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Daily Market Report
31 Jan 2020

EURUSD

Once again macroeconomic data was overshadowed by sentiment as renewed concerns about the coronavirus outbreak led the way. Indeed, US data released this Thursday failed to impress, as the preliminary estimate of Q4 GDP met the market’s expectations printing at 2.1%. The quarterly core PCE inflation missed the market’s expectations, down to 1.3% from 2.1%. Initial Jobless Claims for the week ended January 24 were at 216K, better than the previous 223K but above the expected 215K.

The greenback edged lower, with the EUR/USD reaching 1.1036 as European data beat expectations. The EU Economic Sentiment Indicator improved in January to 102.9 from 101.3. German inflation came in-line with the market’s forecast in January.

On Friday, Germany will release December Retail Sales, seen up by 5.0%, while the EU will publish the preliminary estimate of January inflation, foresee at 1.4% YoY. The Union will also publish Q4 GDP, expected at 0.2%. As for the US, the macroeconomic calendar will bring the December PCE price index, with the core reading foreseen at 1.6%.

The EUR/USD pair is in a corrective phase, but additional gains are still unclear, as the intraday advance stalled around the 23.6% retracement of its latest decline, measured between 1.1172 and 1.0991. In the 4-hour chart, the pair has advanced above its 20 SMA for the first time this week, while technical indicators slowly grind higher within positive levels. The 38.2% retracement of the mentioned decline stands at 1.1060, with a break above it suggesting a more consistent advance.

Support levels: 1.1020 1.0980 1.0950  

Resistance levels: 1.1060 1.1100 1.1145

USDJPY

The Japanese yen appreciated during US trading hours amid renewed demand for safety. US Treasury yields fell to fresh multi-week lows, while worldwide indexes spent the day in the red, as the Chinese coronavirus keeps spreading fueling concerns about an economic downturn. A solid US GDP report, with the country growing at a 2.1% annual pace in the last quarter of 2019, failed to avert concerns.

Japan has a busy macroeconomic calendar this Friday, as the country will publish January Tokyo inflation, foreseen unchanged from its previous estimates, December Retail Trade and Industrial Production for the same month. Later in the day, the country will publish December Housing Starts and Construction Orders.

The USD/JPY pair has broken below the 61.8% retracement of its latest bullish run, now trading around the level at 108.65, and technically bearish according to the 4-hour chart. This last shows that a bearish 20 SMA capped intraday advances, now converging with the 50% retracement of the same rally. Technical indicators, in the meantime, remain within negative levels, the Momentum heading south and the RSI hovering around 32. The pair would need to recover above the 108.90/109.00 price zone to shrug off the negative stance, but at this point is at risk of falling toward 107.90.

Support levels: 108.20 107.90 107.60

Resistance levels: 108.95 109.30 109.65  

GBPUSD

The Pound was the best performer against the greenback this Thursday, reaching a daily high of 1.3109 and settling around the 1.3100 figure, as the Bank of England surprised with its monetary policy announcement. Not only the central bank kept their interest rate unchanged at 0.75%, but only 2 MPC members voted for a cut, despite a couple other hinted a dovish vote for this month. Carney’s speech was generally optimistic, as domestic “near-term uncertainties facing businesses and households have receded.”  Also, the BOE has  removed the long-standing guidance that future rate hikes would be “limited and gradual.”  

A weaker dollar helped the pair to remain afloat. During the last trading day of the week, the UK will publish December Mortgage Approvals and Money Supply.

The GBP/USD pair is technically bullish but will need to continue advancing beyond 1.3140 to keep attracting bulls, as it will be surpassing a critical Fibonacci resistance, the 38.2% retracement of the latest daily slide. In the 4-hour chart, the pair has moved above all of its moving averages, which anyway lack clear directional strength. Technical indicators are losing bullish strength, but holding within positive levels, favoring additional advances for the upcoming sessions.

Support levels: 1.3085 1.3040 1.3000

Resistance levels: 1.3140 1.3190 1.3220

AUDUSD

The Australian dollar remains among the weakest USD rivals, with the AUD/USD pair falling to 0.6699, its lowest since early October. Receding demand for the greenback was not enough to prevent the slump, neither a surge in base metals, particularly those considered safe-haven. The pair rather followed equities in their way south, as persistent concerns about the coronavirus outbreak, and how could it affect the global economy, dented investors’ mood.

Australian data released at the beginning of the day passed unnoticed, with the Q4 Import Price Index up 0.7% and the Export Price Index in the same quarter plummeting 5.2%. This Friday, Australia will publish Private Sector Credit for December, and the Q4 PPI.

The AUD/USD pair is trading a few pips above 0.6700 ahead of the Asian opening, not far from the one-decade low set last year at 0.6670, now the immediate support. According to the 4-hour chart, the pair is at risk of extending its decline, as it continues to develop below a firmly bearish 20 SMA, which extends its decline below the larger ones. The Momentum indicator turns marginally lower within negative levels while the RSI consolidates at around 27.

Support levels: 0.6730 0.6700 0.6670

Resistance levels: 0.6770 0.6805 0.6840

GOLD

As the uncertainty lingers around the markets, Gold had its second day of positive trading testing critical resistance at 1.585$ at the time of the writing which was tested multiple of times since the start of the year. Powell delivered what the markets were expecting for and kept his dovish stance highlighting the importance of the inflation data in the US. While the USD index DXY managed to gain 98 level, the US 10 year yield fell to its lowest level since October 2019. Dovish FED and low yields are usually beneficiary to precious metals such as Gold, Silver and Platinum. Therefore, without extra risk measures, Gold might find extra support this year apart from the usual risk drivers. On the other hand, The World Health Organisation (WHO) will meet tomorrow (Thursday) to discuss whether the virus constitutes a global health emergency.

The first resistance for Gold is still 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 is still trying to recover the heavy sell-off on Tuesday and almost regained its losses. On the other hand, silver looks to have more advantage in measuring the distance to their peak levels compared to Gold. With more room for a rally, Silver trading might be an advantage for traders if the conditions meet for a rally in 2020. On the other hand, fears of the virus outbreak in China to slow down the manufacturing activity is pressuring silver prices due to its industrial demand.

If Silver tests below the important 17.00$ level, the supports can be followed at 16.33$ (%61.8 14.29$-19.65$) and 15.55$ (%76.40 14.29$-19.65$) can be targeted. On the top side, the resistances are lined at 17.60$ (%38.20 14.29$-19.65$), 18.38$ (%23.6 14.29$-19.65$) and over that 18.70$.

Support Levels: 16.97$ 16.33$ 15.55$

Resistance Levels: 17.60$ 18.38$ 18.70$

 

CRUDE WTI

WTI’s weak attempt to gather strength did not live for a long time as the black gold slid below 52.00$ level on Thursday trading Coronavirus fears keep weighing on sentiment. Although the rumours suggest that OPEC+ might extend its production cuts, oil is more focused on the probability that the virus outbreak will affect the manufacturing sector in China in a negative way as well as the demand for energy. Also, as an addition to the downbeat mood, the EIA reported on Wednesday an unexpected build in US crude oil supplies of nearly 3.6M barrels during last week. The World Health Organisation (WHO) will meet tomorrow (Thursday) to discuss whether the virus constitutes a global health emergency which will be a risk event for WTI.

WTI is heading to a level which was seen in October 2019 lately around 51.00$ handle. If WTI keeps its position below 52.00$ level, 51.03$ (October 2019 low), 50.60$ (June/August 2019 support) and 50.00$ levels can be followed as new targets. Over the 53.00$ level, the resistances might be followed at 53.93$ (63.33$-51.03$ %23.60), 55.73$ (63.33$-51.03$ %38.20) and 57.13$ (63.33$-51.03$ %50.00).

Support Levels: 51.03$ 50.60$ 50.00$

Resistance Levels: 53.00$ 53.93$ 55.73$


DOW JONES

Dow Jones was trying to hold its ground on the positive zone as Powell’s speech was without any surprise. As FED kept its monetary policy intact, Powell addressed the inflation still being below %2 and stated that FED is ready to react when the timing is right. As an addition, Powell stated that the deadly virus outbreak in China will definitely create a slowdown in the economic activity. As the initial market reaction, Dow Jones tried to test 29.000 level but failed to break the resistance. Over the first half of this year, Fed plans to adjust the size of repo operations while expecting to continue offering repo support through April. The next risk event for Wall Street will be the US Q4 GDP figures which will be watched closely by the traders.

As long as 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


MACROECONOMIC EVENTS

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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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