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September 22, 2017

Time (GMT) Currency Event Previous Forecast
07:00 EUR French Flash Manufacturing PMI 55.8 55.6
07:00 EUR French Flash Services PMI 54.9 54.8
07:30 EUR German Flash Manufacturing PMI 59.3 59.0
07:30 EUR German Flash Services PMI 53.5 53.8
08:00 EUR ECB President Draghi Speaks
08:00 EUR Flash Manufacturing PMI 57.4 57.2
08:00 EUR Flash Services PMI 54.7 54.7
Tentative GBP Prime Minister May Speaks
12:30 CAD CPI m/m 0.0% 0.2%
12:30 CAD Core Retail Sales m/m 0.7% 0.4%
12:30 CAD Retail Sales m/m 0.1% 0.2%
13:45 USD Flash Manufacturing PMI 52.8 52.9
13:45 USD Flash Services PMI 56.0 55.8
All Day (Sept 24th) EUR German Federal Elections

Global Commentary

Asian markets pulled back on Thursday as the U.S. dollar strengthened and investors shifted gears in response to the increased probability of a U.S. interest rate hike in December. The Nikkei in Japan was the only index to finish in positive territory, gaining 0.18%. Australia’s S&P/ASX 200 was the worst performer in the region as it shed 0.94% due to weakness in commodity prices. Mainland China’s Shanghai Composite erased early gains and ended the day 0.23% lower, while in Hong Kong the Hang Seng pared early losses to finish down just 0.06%.

European markets were broadly higher Thursday as financial shares led the way higher on enthusiasm for the prospect of higher interest rates in the U.S. by the end of the year. The change in investor mindset comes following the more hawkish than expected Federal Reserve monetary policy statement delivered Wednesday after the close of European markets. The Stoxx Europe 600 gained 0.24%, closing at a two-month high, while Germany’s DAX advanced 0.25%, and the CAC 40 in France finished 0.49% higher. Banking shares rose in London as well, but the FTSE failed to find a direction, swinging back and forth between gains and losses before ending the session 0.11% lower.

Markets in the U.S. began the day treading water, but soon sank into negative territory as markets reacted to the prospects for a December interest rate hike. Technology led the way lower, along with consumer staples, and by the close the Nasdaq was leading losses for the major indices as it finished down by 0.52%. The S&P 500 also finished lower by 0.30%, and the Dow Industrials snapped a nine session winning streak, falling 0.24% on the session.

FOREX

AUD/USD – The pair fell sharply on Thursday, erasing any gains the Australian dollar has made in the past two weeks following a dovish speech by RBA president Stevens. Also weighing on the AUD was a downgrade of China by S&P, which caused a sharp drop in metals prices. The pair found support at the 0.7900 level and bounced, but more downside could be on the way as this move came despite broad based weakness in the USD.

Bitcoin – The cryptocurrency moved back into bearish mode on Thursday after Chinese cryptocurrency exchange BTCChina Exchange announced that it would be closing its doors on September 30. The move took Bitcoin down as much as 12% intraday, but the digital currency then found support from bargain hunters and took back roughly half the losses. The support is a positive development as it shows there is likely a floor for Bitcoin around the $3,500 level and that any negative news from China may be nearly fully priced in.

Commodities

Metals – The precious metals settled solidly lower on Thursday, with gold slipping back below the $1,300 level as traders responded to the increased likelihood of a U.S. interest rate hike in December by selling their gold and silver positions. Gold for December delivery slid $21.60, or 1.6%, to settle at $1,294.80 an ounce, its lowest settlement in a month, while December silver also retreated by $0.316, or 1.8%, to finish at $17.018 an ounce. Elsewhere in metals, December copper settled at $2.935 a pound, down 1.2% despite continued signs of increased industrial demand. October platinum finished at $939.90 an ounce, down 0.6%, while December palladium added 0.2% to end at $911.55 an ounce.

Oil – West Texas Intermediate crude, the U.S. benchmark contract, fell by $0.14 on Thursday, while Brent crude, the global benchmark contract, gained the same amount – $0.14. The moves were traders consolidating after the 2% rise in the previous session. While U.S. production and inventory both gained in the past week, there are signs that U.S. refineries are recovering and are coming back to full production, which could reverse the trend in higher inventory levels. There are also signs that OPEC will extend its production cut agreement, which would be a positive for crude. In the meantime traders are pausing until they have a clearer picture of supply and demand for crude.

Indices

S&P500 – The S&P finished lower on Thursday in a broad based drop that saw nine of the eleven S&P sectors end the day in the red. The largest drop was in telecom shares, which have rallied strongly earlier in the week, but there were also sizeable losses for the consumer staples, technology and health care sectors. Gains came from the industrial and financial sectors, but were pared as the day went on, and both finished off their session highs.

DAX – Germany’s benchmark index gained 0.25% on Thursday, boosted by rising bank stocks as investors reacted to news of the raised potential for a U.S. interest rate hike in December. Commerzbank tacked on 3.9%, and Deutsche Bank finished the session 2.7% higher. Germany is looking ahead to this Sunday’s Federal Elections, but with current chancellor Angela Merkel almost 100% guaranteed to win her fourth term there has been muted market reaction to the event.

Nikkei – The Nikkei gained as much as 0.7% in early trade Thursday as investors were encouraged seeing the USD/JPY trading around the 112.50 level. The index pared those early gains however after the Bank of Japan kept monetary policy unchanged, but was still 0.18% higher for the day. The close at 20,347.48 has the Nikkei just 2% below levels not seen since 1996. This put the index above the short-term resistance seen at the 20,300 level, but the market still has to get past stronger resistance at the 20,800 level.


Stocks

Twitter – After gaining for about a month in response to management changes at the company, shares of Twitter have recently pulled back as the entire tech sector endures a bout of selling. There is a good chance that the stock will recover along with the rest of the tech sector, but could fall to support around the $16.50 level before it does so. Even if it does turn higher immediately, we would watch the $19 level very closely for signs of resistance, as the daily chart shows the possibility of a sloppy head and shoulders formation, with the top of the shoulders around that $19 handle.

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