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Daily Market Report
16 Mar 2020

EURUSD

Panic due to the coronavirus pandemic kept dominating the financial world last week. Countries around the world are closing borders and imposing quarantines, putting economies on hold. A global economic downturn has become real as countries pause activity. Saudi Arabia’s decision to smash oil prices for sure adds to concerns, as consumption plummets on a halted world.

Nevertheless, stimulus-related announcements seem to have brought some relief on Friday. US  President Donald Trump declared a national emergency and announced several measures, including to free up as much as $50 billion in financial resources. Also, the NY Fed started Thursday with liquidity injections through repo operations and announced further measures to support the economy.  Equities recovered alongside government bond yields. The better market mood, however, doesn’t grant additional recoveries, as the crisis is far from over.

By the end of the week, Germany released February CPI, which met the market’s expectations printing at 1.7% YoY. In the US, the Michigan Consumer Sentiment Index fell to 95.9 in March from 101.0, although beating the market’s expectation of 95. This Monday, Europe won’t release relevant data, while the US will publish the March NY Empire State Manufacturing Index and Tic Flows for January.

Worth mention that during the weekend, US President Trump complained again about Fed’s Chairman, Jerome Powell, claiming that he is not leading but only following other central bankers. Trump repeated he has the right to fire or demote Powell.

The  EUR/USD pair has finished the week in the red just above 1.1100, down from a multi-month high of 1.1496. The pair bottomed in the 1.1050 price zone on Thursday and Friday, a couple of pips above the 61.8% retracement of its February/March rally. Bears could take over the pair once below it. In the daily chart, technical indicators are retreating sharply from overbought readings, with the RSI about to enter the bearish territory. A bullish 20 SMA, converges with the mentioned Fibonacci support, reinforcing it. Shorter-term, and according to the 4-hour chart, chances are of a downward extension as the pair is developing well below a bearish 20 SMA while hovering around its 100 SMA, as technical indicators consolidate near oversold readings.

Support levels: 1.1050 1.1010 1.0970

Resistance levels: 1.1145 1.1190 1.1225 

USDJPY

The USD/JPY pair closed the week firmly higher near the 108.00 figure, after hitting a multi-year low of 101.76 on Monday. The pair added roughly 350 pips on Friday, boosted by a better market mood, triggered by US President Trump’s decision to declare a national emergency and free up as much as $50 billion in financial resources to counter the negative economic effects of the coronavirus outbreak. The move came after the Federal Reserve announced a bond-buying program on Thursday, an effort to back the financial to cope with the ongoing crisis.

Meanwhile, Japanese data continued to disappoint. The January Tertiary Industry Index released on Friday came in at 0.8% in January, missing the market’s expectation of 1.2%. At the beginning of the week, the country will release January Machinery Orders, seen down by 1.6% in the month and at -0,5% when compared to a year earlier.

The USD/JPY pair has settled around the 61.8% retracement of its latest daily collapse, and while the recovery has been impressive, chances of further recoveries seem limited. In the daily chart, technical indicators advance but remain within negative levels, while the recovery stalled below moving averages. The pair topped Friday at 108.50, the level to surpass to support a bullish continuation. A weekly engulfing pattern, however, skews the risk to the upside. In the 4-hour chart, the Momentum indicator advances within overbought levels, while the RSI consolidates at 68. The 20 SMA heads firmly higher well below the current level, while the pair settled a handful of pips above the 100 SMA, favouring a bullish continuation without confirming it.

Support levels: 107.70 107.25 106.80

Resistance levels: 108.10 108.50 108.90

GBPUSD

The GBP/USD pair collapsed this past week, losing roughly 800 pips and ending it in the 1.2270 area. Prevalent dollar’s demand alongside a lack of action from the UK´s government were behind the slump. PM Boris Johnson and UK’s chief medical officer, Chris Whitty, announced Thursday an action plan that fell way short of what other countries are doing. The plan pretty much recommends a seven-day self-isolation in the case of symptoms, without banning mass gatherings or closing schools. Furthermore, no actions were taken on travel bans. Local scientists are criticising the government, as this light measures, may put the health system under stress and "risk many more lives than necessary."

Meanwhile, Mark Carney stepped down as Bank of England Governor this week. The Financial Conduct Authority chief, Andrew Bailey, has been confirmed as the next Governor of the BOE. Before leaving, Carney slashed interest rates by 50 bps to 0.25%,  taking borrowing costs back to the lowest level in the central bank’s history. Nevertheless, and with Brexit on pause, fears are that the UK is heading into a recession. The UK macroeconomic calendar has nothing to offer this Monday.

The GBP/USD pair is trading at levels last seen in October 2019, oversold but poised to extend its slump. The daily chart shows that the pair has collapsed below all of its moving averages, with the 20 DMA gaining bearish strength below the 100 DMA. Technical indicators, in the meantime, head south almost vertically within oversold levels. The 4-hour chart offers the same picture, with technical indicators maintaining their bearish slopes despite being in extreme readings, as the pair develops far below bearish moving averages. The pair bottomed Friday at 1.2254, with a break below the level exposing October low at 1.2194.

Support levels: 1.2250 1.2195 1.2140

Resistance levels: 1.2320 1.2365 1.2410

AUDUSD

The AUD/USD pair closed the week with sharp losses, down on Friday to 0.6122, its lowest since November 2008. Despite a comeback in high-yielding assets, the Aussie bullish potential was limited by the demand for the greenback. Furthermore, gold prices remained under selling pressure, falling on Friday for a fifth consecutive day.

There was no data coming from Australia at the end of the week, and the country´s macroeconomic calendar will remain empty this Monday. However, China is having a busy start to the week, as the country will publish February Retail Sales and Industrial Production for the same month, both seem contracting from the previous readings. The country will also release housing and money data, while the National Bureau of Statistics will offer a press conference.

The AUD/USD pair bounced from the mentioned low but settled around 0.6180, maintaining its bearish tone ahead of the opening. In the daily chart, technical indicators have barely decelerated their declines in extreme oversold levels, while the pair is developing over 300 pips below a bearish 20 SMA. In the 4-hour chart, the pair is also developing far below bearish moving averages, while technical indicators consolidate in oversold levels, without signs of an upcoming recovery.

Support levels: 0.6120 0.6090 0.6060

Resistance levels: 0.6225 0.6250 0.6280

GOLD

Gold spent last week being hammered with the run to liquidity as FED intervened the markets to fight with the pandemic by using quantitative easing. Also, the meltdown seen in the equity markets forced traders to support their positions with cash to avoid margin calls. Therefore, the demand for cash caused a sell-off in the Gold market causing the yellow metal to test 1.500$ on last Friday printing its worst week since 1983. On the other hand, Trump’s declaration of national emergency managed to lift the Gold from its daily dip levels to 1.550$ levels which it ended the week. While the number of cases and casualties are emerging in the US, now the centre of the epidemic shifted to Europe from China as Italy is leading the number of cases and deaths followed by Spain. The pandemic is now forcing governments, especially in the EU to take extreme countermeasures such as border closings and ban of social gatherings with a pause to schools. Despite the selling wave in favour of USD, Gold is expected to defend its safe-haven status in mid-term as there is still no clear resolution about the coronavirus pandemic. The week will start with the indıstrial production data set from China as it will be a clear indicator of the effects of the virus pandemic. Later in the week, on Wednesday the markets will follow the FED interest rate decision and FOMC press conference after the emergency rate cut. 

Over the 1.530$ (%76.40 1.557$-1.445$) resistance, 1.557$ (2019 peak), 1.600$ and 1.615$ can be followed as resistances. Below the 1.530$ (%76.40 1.557$-1.445$) level, the support levels can be followed at 1.514$ (%61.80 1.557$-1.445$) and 1.500$ levels.

Support Levels: 1.530$ 1.514$ 1.500$

Resistance Levels: 1.557$ 1.600$ 1.615$   


SILVER

Silver also dumped by the investors in favour of USD last week and the white metal retraced back close to its 2019 dip levels. Silver’s lack of indıstrial demand caused by the corona pandemic combined with strong USD supported by FED’s intervention caused the sell-off seen in the white metal. At the moment nothing on the fundamental side is supporting Silver and although the daily RSI(14) is in the oversold zone, further declines might be observed as the coronavirus pandemic is forcing the affected countries to take extreme cautions to stop the virus being spread.

As long as Silver stays below the 15.00$ level, targets downside can be followed at 14.29$(2019 dip), 14.00$(2018 dip) and 13.60$(2015 dip).  The first resistance stands at 15.55$ level (14.29$-19.64$ %76.40) and then 16.33$ (%61.8 14.29$-19.65$) with 17.00$ levels.

Support Levels: 14.29$ 14.00$ 13.60$

Resistance Levels: 15.55$ 16.33$ 17.00$         


CRUDE WTI

After one of the most turbulent weeks in the markets, WTI managed to gain some traction as Trump asked the Energy Department to buy oil for the strategic reserve. However, WTI ended the week with a loss of %24 on a weekly basis as Saudi Arabia and Russia had a conflict on oil output last week. The conflict added to concerns over the ongoing selling pressure caused by the corona pandemic which kept oil prices down. The EIA reported that crude oil supplies went up by nearly 7.7M barrels during last week, adding to the previous 0.785M barrels build.   

Below the 31.00$ level, 27.40$ (9th of March dip) can be followed as the first target down as well as 26.00$ (February 2016 dip) and 25.00$ (2001-2001 support line). Above the 31.00$ level, 34.45$ (9th of March decline %50.00), 36.12$ and 37.00$ can be followed as resistances.

Support Levels: 31.00$ 27.40$ 26.00$

Resistance Levels: 34.45$ 36.12$ 37.00$


DOW JONES

As the markets had high expectations of Trump’s coronavirus economic relief bill, Wall Street managed to almost close the previous bearish gap on Friday and stayed over 23.000 level with a daily incline of %9.36-largest ever in terms of points. While the USD index DXY lifted close to 99.00 levels, 10-year US Treasury bond yields surged by the move. On the other hand, Trump declared a national emergency and banned travel to Europe as a countermeasure against the corona pandemic. Also, after the emergency rate cut which was first in 12 years, last week FED injected 1.5 trillion USD into Wall Street’s key funding markets. This week the markets will follow the Chinese industrial production data early on Monday and also all eyes will be on FED on Wednesday to see if further steps in monetary policy will be taken.            

If the index slides below 23.000 level, 22.500 and 22.000 levels might be seen as new targets down. Over the 24.000 level, the resistances might be followed at 24.680 level (June 2019 and 28 February Low) and 25.000 levels.

Support Levels: 23.000 22.500 22.000

Resistance Levels: 24.000 24.680 25.000


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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