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Daily Market Report
12 Feb 2020

EURUSD

The shared currency has been the weakest against the greenback, extending its decline to 1.0890, a fresh 2020 low. The slump came despite safe-haven assets, the dollar included, were off investors’ radar. The market’s sentiment improved on hopes the coronavirus outbreak might have already reached a peak. Nevertheless, the death toll has passed the 1,000 mark, while the WHO said a vaccine may be ready in 18 months, which means that market’s concerns about economic growth are meant to be with investors for long.

The macroeconomic calendar was scarce of relevant data, but Fed’s Chief Powell and ECB’s President Lagarde were on the wires. The first testified before the US Congress, and among other things, Powell said that forces that held down economic growth eased, bu added that risks to the US economy remain, particularly from the coronavirus. However, he noted that it is too early to asses the effect of the infection on the US economy. He also said that the current monetary policy will likely remain appropriate, but subject to reassessment. Regarding Mrs Lagarde, she spoke before the European Parliament's plenary session, but she referred to moderate growth and inflation below medium-term target, well-known facts.

This Wednesday, the EU will publish December Industrial Production, seen falling sharply, while, in the US, Fed’s Chief Powell will repeat his testimony before a different commission, with little chances of impressing speculative interest.

The EUR/USD pair managed to recover some ground ending the day marginally higher just below a daily high of 1.0924. However, the pair posted a lower low and a lower high daily basis, which keeps the risk skewed to the downside. In the 4-hour chart, technical indicators have corrected extreme oversold conditions, but remain well into negative ground and losing strength upward, indicating that the pair may well resume its slide. Moving averages, in the meantime, retain their sharp bearish slopes above the current level. The pair will likely accelerate its decline on a break below 1.0878, 2019 yearly low.

Support levels: 1.0875 1.0840 1.0810

Resistance levels: 1.0920 1.0965 1.1000

USDJPY

The USD/JPY pair closed unchanged this Tuesday, nearing again the 110.00 threshold but unable to surpass it and settling around 109.80. Demand for the safe-haven yen was absent amid the better performance of global indexes and recovering US government bond yields. The yield on the benchmark 10-year Treasury note rose to 1.59%, further underpinned during the American session by Fed’s Chief Powell words, as he said that the US economy y appears “resilient” to global woes.

Japan will release this Wednesday, January Money Supply M2 and the preliminary estimate of Machine Tool Orders for the same month, previously at -33.6%.

The USD/JPY pair is technically neutral, according to the 4-hour chart, as it has spent the day hovering around a directionless 20 SMA, which holds above the larger one, also directionless. Technical indicators continue to lack directional strength, the Momentum indicator stuck around its 100 level since last week and the RSI is easing from its highs, currently at around 57. The risk is skewing to the downside, although the pair would need to break below 109.00 to become bearish.

Support levels: 109.40 109.00 108.65

Resistance levels: 110.00 110.35 110.70

GBPUSD

The GBP/USD pair has posted a modest advance for a second consecutive day, hovering now around 1.2950. Data coming from the UK was quite discouraging as the preliminary estimate of Q4 GDP came in at 0% as expected, while Industrial Production rose a modest 0.1% MoM in December, and declined by 1.8% yearly basis, missing the market’s expectations. Manufacturing Production in the same period was also disappointing, down by 2.5% YoY.  

In the Brexit front, European Commission President Ursula von der Leyen responded to UK PM Johnson’s words about his desire of a Canada-style deal, indicating that, given the “unique” level of access Britain would have to the bloc’s single market, the UK mist stick to tough rules to prevent any harm to the EU economy.  EU’s Barnier warned UK leaders no to “kid themselves,” as Brussels won’t give a special deal related to financial services. BOE’s Carney spoke before the Economic Affairs Committee, and among other things, he said that some stimulus might be required to get back to trend growth.   

The GBP/USD pair’s recovery had more to do with an easing dollar than with Pound’s strength. Despite advancing, the bullish potential is limited, according to the 4-hour chart, as the pair has settled above its 20 SMA while technical indicators turned flat after entering positive territory. The price, however, continues to develop below the 100 and 200 SMA. The pair has an immediate resistance at 1.2975 but would need to run beyond 1.3030 to turn bullish.

Support levels: 1.2900 1.2865 1.2820  

Resistance levels: 1.2975 1.3000 1.3030

AUDUSD

The AUD/USD pair advanced to 0.6736 and finished the day above the 0.6700 figure, amid easing dollar’s demand and in spite of poor Australian data. The NAB’s Business Confidence Index fell to -1 in January, while the Business Conditions Index rose to 3, both missing the market’s expectations. Home Loans in December, on the other hand, have beat the market’s forecast by rising 3.5% in December. Australia will publish this Wednesday, February Westpac Consumer Confidence, seen at 1.4% after printing -1.8% in January.

Another factor limiting Aussie’s bullish potential is the coronavirus outbreak in China. Despite contagion outside the country has decreased, bringing some relief to financial markets, inside China the virus continues to spread. Goldman Sachs analyst downwardly revised the country growth’s forecast for this year from 5.8% to 5.2%, while central bankers from abroad had expressed concerns about the effects on local economies. With that in mind, a bullish run in the commodity-linked currency remains quite unlikely.

The short-term picture for the AUD/USD pair indicates that the upside remains limited, as despite moving above its 20 SMA, this last maintains its bearish slope as well as the larger ones, which stand above the current level. The Momentum indicator stands at daily highs and heads higher, but the RSI has turned flat at around  50, reflecting limited buying interest. Further advances are likely if the pair manages to extend beyond 0.6770 a strong static resistance level.

Support levels: 0.6700 0.6660 0.6630   

Resistance levels:  0.6740 0.6770 0.6805

GOLD

Gold retraced back to 1.560$ on Tuesday trading as global equity indexes boosted by heightened hopes of the coronavirus outbreak finally plateauing toward the end of the month. "China coronavirus outbreak may peak later this month and then plateau, based on the current model and trend,"Chinese Government Medical Advisor Zhong Nanshan stated on Tuesday to trigger the risk rally pressuring the safe havens. However, around the end of the session Gold managed to get away from its lows and Wall Street retraced back from its fresh all-time highs. On the other hand, as the USD had a hit from Powell’s comments Gold’s decline remained limited. Powell stated on his first day of testimony that the current monetary policy stance was appropriate and Fed will respond accordingly if developments emerge to cause a material reassessment of the outlook.

Gold trading is still capped at 1.600$ level. 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 had narrow range trading session on Tuesday keeping it’s important support level at 17.60$. The risk rally was fueled by the hopes of a quick resolution regarding the virus outbreak while the safe havens were put under pressure with the risk-on mood, sooner than expected normalization in the manufacturing sector in China supported the white metal.

Silver seems like it’s trading in a wait and sees mode. 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$-19.65$). If Silver stays over 18.00$ it can test 18.38$ (%23.6 14.29$-19.65$) and 18.70$.

Support Levels: 17.60$ 16.97$ 16.33$

Resistance Levels: 18.38$ 19.00$ 19.64$


CRUDE WTI

WTI trying to build a base around mid-49.00$ level after a five week decline. Coronavirus based heavy sell-off seem to be slowing down while there is still an uncertanity based on further production cut from OPEC+. Chinese officials stated on Tuesday that the coronavirus might peak around the end of this month and then plateau. The statement triggered a risk-on move at the markets which also supported the black gold.    

Over the 50.00$ level, the upside targets can be followed at 51.03$ (October 2019 low) and 53.00$ levels while If WTI stays below 50.00$ level, the support levels can be followed at 46.96$ and 44.66$ levels. 

Support Levels: 46.96$ 44.66$ 44.47$

Resistance Levels: 51.03$ 52.00$ 53.00$


DOW JONES

The relief rally again carried Wall Street to fresh highs however at the time of the writing Dow Jones gave away it’s gains made before Powell’s testimony. Earlier today, Chinese Government Medical Advisor Zhong Nanshan stated that China coronavirus outbreak may peak later this month and then plateau, based on the current model and trend which supported the positive market mood. Meanwhile, the CBOE Volatility Index is down 2.35% alongside the easing outlook to virus outbreak. On the other hand, Powell stated in his testimony that the current monetary policy stance was appropriate and Fed will respond accordingly if developments emerge to cause a material reassessment of the outlook. The FED being on hold pressure the USD index DXY and the positive mood seen earlier on the markets. 

If the index stays over 29.000, 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


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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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