While such news would often be considered USD-negative, US Dollar bears were soundly crushed this morning when an initial breakdown was aggressively snapped back. This highlights the potential for the theme discussed earlier this week, asking whether US Dollar bears have capitulated after an aggressive down-trend in the past few months.
This article incorporates price action to help spot that potential for capitulation. To learn more about price action, check out our DailyFX Education section.
Jackson Hole Opens with Volatility
Well, its 2020 and Day One of Jackson Hole has so far not disappointed, staying on theme with the craziness that has become this year. The Fed announced a potentially major change this morning when Chair Powell announced a strategy shift at the bank.
While the Fed has been one of the notable Central Banks employing a dual mandate, targeting both inflation and employment, more recently we’ve seen the bank’s grasp expand to include items like income inequality and even global warming. But today they announced what appears to be a prioritization in the dual mandate that they’re charged to defend, by announcing that they’ll be focusing more on the employment side of their directive while being more flexible with inflation.
While the Fed previously targeted 2% inflation, this morning they announced that they’re now looking for 2% inflation ‘on average.’ This means the bank will likely be a bit more forgiving with inflation overshoots and judging by last month’s inflation data, there’s a reason that they’re employing this shift as the troves of stimulus launched in the last six months may, in fact, create some pretty aggressive inflation. And given that employment numbers remain poor, the bank didn’t want to be put into a spot where they had to hike rates in a weak economy just for the simple reason of controlling price pressures.
The immediate response to this announcement was bullish breakouts in Gold, Silver, Stocks as the USD dipped down for a quick support test. But that didn’t last for long, as we’ll touch on after the next couple of charts.
Gold 15 Minute Price Chart: Breakout, Snap Back On Powell Comments
Taking a step back on Gold, and that false breakout speaks volumes about this morning’s price action, and from there some deduction can help lead into some strategy ideas.
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As looked at earlier this week, the bigger picture bullish trend in Gold remains on pause as price action grinds around a key support area on the chart. This is the same support zone looked at earlier in August, just after prices had set a fresh all-time-high. But, as also noted in that article, a bearish engfulfing candlestick showed up, opening the door for a pullback and that’s what helped to drive prices down to support in the first place. But, over the past few weeks, this zone from around the prior high of 1920 up to the 1941 level has helped to hold the lows.
This morning saw a quick breach of a bearish trendline connecting lower highs of the past couple of weeks, but that breakout could not hold as buyers quickly pulled back and price action sank to support.
At the core of many of this morning’s reversals is a similar theme in the US Dollar, and this is something we’ve been following for the past few days as there’ve been increasing signals of potential capitulation.
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Last week saw USD bears probe down to a fresh two-year-low, but they couldn’t hold the move nor could they break any fresh ground. The current down-trend has been in force for most of Q3, with an aggressively bearish move driving through July and price action beginning to exhibit tendencies of range so far in August.
But last week’s failed breakdown exposed a wick underneath recent support – and just below current price action is a potentially key zone of confluence on the US Dollar around the 92-handle. This could be a case of USD bears showing trepidation after an extended downside run has pushed USD price action near a critical support zone.
Also of interest on that theme and something we discussed on Tuesday – there aren’t many other major currencies that actually look attractive for strength right now – and if the USD is going to keep dropping – some other major currencies are going to need to pick up the slack. Will that be the Euro or the British Pound? Or perhaps the Japanese Yen?
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At this point the US Dollar remains in a spot that could be open for reversals. On the weekly chart below, we can see four of the past five weeks have shown reactions around the 92.55 level – highlighting the continued build of support around this price despite the seemingly negative backdrop on the currency.
And taking a step back to the Monthly chart, we can get a better idea of what bears might be shying away from, as there are multiple reasons for buyers to jump in at each of the support items just below current price. A trendline connecting 2011 and 2014 lows is confluent with two different Fibonacci levels around the 92-handle.
US Dollar Monthly Price Chart
Chart prepared by James Stanley; USD, DXY on Tradingview
— Written by James Stanley, Strategist for DailyFX.com
Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
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Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
