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Daily Market Report
28 Oct 2019

EURUSD

The American dollar has advanced slowly but steadily throughout the past week, ending it with gains against most major rivals. The EUR/USD pair closed Friday at 1.1079, in spite US data released at the end of the week didn’t back the greenback. In Europe, figures were mixed as the German IFO survey showed that business sentiment remained steady at 94.6 in October, better than an expected decline to 94.5, while the GFK Consumer Confidence Survey for November fell to 9.6 from 9.8 previously.  The US released the final version of the Michigan Consumer Sentiment Index, down to 95.5 in October from a previous estimate of 96.0. The dismal sentiment that kept safe-haven strong was the result of persistent Brexit uncertainty, exacerbated by UK PM Johnson putting up the possibility of a snap election next December.

The week is set to start slowly in the data front, as the EU will release money data from September, while the US will offer September Goods Trade Balance, the Chicago Fed Activity Index, and October Dallas Fed Manufacturing  Business Index. Later in the week, however, the US will publish the preliminary estimate of Q3 GDP, and the monthly Nonfarm Payroll employment report. In the middle, the US Federal Reserve will have a monetary policy meeting and is expected to cut rates by 25bps.

The EUR/USD pair is trading a few pips above the 38.2% retracement of its latest rally, measured between 1.0878 and 1.1179 at 1.1065, the immediate support. In the daily chart, the pair has been unable to sustain gains above the 100 DMA, but it holds above a bullish 20 DMA, this last, converging with the 50% retracement of the mentioned rally. Technical indicators have retreated from overbought levels, heading firmly lower within positive ground, falling short of suggesting additional slides ahead. In the 4-hour chart, a bearish 20 SMA, caps advances around 1.1110, while technical indicators remain at weekly lows, lacking directional strength. A bearish extension will depend on whether the pair can break below the mentioned Fibonacci support, in which case, it could approach the 1.1000 figure.

Support levels: 1.1065 1.1030 1.1000

Resistance levels: 1.1110 1.1145 1.1180

USDJPY

The USD/JPY pair has finished the week with modest gains at 108.66, having been unable to reach a fresh October high. The pair has spent these last few days ranging amid persistent Brexit uncertainty keeping demand for safe-haven assets underpinned. The yen lost some ground on Wednesday, following headlines related to the BOJ’s future monetary policy. According to those, policymakers are considering lowering their forecast for economic growth and inflation this year. The central bank is scheduled to meet this week, and no particular announcement is expected this time, although there’s mounting speculation that Kuroda & Co. will pave the way for additional stimulus.

Helping the pair to advance, US Treasury yields edged higher on Friday, with the benchmark yield on the 10-year note closing the week at 1.80%. Wall Street also posted a substantial advance at the end of the week.  At the start of the week, Japan will publish the September Corporate Service Price Index, seen at 0.5% from the previous 0.6%.

The USD/JPY pair has continued to consolidate at the upper end of its October range, meeting buyers on pullbacks to the 23.6% retracement of such rally. In the daily chart, it remains above its 20 and 100 DMA, but below a directionless 200 DMA, which stands a few pips above 109.00. The Momentum indicator eases from overbought levels, while the RSI consolidates around 60, lacking clear directional strength but, given that they stand well into positive ground, leaning the risk to the upside. In the shorter term, and according to the 4-hour chart, the pair is neutral-to-bullish as it holds above a directionless 20 SMA, but with technical indicators still stuck to their midlines.

Support levels: 108.25 108.00 107.75

Resistance levels: 108.70 109.00 109.35

GBPUSD

The GBP/USD pair reached 1.3012 at the beginning of the week, the highest since last May, but closed it in the red around 1.2830, as there’s no light at the end of the Brexit tunnel. After the Parliament rejected UK PM Johnson’s latest deal, the multiple options available have pushed speculative interest away from Pound. Johnson was forced to ask for an extension, but also put up a motion for a snap election next December 12. It seems unlikely it would get enough support from MPs. In the meantime, the EU has granted an extension but still didn’t informed for how long, something that will probably be unveiled early this week. The long-supported menace to leave the EU with or without a deal from PM Johnson has lost strength.  The decline was limited just because the market does not believe the UK will crash out of the Union this week.

This Monday, the UK will see the release of the CBI Distributive Trades Survey-Realized. The market is anticipating sales to have plummeted, with the index seen at -25% from a previous -16%.

The GBP/USD pair closed the week around the 23.6% retracement of its October rally, and the daily chart shows that the risk remains skewed to the upside, as it’s developing above all of its moving averages, with the 20 DMA heading north above the 100 DMA. Technical indicators have barely corrected overbought conditions,  with the Momentum aiming to resume its advance and the RSI around 63, suggesting sellers are not yet convinced. In the shorter term, and according to the 4-hour chart, the risk is skewed to the downside, as technical indicators have remained within negative levels, while the pair developed below a bearish 20 SMA.

Support levels: 1.2810 1.2785 1.2740

Resistance levels: 1.2860 1.2895 1.2930 

AUDUSD

The AUD/USD pair has failed to extend gains this past week, ending it with modest losses at0.6820. The pair traded as high as 0.6882, with the positive momentum of the Aussie fading alongside the positive market mood throughout these last few days. Australian data was mixed, but confirmed weak economic progress, adding to AUD losses by the end of the week. According to the Commonwealth Bank,  that services activity contracted to 50.8, although manufacturing output beat expectations by printing 50.1, still below the previous monthly figure.

There are two factors preventing the Aussie from falling sharply. The first one is the quiet optimism related to US-China trade talks, as both parts seem confident they will reach a deal. The other is gold prices, which soared on the back of demand for safety. The country won’t release relevant data this Monday, and New Zealand will kick-start the week with a holiday, which means price action could be dull in the first part of the new day.

The AUD/USD pair stabilized at the 38.2% retracement of its latest daily advance. In the daily chart, technical indicators are trying to resume their advances within positive levels after correcting overbought conditions, while the price holds above a bullish 20 SMA. The 100 DMA, however, caps advances with a bearish slope. In the 4-hour chart, the pair is technically bearish, as its trading below a bearish 20 SMA, while technical indicators are slowly grinding lower within negative levels. A steeper decline could be expected on a break below 0.6770, a strong static support level.

Support levels: 0.6800 0.6770 0.6730  

Resistance levels: 0.6840 0.6875 0.6900

GOLD

After the safe heaven tested its yearly highs on the beginning of September, the yellow metal retraced back and in a consolidation mode trying to keep 1.500$ level. While both the FED and ECB are slashing their rates to support their economies against recession, lower borrowing costs is leading to an increase in risk appetite and pressuring the gold. The FED  is expected to deliver a highly expected final rate cut of the year on October 30th.

On the other hand, while easing tension about the situation in Syria is pressuring the Gold, another uncertainty caused by the Brexit saga is supporting the yellow metal. As the 31st of October is still the official Brexit day, President Johnson called for a general election on December 12th. As the possibility of a no-deal Brexit looming over the markets, Gold is expected to increase its demand by the market players.

From the technical point of view, after testing this year’s highs at 1.557$, XAUUSD can keep its up momentum int eh retracement period as long as it stays over 1.482$. Over the 1.500$ psychological level, the resistances are located at 1.508$, 1.519$ and 1.534$ levels. On the downside, below the 1.500$ level, the supports are located at  1.488$, 1.482$ and 1.460$.

 

SILVER

Along with the Gold, Silver has peaked out to this month’s highest level with the fears of almost certain rake cut by the FED this week. The threat of the trade war between China and the US is slowing the global economic growth and also worse than expected macro data from the US is forcing FED to act against a possible recession as the ECB is following the same schema.

On the other hand, as the Brexit deadline approaches, there is a good opportunity for both Gold and Silver to gain attraction from the investors as safe heaven during the time of uncertainty.

After hitting this year’s high int the beginning of September, Silver managed to end its retracing move at 16.89$ level. Over 18.38$ level, the resistance levels can be located at 18.59$ and 19.00$ levels. Below the 18.00$ level, the initial supports can be located at 17.60$ and 16.89$ levels. Also, below the 16.89$ level we can consider the retracement move turned into a downtrend with a target of 15.55$.

 

CRUDE WTI

WTI kept its upbeat move inline with the reports mentioning that OPEC is considering deeper production cuts. On Tuesday, citing sources with direct knowledge of the matter, Reuters reported that the Organization of the Petroleum Exporting Countries (OPEC) and its allies were planning to discuss deeper oil output cuts to counter the dismal oil demand growth outlook at their next meeting in December. The attacks on the oil refineries in Saudi Arabia already had an impact on oil production and it is highly expected that Saudi Arabia will demand other producers to cut their production to balance the total output. On the other hand, Igor Sechin, the CEO of Russia's Rosneft, clearly expressed that he is against of cutting production and recently indicated that Saudi Arabia should mind its own business rather than put pressure on Russia to reduce output.

On the US side, oil traders will follow BP’s earnings and the effects of low oil prices and halt in production in the Gulf of Mexico due to Hurricane Barry.

After spending the last week with a series of the strong up move, WTI is set to test 57.18$ and 58.63$. Below the 55.45$ level, the first support can be followed at 53.57$.

 

DOW JONES

The US stock market rallied on the last trading day of the week after a volatile series of trading since mid-July as DJI hit an all-time high at 27.398. On the earnings season, solid results were shadowed by Amazon as the company reported Q3 earnings That initially sent the stock down 9% in after-hours trading. Profits were $2.1 billion, or $4.23 a share, on sales of $69.98 billion. Revenues rose from $56.58 billion a year ago, but earnings declined from $5.75 a share, the first time Amazon earnings have shrunk on a year over year basis since June 2017. Analysts expected Amazon to report earnings of $4.59 a share on sales of $68.83 billion.

On the FED side, markets are getting ready for the third and most likely final rate cut of the year as we head into a busy week data-wise. Q3 GDP and NFP data in the US will be followed alongside the FED’s monetary policy meeting.

President Trump was on the tape on Friday claiming that a deal was in reach w

th China regarding the trade wars. China is offering to purchase 20 billion a year of US agricultural products which is the amount purchase in 2017 if the US will return tariffs back to the 2017 levels. This might make the phase 1 portion of the deal more difficult than previously expected.

On the technical side, 26.757 is the critical support level for up momentum to continue.  Below that 26.360 can be targeted in case of a worse than expected dataset regarding the US economy. On the upside, 27.000 is the first resistance and over that 27.398 can be targeted as all-time high.

 

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* All the Moving Average support and resistance levels are dynamic by nature. Means when the price approaches the Moving averages, slight variation occurs in the forecasted Moving Average support and resistance levels. Previous few days’ intraday levels are also signicant while trading the current day as the price tend to hover around these levels for some time. Levels in red indicate strong, critical or vital.

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