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Daily Market Report
27 Jan 2020

USDJPY

Despite the sharp upsurge witnessed in the US Dollar Index on Friday, the USD/JPY pair lost its traction and dropped to its lowest level in two weeks at 109.17 with JPY finding demand amid flight-to-safety. Although the World Health Organisation's (WHO) said it was too early to call the coronavirus a global health emergency, the number of confirmed cases exceeded 1,300 in China alone and at least 41 people have died due to the infection. Reflecting the sour mood, the 10-year US Treasury bond yield erased nearly 3% and global equity indexes closed the day in the negative territory.  

During the Asian session on Friday, the Bank of Japan in its January meeting minutes reiterated that most members of the policy board agreed that it was appropriate to continue easing consistently while noting risks to the economy and inflation warranted attention. There won’t be any significant macroeconomic data releases from Japan and investors will keep a close eye on fresh developments surrounding the coronavirus.

The USD/JPY pair closed below the 20-day SMA after erasing 20 pips on Friday. However, the RSI indicator on the 4-hour chart is now a tad below the 30 mark, showing that a near-term technical correction is possible. Unless the pair makes a clean break above 109.40, where the 100 SMA on the 4-hour chart and the 20-day SMA are located, sellers are likely to retake the control of the pair’s action. 

Support levels: 109.15 109.00 108.50

Resistance levels: 109.40 109.65 110.00


GOLD

Investors decided to stay on the safe side before the weekend holiday as the flight to safety carried Gold over 1.570$ level. The World Health Organisation's (WHO) said coronavirus had not yet become a global health emergency and noted that it was too early to draw conclusions on its severity. However, the 10-year US Treasury bond yield spent most of the day in positive territory before losing around %1 at the end of the day. The week ahead will be a more volatile one as investors will follow goods orders and GDP data sets from the US alongside FED’s interest rate decision and press conference afterwards. As FED is expected to hold its monetary policy, President Trump is still criticizing FED for lower interest rates.

The first resistance for Gold might be followed at the physiological level of 1.600$. Over this level, 1.615$ (April 2012-March 2013 support/resistance line) and 1.650$ can be followed as resistances. Below the 1.557$ (2019 peak), 1.530$ (%76.40 1.557$-1.445$) and 1.514$ (%61.80 1.557$-1.445$) levels can be followed as support levels.

Support Levels: 1.557$ 1.530$ 1.514$

Resistance Levels: 1.600$ 1.615$ 1.650$


SILVER

Silver followed the same fashion as Gold on Friday trading and managed to re-gain 18.00$ level as the flight to safety kicked in before the weekend. On the other hand, for long term trades, while Gold is not far away from its all-time high levels, Silver is more than %65 lower from its peak levels. This leaves Silver for more room to advance during the rallies.

If Silver stays over 18.00$ it can test 18.38$ (%23.6 14.29$-19.65$) and 18.70$. On the other hand, below the 17.60$ level, which is the %38.20 level of 14.29$ and 19.64$ move the first support is located at 16.97$ (%50.0 14.29$-19.65$) and 16.33$ (%61.8 14.29$-19.65$). 

Support Levels: 17.60$ 16.97$ 16.33$

Resistance Levels: 18.38$ 19.00$ 19.64$


CRUDE WTI

WTI spend the whole week with heavy losses and slid below 55.00$ which was last seen at the end of October 2019. On the data side, the EIA reported on Thursday a 405K barrels drop during the past week, coming in short of previous estimates. On Wednesday, the API said US oil supplies went up by 1.6M barrels during last week. Oil traders decided to ignore the events in Libya which disturb the oil production and fears of oversupply conditions in the coming period hammered oil prices. On the other hand, the virus outbreak might slow down the manufacturing activity in China, therefore, there might be a decline in the demand.

WTI is now trading in oversold territory so a technical correction can be imminent. The first support stands at 53.98$ (63.33$-51.03$ %23.60) and below that, a test of 50.54$ (76.88$-42.40$ %23.60) can be followed as this level is tested a couple of times at June 2019. Above 55.57$ (76.88$-42.40$ %38.20), the first resistance can be followed at 57.13$ (63.33$-51.03$ %38.20).

Support Levels: 53.93$ 51.03$ 50.54$

Resistance Levels: 55.57$ 57.13$ 58.63$


DOW JONES

Dow Jones slid below 29.000 level on Friday as investors decided to defend themselves against further developments about virus outbreak in China. Upbeat earnings failed to keep Wall Street close to its all-time high levels although WHO stated that the virus outbreak in China is still not a global threat level. On the data front, this week might be more volatile with ket releases in the US. goods order and GDP data sets will be followed with FED’s interest rate decision and press conference afterwards. As FED is expected to be on hold, President Trump still criticizing FED for much lower, even negative interest rates.

If the index stays below 29.000 level, 29.500 and 30.000 levels can be followed as new targets high while below the 28.400 level, 28.000 and 27.770 can be followed as supports.

Support Levels: 28.400 28.000 27.770

Resistance Levels: 29.500 30.000 30.500


GBBBPS

The GBP/USD pair spiked to its highest level since January 7th at 1.3174 on Friday with the initial reaction to the upbeat PMI data from the UK. However, the pair quickly erased its gains and closed the day around 50 pips lower pressured by the USD strength. Although the UK Markit Manufacturing PMI in January’s advanced reading rose to 49.8 from 47.5 and the Services PMI improved to 52.9 from 50, markets don’t seem to be convinced that these readings will allow the Bank of England to refrain from making a dovish shift in its policy stance. 

On the other hand, with the Markit Composite PMI rising to its highest level in 10 months to show ongoing expansion in the US’ private sector’s economic activity, the USD continued to find demand and forced the pair to push lower in the second half of the day. There won’t be any significant macroeconomic data releases from the UK on Monday.

The GBP/USD pair continues to trade below the 20, 100 and 200 SMA on the 4-hour chart, suggesting that the bearish pressure is likely to remain strong in the near-term. Additionally, the RSI on the same chart is stretching lower below 50 and the Momentum has pierced below the 100, supporting the bearish outlook. Nevertheless, investors could opt out to stay on the sidelines while waiting for Thursday’s critical Bank of England announcements and the pair could go into a consolidation phase. 

Support levels: 1.3060 1.3040 1.3000

Resistance levels: 1.3100 1.3150 1.3185


AAAUUU

After rising toward 0.6900 on the back of the upbeat labour market data from Australia, the AUD/USD pair reversed its direction and slumped to its lowest level since early December at 0.6817 on Friday before closing the week at 0.6825. The Commonwealth Bank Composite PMI in January’s advanced reading fell to 48.6 from 49.6 in December to show that the business activity in the private sector continued to contract at a faster pace. 

Additionally, concerns over the potential negative impact of the coronavirus on the Chinese economy and its trading partners continued to weigh on the AUD. The National Australia Bank’s Business Confidence data on Tuesday and the Reserve Bank of Australia’s (RBA) inflation report on Wednesday will be key for the AUD during the first half of the week. 

The AUD/USD pair closed the day below its 100-day SMA on Friday while the 100 SMA and the 200 SMA on the 4-hour chart made a bearish cross to show that the pair could have a difficult time recovering its losses in the near-term. The Momentum indicator on the 4-hour chart slumped below the 100 mark and the RSI is below the 50 handle, suggesting that the pair has more room on the downside before turning oversold. 

Support levels: 0.6820 0.6800 0.6770

Resistance levels: 0.6835 0.6890 0.6920


EUEUER

The broad-based USD strength weighed on the EUR/USD pair on Friday and dragged it to its lowest level since December 2nd at 1.1020. The mixed PMI data from the euro area made it difficult for the shared currency to show resilience against the USD, which gathered strength as a safer alternative amid heightened fears over coronavirus becoming a global epidemic.  

The data published by IHS Markit revealed that the business activity in the manufacturing sector in the eurozone is expected to contract at a softer pace in January than it did in December. However, the Services PMI in the same period fell to 52.2 from 52.8 to keep the Composite PMI unchanged at 50.9. Meanwhile, European Central Bank President Christine Lagarde, who has adopted a so-called owlish stance, on Friday noted that they have not yet seen a transmission from wages to inflation. On Monday, IFO’s business sentiment data from Germany will be watched closely by investors.

Following Friday’s drop, the RSI indicator on the 4-hour chart fell below the 30 mark to suggest that the pair has become technically oversold and could stage a rebound before extending its losses. However, the 100 SMA and the 200 SMA made a bearish cross on the 4-hour chart, supporting the view that sellers are likely to remain in control of the pair’s action.  

Support levels: 1.1020 1.1000 1.0980

Resistance levels: 1.1070 1.1140 1.1180

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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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