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Daily Market Report
03 Feb 2020

EURUSD

The EUR/USD pair neared the 1.1100 figure late Friday, on persistent dollar’s weakness. Risk-off was the main theme, with Wall Street plummeting and soaring demand for safe-haven assets included Treasury bonds. The yield-curve began shrinking, reviving concerns of a US recession and hurting demand for the greenback. Fed´s Vice Chairman Richard Clarida said that he was not worried about it and argued that it was a product of global uncertainty rather than the US outlook when asked about the issue, but the market ignored his word.

Meanwhile, weekend news indicated that the coronavirus outbreak continued expanding, with more cases reported outside China and more deadly cases in the Country. Furthermore, a bird flu outbreak, which is considered much deadlier than coronavirus, has been reported in Hunan province, not far from the epicenter of coronavirus. No human cases have been reported, yet the headline will likely add to the ongoing dismal mood.

In the macroeconomic front, Markit will release this Monday the final versions of its January Manufacturing PMI, foreseen unchanged in the Union, and the US. This last will also release the more relevant official ISM Manufacturing PMI, seen in January at 48.5, up from the previous 47.2.

The EUR/USD pair is a few pips below the 61.8% retracement of its 1.1173/1.0991 decline at 1.1103, the immediate resistance. In the daily chart, the advance is falling short of signaling a bullish continuation as the pair stalled its recovery around a bearish 20 DMA, while technical indicators bounced sharply from oversold levels, but remain within negative levels. In the shorter term, and according to the 4-hour chart, the risk is skewed to the upside, as technical indicators head north almost vertically in overbought levels, while the price surpassed its 20 and 100 SMA.

Support levels: 1.1060 1.1020 1.0980  

Resistance levels: 1.1105 1.1145 1.1190

USDJPY

The USD/JPY pair plunged to 108.30 on Friday, to close a second consecutive week in the red at 108.35. The yen rallied on its safe-haven conditions, as coronavirus-related fears sent Wall Street tumbling into the red at month-end. The dollar came under further pressure after part of the US Treasury yield curve inverted on increased demand for bonds. The 10-year yield fell to 1.50% its lowest since last October, while the yield of the 3-month bill settled at 1.55%. Given that the coronavirus outbreak keeps escalating worldwide, risk-off will likely persist.

On Friday, Japan published at the beginning of the day, January Tokyo inflation. The yearly CPI ex fresh food resulted in 0.7%, missing the market’s expectations. Retail Trade in December was up monthly basis by 0.2% but when compared to a year earlier, it fell by 2.6%. Industrial Production was also a miss, down in December by 3.0%. Such figures boosted concerns about the country’s economic health. At the weekly opening, the country will release January Foreign Reserves, hardly a market mover.

The USD/JPY pair has broken below the 61.8% retracement of its January rally at 108.65, hence exposing the base of the range at 107.64. In the daily chart, it has broken below all of its moving averages, while technical indicators head south almost vertically, near oversold readings. In the 4-hour chart, the 20 SMA is heading south at around 108.90, converging with the 50% retracement of the mentioned slide and reinforcing the bearish perspective. Technical indicators have reached oversold readings, the Momentum heading lower and the RSI consolidating at around 30, all of which favors additional sides ahead.

Support levels: 108.30 107.95 107.60

Resistance levels: 108.65 109.00 109.40  

GBPUSD

The GBP/USD pair closed the week a few pips above the 1.3200 figure, its highest in almost a month. The Pound kept rallying on the back of a surprisingly hawkish BOE on Thursday, as policymakers voted 7-2 to maintain rates on hold. The greenback, on the other hand, was dumped on the back of a shrinking US Treasury yield-curve as risk aversion led. On Friday, the UK finally left the Union after over three years of struggle. The news has a limited impact as it has already been priced in long ago, while the relationship between the two economies will remain the same. The main risk factor now is Scotland, as the country wants to remain within the EU. PM Sturgeon has again asked UK PM Johnson to authorize a referendum in Scotland.

During the last trading day of the week, the UK released December money data, with M4 Money Supply up by 0.1% MoM. Mortgages Approvals were up to 67.241K, while Consumer Credit rose to £1.218B, all of them above the market’s expectations. This Monday, the UK will see the release of the final version of the January Markit Manufacturing PMI, foreseen unchanged at 49.8.

The GBP/USD pair is trading around the 50% retracement of its 1.3513/1.2904 decline and technically bullish. In the daily chart, the pair has moved above all of its moving averages, and while the 100 SMA advances, the 20 SMA remains directionless at around 1.3080. Technical indicators in the meantime, head firmly higher within positive levels. In the 4-hour chart, the risk is also skewed to the upside, as the pair has moved well above all of its moving averages, while technical indicators have barely decelerated their advances in overbought levels. The next Fibonacci resistance comes at 1.3280, a possible bullish target for these upcoming sessions.

Support levels: 1.3085 1.3040 1.3000

Resistance levels: 1.3140 1.3190 1.3220

AUDUSD

The Australian dollar continues to be the weakest dollar’s rival, dragged lower by the market’s dismal mood triggered by Chinese woes. The coronavirus outbreak spurred concerns about global growth as many countries are suspending flights to and from the country. Trade would likely be affected next if the situation continues. The AUD/USD pair settled around 0.6690, not far from the one-decade low set last year at 0.6670.

Early Monday, Australia will release January TD Securities Inflation, previously at 1.4% YoY, the AIG Performance of Manufacturing Index, previously at 48.2, and December Building Permits, seen down by 3.0% monthly basis. More relevant, China will release the January Caixin Manufacturing PMI, foreseen at 51.3 from 51.5.

The AUD/USD pair is extremely oversold in its daily chart, although technical indicators continue heading firmly lower, suggesting sellers are not yet done. The RSI is currently at 22, a level not seen throughout the last two years, while the pair stands far below all of its moving averages. In the shorter term, and according to the 4-hour chart, a bearish 20 SMA continues to head south although now at around 0.6730, reflecting the strength of sellers. Technical indicators have stabilized near oversold readings, without signs of downward exhaustion.

Support levels: 0.6730 0.6700 0.6670

Resistance levels: 0.6770 0.6805 0.6840

GOLD

On the last trading day of the week, Gold was boosted due to risk-off flow before the weekend and closed the week at it’s highest level since April 2013. Flight to safety was mostly triggered by the developments regarding the virus outbreak in China. The World Health Organization issued a global emergency as the death toll in China keeps rising. Also, while Russia launched more controls at its borders with China limiting visa grants to Chinese citizens, EU zone except for France hold Schengen Visa applications for a limited time. Apart from the fears of a wider scale global epidemic, markets fear a slowdown on manufacturing in China as a result of the countermeasures taken against the virus outbreak. Gold benefited as a classic safe-haven trade on Friday while the 10-year US Treasury bond yield fell down nearly 2%. Also, the USD index DXY slid below the 98 level and Wall Street tumbled back. This week, apart from the virus outbreak headlines, the markets will follow Chinese manufacturing PMI on Monday and trade balance data set on Friday as an indicator of the world economic activity.

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’s industrial label kept the white metal’s prices under pressure due to fears of an economic slowdown caused by the deadly virus outbreak in China. However, its precious metal label was enough the carry Silver over 18.00$ by a small margin due to flight to safety mood seen on the markets. The World Health Organization issued a global emergency and also Chinese citizens started to face visa limitations by both from Russia and the EU. This week the headlines about the virus outbreak and Chinese data set will likely to dominate the risk sentiment in the markets.

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 ended the week with its worst performance since 1991 as the black gold slid below 52.00$ level. Fears of a global slowdown, especially in China due to the new virus outbreak in China is hammering oil prices although OPEC+ oil output cut is still intact with rumours of even deeper cuts on the table. WTI was in a freefall since the start of the virus outbreak news emerged since it tested a critical price level at 51.00$ last week which was followed as strong support since the start of 2019. The Baker Hughes oil rig count data in the US came almost in line with the expectations with 675 vs 676 which did not affect the WTI sell-off last Friday.

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 is hammered on Friday with %2.09 drop as the negative news emerged regarding the deadly virus outbreak in China. The World Health Organization declared a global emergency as both death and contamination toll kept rising in China and also a number of contaminated people seen on a global scale. Also, Russia and EU issued visa restrictions to Chinese citizens as an additional measure to travel bans in China. Alongside the developments, the market sentiment turned into the flight to safety before the weekend holiday and while Wall Street retraced back heavily, safe-havens gained traction up. The CBOE Volatility Index, Wall Street's fear gauge, was up nearly 10% on Friday as an indicator of the panic in the markets while the USD index DXY slid below 98, testing 97 level. Apart from the developments regarding the virus outbreak, the markets will follow the ISM manufacturing/non-manufacturing ISM data in the US with Chinese manufacturing PMI on Monday and trade balance data set on Friday.

From the technical point of view, over the physiological 28.000 level, 28.400 can be followed as next resistance while below 27.770 level the supports can be seen at 27.400, 27.000 and 26.757 (24.680-27.400 %23.60) levels.

Support Levels: 27.700 27.400 27.000

Resistance Levels: 28.400 29.000 29.500


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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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