Minutes of the European Central Bank's (ECB) strategic review meeting in recent weeks were on the radar of markets. Minutes noted that asset purchases are ammunition for the economy in terms of forward guidance and long-term financial activities, emphasizing the importance of asset purchases, while inflation less than the target will be related to the new strategy, and housing prices included in the inflation basket. In addition, ECB Vice-President Luis de Guindos said they would focus on medical data following the end of the coronavirus-related emergency. Meanwhile, overshadowed by inflation concerns, Consumer Price Index (CPI) in Germany, Europe's locomotive economy, rose 0.9 percent in July compared to the previous month and was 3.8 percent, above market expectations of 3.3 percent year-over-year, according to preliminary data from Destatis.
According to another data for Germany, the unemployment rate decreased by 91 thousand, which was at 5.7 percent and was below market expectations of 5.8 percent, pointing to a recovery in the employment markets. In addition, July Economic Confidence Index in the Eurozone rose to 119.0, above market expectations, of 118.5, according to data published by the European Union (EU) Commission based on the results of the business and consumer survey.
Published economic data on the United States (US) economy was critical in terms of dollar pricing. According to data published by the Bureau of Economic Analysis (BEA) as a preliminary data, the US economy grew 6.5 percent in the 2nd quarter of 2021, below market expectations of 8.5 percent compared to the previous quarter, indicating that economic growth had lost momentum. In addition, according to data published by the US Department of Labor on a weekly basis and critical to the employment markets, jobless claims was registered as 400 thousand, above expectations of 380 thousand, showing that the recovery in employment slowed down. In another data, the Commerce Department said that existed home sales in June fell 1.9 percent, despite the expectations of 0.3 percent decline.
On the other hand, there has been a flash development on the infrastructure package, which has long been deadlocked. While the U.S. Senate gave initial approval to the $ 1.2 trillion cross-party infrastructure package bill, the package passed by a vote of 32 to 67, bolstering the bull market in stock market indices.
It was important that the Bank of England (BoE) announced on the first day of October that the euro liquidity facility would be abolished and that the decision could be withdrawn by consulting the ECB if market conditions deteriorated. Meanwhile, the London-based economic think tank NIESR announced that the British government will need to buy hundreds of billions of pounds of bonds in the BoE's hands so that it can independently assess whether it is time for the BoE to raise interest rates.
Meanwhile, UK Finance Minister Rishi Sunak told The Office for Budget Responsibility (OBR) that they would begin drawing up economic and fiscal forecasts to be published on 27 October, while those forecasts would reflect the outline of their long-term spending plans. In addition, Pascal Soriot, CEO of British vaccine manufacturer AstraZeneca, announced that they will apply for approval for use of their vaccine in the United States within 2-3 months.
In the Asian session, published data on Japan's economy was influential in terms of yen. According to preliminary data from the Japanese Economy Ministry, industrial production in June performed well, rising 6.2 percent above expectations of 5.0 percent compared to the previous month, while retail sales remained 0.1 percent year-over-year, below market expectations of 0.2 percent. In addition, in June, Japan's job posting/job application ratio exceeded expectations of 1.10 to 1.13 and the unemployment rate was 2.9 percent, below market expectations of 3.0 percent, reflecting the improvement in employment markets. Apart from the data, in Japan, it was critical that the government recommend declaring a state of emergency (SOE) in 4 more regions due to increased cases. In Turkey, the presentation of the Central Bank of the Republic of Turkey (CBRT) President Sahap Kavcioglu on the inflation report was on the radar of the markets.
The most notable detail in the presentation was that the CBRT raised its inflation expectation from 12.2 percent to 14.1 percent for the end of 2021 and its 2022 forecast from 7.5 percent to 7.8 percent. Kavcioglu said that commodities, exchange rates and increased demand have an upward impact on inflation, they expect a slowdown in inflation growth at the end of the year, and a significant part of the increase in producer prices is reflected in consumer prices. The CBRT President also said that they will soon announce new swap agreements and that digital currency work is continuing. In addition, according to the statistics of foreign exchange and liquidity developments published by the CBRT, in the week ending on July 19, CBRT's total reserves increased by $ 819 million compared to the previous week to $ 104.88 billion, while net international reserves decreased by $ 342 million to $ 23.79 billion. Stoppage rate in Turkish lira deposits will be valid until the end of September, Treasury and Finance Minister Lütfi Elvan said. According to TurkStat, Economic Confidence Index in July rose to 100.1, exceeding 100.0 threshold, which indicates an optimism.
The VIX, also known as the fear index, is calculated based on the difference between the buy and sell prices of the options contracts where the stocks in the S&P500 index are the underlying assets. If the index value is below 10 points, it means that there is optimism in the markets and the investors are eager to take risks, the pessimism starts to increase slightly even if it is considered as the normal range when it is in the range of 10 – 20. When VIX is in the range of 20 – 30, it means that the stress in the markets has started. A score of over 30 means that the investors’ desire for risk-taking is under pressure and asset prices will fluctuate.
The pullback in the dollar index accelerated after the July meeting of the Federal Open Market Committee indicated that monetary policy would remain supportive until the economic recovery was complete. In contrast, developed country currencies are also showing a mixed outlook in line with news linked to the delta variant. In this sense, it can be estimated that the negative course in the dollar index has not yet become apparent. And technically, despite the loss of momentum, it seems that the upward potential is maintained in line with transactions above Fibonacci 61.8 percent fan line. As long as the fan line is not broken with permanence, 92.50 and 92.80 important resistance zones are above 92.20 in the index where band pattern can be seen in the range of 91.70 – 92.20 under current conditions.
Confidence in the Eurozone economy is at an all-time high, while euro assets are also looking to recover their losses. Technically, the price outlook for the pair, which is likely to maintain recovery behavior as long as it continues to close above 1.1850, can focus on 1.1940 and 1.1965 resistances, in case, it can break 1.1910 resistance strongly. Below 1.1850, the 200-period weighted moving average indicating 1.1825 can be considered as the second support.
In global markets, the dollar is falling slightly, while purchases of TRY assets with the CBRT's tight stance are causing pair to decline. But again, the CBRT's upward revision of the Consumer Price Index forecast indicates that inflationary pressures on the currency pair will continue. In this context, a transition to 8.5000 may trigger a rise towards 8.5500 and then 8.6000 again. On the other hand, the downward movements of the currency pair do not seem likely to gain volume unless the 100-session weighted moving average, which plays a key role in determining medium-term direction, is permanently broken.
The downward trend in case numbers in the UK, which moved into Phase 3 of normalisation, led to a recovery in pound. On the other side, the trade corridor talks on the US – UK line also had an impact. Based on this, the pair, which broke the channel pattern that descended by gaining close to 3 percent in 1-week pricing, may hold onto 1.3900, and target 1.4000 and 1.4055 levels. On the other hand, 1.3860 and 1.3800 supports remain important in possible eases below 1.3900.
Yen assets continue to weaken on concerns that the scope of the reintroduced state of emergency will put pressure on economic activity. Despite the easing of the dollar in global markets and purchases from the safe haven assets, the decline in yen keeps the pair outlook bullish. In this context, a break in the minor descending trend, which points to 110.10 resistance above 109.80, can target 110.40; the major trend below is also in a position to gather strength in the name of healthier pricing.
The weak course in the borrowing market following the July meeting of the Federal Open Market Committee is feeding demand for the gold. From a technical point of view, as long as it stays above 1814 in the price view of the precious metal, where the intermediate descending trend ends with purchases, the potential for a rise to 1852 resistance after 1839 can be maintained. Under 1814, on the other side, 1800 support can be followed.
In addition to U.S. oil inventories falling sharply above expectations, strong incoming growth data for the country's economy supported spot energy prices. Crude oil, which tested a 2-week high in this direction, could move to 73.85 above 74.90, in case, it can maintain its gains above the minor descending trend it ended. In commodity retreats, the 50-session simple moving average of 71.05 below 72.00, can work as an important barrier.
Investor stress in international markets showed a mixed outlook and silver recovered. In the commodity, which will continue upward movements as long as it puts pressure on the critical support of 25.00, 25.85, 26.10 and 26.35 resistances can be followed. In a possible transition below 25.00, on the other hand, 24.75 support may be on the agenda.
As expectations for the Eurozone's locomotive sectors became optimistic, DAX30 Index tried to recover its 3-day losses with a stream of macroeconomic data coming from Germany, the region's largest economy, in line with market expectations. The index, which opened on the last trading day of the week in this direction, will turn its radar to 15 815, a record high above 15 705, if it exceeds 15 600 resistance. It seems impossible for the index to start a retracement movement, unless the lower boundary line of the minor channel is broken. But in this possible scenario of sales, 15 420 and 15 315 supports can be followed.
|Support||15 420||15 315||15 200|
|Resistance||15 600||15 705||15 815|
Fed Chair Jerome Powell's dovish messages, along with strong corporate profits and growth figures during the opening balance sheet season, keep the SP500 index earnings near its all-time peak. Technically, the leading index, which maintains bullish momentum by closing above the 38.2 percent fan line, can retest 4 400 level, in case, it can test 4 416 level. On the other hand, in the profit realizations that the index may encounter, 4 370 – 4 355 range can be monitored as support zone.
|Support||4 370||4 355||4 340|
|Resistance||4 400||4 416||4 430|
The recovery in Bitcoin, which leads the cryptocurrency market, continues. If it becomes permanent above 38 250 level, the recovery potential will be maintained and BTC will target 41 300, 42 800 and 44 700 resistance levels. On the other side, we will follow 36 700 - 34 900 range in possible decreases below 38 250.
|Support||38 250||36 700||34 900|
|Resistance||41 300||42 800||44 700|