than expected in July, and means that core inflation is now a touch below target at 1.8%, up from 1.2% in May. A much less pronounced fall in clothing prices than we’d normally see at this time of year seemed to be the main culprit, but there were a series of small contributors to July's outperformance."

"This latest volatility emphasises that the inflation data is pretty difficult to read cleanly at the moment. We know for instance that in the midst of the lockdown back in April and May, around 40% of the stuff consumers usually buy was unavailable, according to Bank of England estimates. That meant that it was difficult to measure various prices, although the ONS notes this issue has now pretty much gone away."

"But a potentially longer-lasting consequence of the pandemic is that the weights attached to the CPI basket are probably no longer a great indication of what people are spending their money on. Habits have shifted dramatically as a result of Covid-19 - the rapid switch from in-store to online retailing is one good example."

"The inflation picture is likely to get muddier still when we get the August figures. We’re likely to see a heavy drag from the VAT cut from 20% to 5% on things like restaurants, hotels and various recreational activities, but also the ‘Eat Out to Help Out’ scheme. This latter policy has enabled restaurants to offer half-price food and non-alcoholic drinks on Monday-Wednesday through August."

"Although it’s pretty much guesswork as to how noticeable these policy changes will be, it is possible that August’s CPI rate will fall below zero. The Bank of England has estimated that the VAT change and the Eat Out scheme will each knock around 0.4% off headline CPI, the latter effect obviously evaporating in September once the policy has ended. For what it’s worth we think we could see a deeper slide in August, but in the end it’s a bit of an academic question."

FXStreet notes that EUR/USD has surged above resistance at 1.1916/26, driven by the resumption of the core USD bear trend and this ends its brief high-level consolidation phase. Economists at Credit Suisse maintain a core bullish outlook with 1.2145/55 as the next flagged and first major objective– which they look to cap at first for a fresh consolidation phase. Support rises to 1.1883/81.

“EUR/USD has removed with ease key resistance from its recent highs and downward sloping ‘neckline’ from its early 2018 top at 1.1916/26 and this marks the completion of a bullish continuation pattern to reassert the core uptrend.” 

“With a large base already in place above 1.1495, we maintain our core positive outlook and look for the uptrend to resume with resistance seen next at 1.1997 and then our 1.2145/55 next major flagged resistance – the point-of-breakdown from the early 2018 top and 78.6% retracement of the 2018/2020 bear trend. We will then look for this to cap at first for a fresh consolidation phase. But, we look for this to be followed by further gains in due course with the ’measured base objective’ seen at 1.2355 and with 1.2518/98 the next major area of meaningful resistance, which we expect to prove a much more formidable barrier.” 

“Near-term support moves to 1.1915/10, with 1.1883/81 ideally now holding to keep the immediate risk higher. A break can see a pullback to 1.1833/27, but now ideally below 1.1783.”

FXStreet reports that Alvin Liew, Senior Economist at UOB Group, assessed the latest GDP figures in the Japanese economy.

“Japan’s 2Q 2020 GDP recorded an unprecedented contraction of -7.8% q/q (-27.8% annualized rate). Almost all major GDP segments (including private consumption, business spending, public consumption, net exports and private inventories) declined, except public investment.”

“Even as we factor a rebound in the second half of this year, earlier optimism of a robust recovery has now given way to a weaker one given the weakness in manufacturing and services PMIs and lackluster household spending recovery. Beyond the COVID-19, we see Japan facing significant challenges due to the worsening US-China relations, the tighter fiscal space for the government and greater reliance on the central bank to support the domestic economy.”

“Based on the significant downgrade in the 2Q GDP and a weaker 2H rebound projection, we now expect Japan full-year GDP to contract by a deeper 6.0% in 2020 (from -5.5% previously) compared to +0.7% in 2019. This already factors in a 2H rebound in the magnitude of +9.5% q/q SAAR in 3Q and 10.4% in 4Q, which translates into -8.0% y/y in 3Q and -3.9% y/y in 4Q. However, there are material downside risks to our 2H rebound as we still see significant uncertainty due to COVID-19 developments. On the other hand, the primary upside risk to the forecasts will be the successful and quick deployment of a vaccine against COVID19.”

Reuters reports that the World Trade Organization said on Wednesday its goods trade barometer hit a record low, suggesting global merchandise trade registered a historic fall in the second quarter of 2020 as the coronavirus pandemic raged.

"Additional indicators point to partial upticks in world trade and output in the third quarter, but the strength of any such recovery remains highly uncertain: an L-shaped, rather than V-shaped, trajectory cannot be ruled out," the WTO said 

The barometer reading of 84.5 was down 18.6 points down from the year-ago period. In normal times, it anticipates changes in the trajectory of trade by a few months, but volatility triggered by the pandemic has reduced its predictive value.

"This reading - the lowest on record in data going back to 2007, and on par with the nadir of the 2008-09 financial crisis - is broadly consistent with WTO statistics issued in June, which estimated an 18.5% decline in merchandise trade in the second quarter of 2020 as compared to the same period last year," the WTO said.

The exact extent of the fall will become clear only when official trade data for April to June become available.

The WTO had forecast in April that global trade in goods would fall between 13% and 32% in 2020 before rebounding by 21-24% in 2021, but in June said rapid responses by governments meant its pessimistic scenario for this year was unlikely.

"The WTO's June statistics implied a 14% drop in global merchandise trade volume between the first and second quarters of this year. This estimate, together with the new Goods Trade Barometer reading, suggest that world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the WTO's April forecast," it said on Wednesday.

According to the report from Eurostat, in July 2020, a month in which COVID-19 containment measures continued to be lifted, the euro area annual inflation rate was 0.4% in July 2020, up from 0.3% in June. A year earlier, the rate was 1.0%. Сore figures rose by 1.2% versus +0.8% in June and +1.2% expectations.  European Union annual inflation was 0.9% in July 2020, up from 0.8% in June. A year earlier, the rate was 1.4%.

The lowest annual rates were registered in Greece (-2.1%), Cyprus (-2.0%) and Estonia (-1.3%). The highest annual rates were recorded in Hungary (3.9%), Poland (3.7%) and Czechia (3.6%). Compared with June, annual inflation fell in ten Member States, remained stable in three and rose in fourteen.

In July, the highest contribution to the annual euro area inflation rate came from non-energy industrial goods and services (both +0.42 percentage points, pp), followed by food, alcohol & tobacco (+0.38 pp) and energy (-0.83 pp).

FXStreet reports that ample liquidity and negative real rates continue to support the precious metals sector. The investment demand for all metals has been strong. Gold looks relatively attractive after its recent underperformance against silver. Any price setback presents a buying opportunity, strategists at ANZ Bank inform.

“An unexpected rise in real yields was the spark that ignited a sell-off in gold prices recently. This saw ETF flows turn negative in August for the first time since June. Ample money supplies, record ETF flows and the weaker US dollar are the factors supporting robust investment demand. Nevertheless, there has been muted speculative interest in gold futures.”  

“Silver has unexpectedly outperformed gold, with the gold:silver ratio falling to 71x this month. Resilient demand from the electronics and solar sectors, along with supply disruptions in Latin America, have supported gains.”

“PGMs are getting investor attention, with rising net ETF inflows and coin sales. The auto sector is recovering – China being the first to see a growth in auto sales. Nevertheless, growth decelerated in recent weeks.”

According to the report from European Central Bank, the current account of the euro area recorded a surplus of €21 billion in June 2020, increasing by €10 billion from the previous month. Surpluses were recorded for goods (€25 billion), services (€4 billion) and primary income (€2 billion). These were partly offset by a deficit for secondary income (€10 billion).

In the 12 months to June 2020, the current account recorded a surplus of €267 billion (2.2% of euro area GDP), compared with a surplus of €305 billion (2.6% of euro area GDP) in the 12 months to June 2019. This decline was mainly driven by decreases in the surpluses for services (down from €88 billion to €31 billion) and primary income (down from €89 billion to €65 billion). These developments were partly offset by an increase in the surplus for goods (up from €287 billion to €321 billion) and a decrease in the deficit for secondary income (down from €159 billion to €150 billion).

In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €514 billion in the 12-month period to June 2020 (up from €134 billion in the 12 months to June 2019). Over the same period, non-residents made net acquisitions of euro area portfolio investment securities amounting to €439 billion (up from €132 billion).

FXStreet reports that the CNY rally is continuing as the domestic economic recovery strengthens and the market is discounting escalating geopolitical risk. On the other hand, an omen of the rising digital iron curtain and a potential flashpoint, if ignited, could weaken CNY and test the forecast range’s upper bound. All in all, economists at MUFG Bank expect USD/CNY to trade within a 6.85-7.00 range.

“High-frequency signals suggesting China’s rapid economic rebound have extended into the second half of the year, propelled by recovering foreign demand and strong fiscal support, fueling the CNY rally. Market participants continued discounting escalating geopolitical risks between the two global giants as the CNY rally against the dollar continued. Towards the end of August, USD/CNY likely will continue trading within the 6.95-7.00 range, with a downside bias.”

“We might see the digital iron curtain rising should Chinese policymakers produce a similar ban on US software applications. Consequently, we would see two larger separate intranets, which would not be good news for the internationalization of the CNY and could weaken the CNY.”

“In the last three years, the managed floating CNY system partially smoothed out significant global FX market fluctuations when the counter-cycle factor was turned on. Therefore, we would like to suggest that USD/CNY will likely trade within the 6.85-7.00 range.”

During today's Asian trading, the US dollar fell against the euro and pound, but rose slightly against the yen. The dollar exchange rate is near a two-year low in the pair with the euro.

Former Vice-President of the United States Joe Biden was elected as the candidate for President of the United States from the Democratic party, according to the results of voting at the online Convention.

On Wednesday, the minutes of the meeting of the Federal Open Market Committee from July 28-29 are expected to be published. In addition, traders are waiting for signals from the Federal reserve Bank conference in Kansas city at the end of August.

"Hot topics are sure to be controlling the yield curve, suppressing the financial sector through digital currencies and keeping high inflation. However, in the long term, everything will depend more on the readiness to realize the potential of these measures with the help of fiscal policy, " said John hardy, chief currency strategist at Saxo Bank.

The yen is getting cheaper. The drop in Japanese exports slowed in July on the back of increased shipments to China for the first time in seven months, but was recorded for the 20th consecutive month. Exports fell by 19.2% compared to July last year. Imports last month fell by 22.3% to 5.36 trillion yen. The decline was recorded for the 15th consecutive month. Japan's foreign trade surplus in July was 11.6 billion yen, compared with a deficit of 254 billion yen in the same month last year. The surplus was recorded for the first time in four months.

The pound is getting more expensive. Traders are watching the next round of negotiations on a new trade agreement between the UK and the European Union. Meanwhile, consumer prices in the UK in July 2020 rose by 1% in annual terms, according to data from the National statistics office. Thus, inflation accelerated compared to June's 0.6%.

The ICE U.S. Dollar index, which shows the value of the us dollar against six major world currencies, rose 0.03% on Wednesday from the previous day.

CNBC’s Jim Cramer advised investors to be prepared to reevaluate their industrials holdings, should the value of the American greenback rise.

The U.S. dollar index, typically viewed as a safe-haven investment, set a new two year low during the trading day, but a “contrarian” call from renowned trading expert Larry Williams suggests that the index could be bottoming. The dollar is now down 4.23% this year.

“The charts, as interpreted by the great Larry Williams, suggest that the U.S. dollar could be ready to come out of its funk and start rallying again,” the “Mad Money” host said. “If he’s right, we’re going to have to reassess a whole host of American companies that’ve been getting a huge boost from our weakened currency, and by reassess I mean lighten up on stocks of companies with big overseas sales.”

The greenback, which topped out at 102.99 in March, has tumbled as the federal government carried out multiple fiscal rescue programs to buffer the economic damage from the coronavirus lockdown in the first half of the year. U.S. currency was also weaker against both the euro and Japanese yen.

As the dollar set a new low, the S&P 500 managed to reach a new all-time high during the session, recovering all of its market losses since reaching a peak prior to the coronavirus outbreak growing into a global crisis. The greenback reached a 27-month low.

Congress pushed through emergency legislation spending trillions of dollars on aid for Americans, hospitals, businesses and governments, while the Federal Reserve pumped trillions in liquidity into financial markets.

“That’s one reason why so many American industrials have managed to have great stocks, here,” Cramer said. “A weak dollar means their exports are cheaper for the rest of the world. It gives us a big competitive advantage, even though it also makes imports more expensive.”

Citing Williams, Cramer pointed out multiple indicators that suggest the U.S. dollar index may be poised to reverse course. They include correlations in the crude market, a greenback nearing seasonal lows and the TD Sequential — a momentum indicator — suggesting the decline in the dollar is coming to an end.

Looking at the monthly chart of the dollar index, which measures the American dollar against foreign currencies, Cramer noted a bullish sign in buying and selling activity of commercial hedgers.

“Whenever these commercial hedgers build a big net long position, above the black horizontal line, Williams points out that the dollar index actually tends to rally pretty consistently,” the host said. “We’ve just gotten to a point where the commercial hedgers are net long, [which is] an unusually bullish position that says buy the greenback.”

Reuters reports that Italy is working on identifying investment and reform projects to tie in with European Union financial support and will present its recovery plan by mid-October, Prime Minister Giuseppe Conte told a newspaper on Wednesday.

“We will pay great attention to material and immaterial infrastructure and aim to invest in schools, universities and research. We will also use the opportunity to improve the efficiency of public administration and justice,” he told the daily Il Fatto Quotidiano.

Conte said he also backed calls from former European Central Bank President Mario Draghi to strengthen instruments aimed at bringing greater stability to the euro area.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2062 (2207)

$1.2032 (1336)

$1.2008 (2730)

Price at time of writing this review: $1.1943

Support levels (open interest**, contracts):

$1.1837 (335)

$1.1806 (1392)

$1.1771 (776)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 90599 contracts (according to data from August, 18) with the maximum number of contracts with strike price $1,0500 (5007);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3441 (1772)

$1.3373 (1411)

$1.3322 (1108)

Price at time of writing this review: $1.3257

Support levels (open interest**, contracts):

$1.3058 (555)

$1.2979 (1513)

$1.2935 (897)

Comments:

- Overall open interest on the CALL options with the expiration date September, 4 is 22808 contracts, with the maximum number of contracts with strike price $1,3800 (3394);

- Overall open interest on the PUT options with the expiration date September, 4 is 17846 contracts, with the maximum number of contracts with strike price $1,3000 (1513);

- The ratio of PUT/CALL was 0.78 versus 0.76 from the previous trading day according to data from August, 18

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

FXStreet reports that in light of the recent price action, Cable could extend the upside momentum to the 1.3340 zone in the next weeks.

24-hour view: “We expected GBP to ‘edge higher’ yesterday and were of the view that ‘the prospect for a break of the solid resistance at 1.3160 is not high’. While we got the direction right, we did not anticipate the sudden surge that sent GBP rocketing to a fresh 2020 high of 1.3276 (closed at 1.3237, +1.00%). While further GBP strength would not be surprising, severely overbought conditions could counteract the strong momentum and ‘limit’ gains to 1.3300. For today, the next resistance at 1.3340 is likely out of reach. Support is at 1.3200 followed by 1.3165.”

Next 1-3 weeks: “We expected GBP to trade sideways within a 1.2950/1.3160 range since last Tuesday (11 Aug, spot at 1.3075). After about a week, the sideway-trading phase ended abruptly as GBP cracked several solid resistance levels with ease and vaulted to a high of 1.3276 before closing higher by +1.00% (1.3237), its biggest 1-day gain in 2-1/2 months. The break of key resistance levels coupled with the sudden burst in upward momentum suggests GBP could continue to advance towards 1.3340, even as high of 1.3400. On the downside, the ‘strong support’ level at 1.3120 is expected to be strong enough to hold, at least for these few days. Only a breach of the ‘strong support’ level would indicate the current strong upward pressure has eased.”

According to the report from Office for National Statistics, the Consumer Prices Index (CPI) 12-month rate was 1.0% in July 2020, up from 0.6% in June. Economists had expected a 0.6% increase. On a monthly basis, the consumer price index rose 0.4% after increasing 0.1% in June. Economists had expected a 0.1% decrease.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.1% in July 2020, up from 0.8% in June 2020. The largest contribution to the CPIH 12-month inflation rate in July 2020 came from recreation and culture (0.33 percentage points). Clothing, rising prices at the petrol pump, and furniture and household goods made large upward contributions to the change in the CPIH 12-month inflation rate between June and July 2020.

Falling food prices resulted in a partially offsetting small downward contribution to the change.

As the restrictions caused by the ongoing coronavirus (COVID-19) pandemic have been eased, the number of CPIH items that were unavailable to UK consumers in July has reduced to 12, as detailed in Table 58 of the Consumer price inflation dataset; these account for 1.3% of the CPIH basket by weight and made no overall contribution to the change in the CPIH 12-month rate; the number of unavailable items is down from 67 unavailable items for June, and 74 and 90 unavailable items for May and April, respectively; for July, we have collected a weighted total of 82.0% of comparable coverage collected previously (excluding unavailable items).