Amana Capital Market News
Ripple’s XRP was already having a good week as the price ended its downtrend when trading above the August 18 high of $0.3690, yesterday evening.
A price correction would have been natural as the price reached the July 26 high of $0.47 but this is where crypto markets are different – instead of trading lower to better the risk-reward ratio for new trades, the price was up by approximately 70% on the day at 15:15 London time. Moreover, from its September low of $0.25, the price was up by 200%.
There is no additional news that motivated today’s strong rise, and we would need to wait and see if the price will be able to maintain its gains.
If the price closes around current levels of $0.6672 I suspect traders might be interested to buy dips in the price. I also suspect that traders will be monitoring the rest of the top cryptocurrencies for signs of a broad bull trend taking form, and the chance of being long the next soaring crypto coin.
The risk, of course, is that a new bull market does not take form. As for Bitcoin, the price trend remains bearish below the September high of $7429, while Ethereum remains bearish below the September high of $303, and Bitcoin Cash is bearish below the $665 high.
The only top coin that appears to be concluding its downtrend is Stellar Lumen (XLMUSD). Since August 9, the price has been trading sideways between $0.1815 and $0.2495, but earlier today the price rose to $0.28, and since then bullish traders have been struggling to stop the price to revert to the August – September price range.
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XRPUSD Daily Chart
Today’s US PMI Index, reported by IHS Markit, came in at a mixed tone with the Manufacturing PMI reaching a 4-month high of 55.6 and the Services PMI plummeting to an 18-month low of 52.9 in September, bringing the U.S. Composite Output Index to 53.4. This is the weakest upturn in business activity since April 2017, and well below market expectations of 55.0 for all three reporting numbers.
The slow-down in the service economy more than offset a rise in the manufacturing sector in September, with the report noting that company shutdowns on the U.S. east coast ahead of hurricane Florence may have contributed to the moderation in output growth. Average prices charged by private sector firms also rose at the fastest pace in the last nine years, partly because of higher labour costs and increased prices for metals due to tariffs.
The Markit PMI Index is based on a survey of purchasing managers in the manufacturing and services industry. It’s considered a leading indicator of economic performance, as businesses and their purchasing managers react quickly to changing market conditions. Today’s release is the Flash version of the Index, which is reported around one week before the final version and thus tends to have a greater market impact.
The US dollar was slightly lower following the release and traded at 1.1746 against the Euro, as of 15:05 London time, after reaching an intraday high of 1.1732. The pair seems well supported above the 1.1700 level.
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- Canadian Core monthly CPI +0.1% Vs -0.1% expected
- Core year-on-year CPI +1.7% rises Vs +1.4% expected
- Retail sales ex-Autos expands +0.9% Vs +0.6% expected
The Canadian Dollar has firmed against the U.S. Dollar after Canadian economic data showed core monthly CPI data rising faster than expected, while year-on-year CPI data rose faster than expected with a +1.7. Canadian headline CPI came in as expected.
Retail sales data showed a +0.3% monthly increase, missing expectations of a +0.4% rise, while retail sales ex-autos was the big beat in today’s spending data, rising +0.9%.
The USD/CAD pair had been hovering around the 1.2900 level prior to the releases, the initial market reaction implies that traders see greater chances of an upcoming Bank of Canada rate hike.
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Preliminary eurozone PMI data showed manufacturing activity falling during September, while the eurozone services grew faster than most economists had expected.
The eurozone manufacturing PMI came in worse than expected with a 53.3 reading, missing the 54.4 forecast and August 54.6 reading. PMI services came in at 54.7, beating expectations of 54.4.
Overall, today’s eurozone manufacturing PMI continues to highlight the challenges the sector faces as manufacturing activity continues to trend lower after peaking in December last year.
German PMI Data
Preliminary German PMI manufacturing activity showed a marked decline during the month of September with a disappointing 53.7 headline, widely missing the 55.7 number expected which was also sharply down from last months 55.00 figure.
German PMI services data provided the only bright spot in today’s PMI report, with the headline reading coming in a solid 56.00, beating expectations of 55.00.
French PMI Data
Preliminary French PMI manufacturing came in worse than expected with a soggy 52.5 reading, which was worse than 53.3 number expected and weaker than previous months 53.00 reading.
French PMI services missed expectations with a 54.3 reading falling well-short of the 55.2 number expected. Today’s reading pointed to a broad-based slowdown in French economic activity during the month of September.
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EUROZONE MANUFACTURING MONTHLY PMI CHART
Japan’s core consumer prices rose modestly in August on an annual basis, but are still well below the Bank of Japan’s 2% target. The nationwide core CPI, which excludes fresh food, was reported to rise 0.9% in August compared with the same month last year, matching economists’ forecasts of a slight rise from the previous month’s 0.8% reading.
The overall consumer price index, which includes fresh food costs, accelerated to 1.3% y/y in August from 0.9% y/y in July.
Nevertheless, Japan’s central bank will likely stick to its ultra-loose monetary policy as inflationary pressures remain generally soft and the core CPI isn’t expected to pick up well above 1% for the time being. The BoJ kept interest rates unchanged at -0.10% at its latest meeting on Wednesday.
Following the report, the Japanese yen spiked sharply lower against the US dollar early this morning to reach an intraday low of 112.87, after which the currency rebounded somewhat to trade at 112.69, as of 9:01 London time.
The currency pair still seems well supported above the 112.00 mark, which aligns with yesterday’s low, with the July high of 113.17 acting as a short-term resistance to the upside.
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USD/ZAR: Rand Rallies Against US Dollar on Hawkish Reserve Bank Comments and Economic Stimulus Package
The South African Reserve Bank kept interest rates steady at 6.50% in a close-call decision at yesterday’s meeting, with four members voting for unchanged rates and three members preferring a 25 basis points hike.
In a statement following the meeting, the central bank stated that risks to the inflation outlook are on the upside, but the economic growth outlook is deteriorating which led to a cut in the projected GDP growth for 2018 from 1.2% down to 0.7%. The CPI is expected to hit 5.9% in the second quarter of 2019, only slightly below the official 3-6% target range.
Recently, markets were pricing in a 50% rate hike chance at yesterday’s meeting, up from just 12% in August, on the back of a weakening South African rand and monetary tightening in other emerging market economies, such as Turkey and Russia.
Market concerns were also eased as the South African government announced a surprising economic stimulus package to be unveiled today. The package is expected to include market reforms, increase job creation and quicken GDP growth in the country’s slowing economy. South Africa’s economy declined by 0.7% in the second quarter, after a 2.6% contraction in the first quarter of the year, placing the country officially into a recession.
Following the hawkish monetary policy meeting, the South African rand has printed its best trading day against the US dollar in 2018 so far. This morning, the currency continued higher and traded at 14.24 against the greenback, as of 8:28 London time. The August 28 low could provide some support around the 14.00 mark.
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