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Daily Market Report
05 May 2020

EURUSD

Risk-off took over the financial world at the beginning of the week, with the greenback edging higher against most major rivals. The EUR/USD pair traded as low as 1.0895, ending the day just above this last. The dismal market mood was triggered by mounting tensions between the US and China, as US President Trump said that he has strong evidence that the coronavirus originated in a Wuhan lab. He also said that the Asian giant is not complying with the trade deal quotas, and menaced to terminate the phase one.

Data coming from Europe was mixed, as the final version of the German April Markit Manufacturing PMI was upwardly revised to 34.5, although the one for the whole Union came down to 33.5. Also, the EU Sentix Investor Confidence index plunged to -41.8 in May, much worse than the -33.5 anticipated. As for US data, the ISM-NY Business Conditions Index for April resulted at 4.3 from 12.9 previously, while March Factory Orders fell by 10.3%. This Tuesday, the EU Commission will release its growth forecast, and against the usual, it may impact the shared currency. The US will publish the April ISM Non-Manufacturing PMI, previously at 50.

The EUR/USD pair is at risk of extending its decline, as, in the 4-hour chart, it settled below its 20 SMA for the first time in over a week. In the mentioned time-frame the 100 and 200 SMA converge directionless at around 1.0880, providing support, while technical indicators have turned flat around their midlines. Further declines are to be expected on a break below 1.0880, the immediate support.

Support levels: 1.0880 1.0830 1.0795

Resistance levels: 1.0920 1.0950 1.0995 

USDJPY

The Japanese yen appreciated at the weekly opening amid the risk-off mood, taking a slight advantage against its US rival. The pair fell to 106.64, trading a handful of pips above this last as the new day starts. Japan has been on holidays on Monday, and local markets will also remain closed this Tuesday, as the country celebrates Children’s Day.

US Treasury yields remained flat throughout this Monday, amid tensions between the US and China. Equities, on the other hand, posted sharp losses in Asia and Europe, although US indexes bounced from daily lows, with the Nasdaq managing to post some modest intraday gains.

The USD/JPY pair is neutral-to-bearish in the short-term, as the 4-hour chart shows that it spent the day hovering around a flat 20 SMA, while below the larger ones. The Momentum indicator is flat, hovering around its midline, while the RSI heads marginally lower at around 46, skewing the risk to the downside. Further slides are to be expected on a break below 106.35, last week’s low and the immediate support level.

Support levels: 106.35 106.00 105.65

Resistance levels: 106.95 107.30 107.70  

GBPUSD

The GBP/USD pair is down for a second consecutive day, trading near a daily low of 1.2404 amid renewed demand for the greenback in a risk-averse environment. The UK macroeconomic calendar remained empty this Monday but will include the final version of the Markit Services PMI for April this Tuesday, seen downwardly revised to 12.2. Meanwhile, UK PK Johnson’s spokesman said that the kingdom would start trade talks with the US this week, hoping to reduce trade barriers and tariffs. Talks between representatives of the two countries are expected to last at least two weeks. The lack of progress in Brexit negotiations is also taking its toll on the pound.

The GBP/USD pair is technically bearish, as, in the 4-hour chart it has broken below its 20 and 100 SMA, which anyway lack directional strength. Technical indicators entered negative territory, with the Momentum maintaining its downward slope and the RSI flat at around 43. Once below the 1.2400 figure, the pair has room to extend its decline toward 1.2355, the 23.6% retracement of its latest bullish run.

Support levels: 1.2395 1.2355 1.2310

Resistance levels: 1.2485 1.2530 1.2585  

AUDUSD

The AUD/USD pair trades with modest intraday gains at the end of the American session in the 0.6420 price zone, helped by Wall Street’s recovery from intraday lows. The Aussie fell at the beginning of the day, undermined by the prevalent risk-averse sentiment and softer than expected Australian inflation. The TD Securities Inflation estimate for April resulted in -0.1% MoM and at 1.2% YoY, below its previous estimates. On a positive note, Building Permits in the country beat market’s expectations down by 4.0% in March vs the -15% forecast.

The Reserve Bank of Australia is having a monetary policy meeting this Tuesday. Policymakers are expected to live the rates at a record low of 0.25%, although investors will be looking for a possible adjustment to the central bank’s assets purchase program. More relevant, investors will scrutinize Lowe’s words about the economic situation of the country and estimates of growth and unemployment.

The AUD/USD pair has recovered from 0.6372, its lowest in a week, but remains at risk of extending its decline according to intraday readings. In the 4-hour chart, the 20 SMA gains bearish strength above the current level, although it met buyers around its 100 SMA. Technical indicators have recovered from oversold levels, but remain within negative levels. Overall, the upcoming directional strength will depend on Lowe’s words.

Support levels: 0.6375 0.6350 0.6310

Resistance levels: 0.6440 0.6480 0.6515

GOLD

Risk appetite in the markets continued to fade away on Monday as the verbal tensions between the US and China escalated due to coronavirus pandemic. The US now says they have evidence that the coronavirus originated in China at the Wuhan located Laboratory for research into diseases. US President stated that they are going to be giving a very strong report as to exactly what they think happened about the issue. On the other hand, as the election in the US coming close, President Trump might need new battlefronts to support his campaign. Therefore the accusations might stay as a polemic only. Due to escalating tensions, Wall Street halted its advance and Gold had marginal gains while the USD index DXY rallied through mid-99.00 levels.

From the technical point of view, if Gold decisively stays over 1.700$, the resistances might be followed at 1.750$(December 2012 peak) and 1.785$ (2012 multi-time peak). Below the 1.650$, the supports might be followed at 1.615$, 1.600$ and 1.557$.

Support Levels: 1.650$ 1.615$ 1.600$

Resistance Levels: 1.700$ 1.750$ 1.785$


SILVER

Silver failed to hold over 15.00$ level and retraced back due to a decline in the risk appetite on Monday. Unlike Silver, Gold had a positive day amid rising tensions between the US and China as President Trump blamed China for the coronavirus pandemic. On the other hand, the Gold to Silver ratio is still signaling a potential rally is brewing. Over the past 100 years, the silver to gold ratio has seen highs around 100 and lows under 20 while Silver traditionally follows Gold. Silver also has a history of lagging behind for years and then catching up all at once, leading to eye-widening rallies when the risk sentiment returns. The current level of the ratio hovers around 120 indicating a big gap to catch-up.

As long as Silver stays over 15.00$ levels, 15.55$ and 16.33$ levels can be followed as resistances. Below the 15.00$ level, the targets can be followed at 14.29$ (2019 dip), 13.00$ and 12.00$ levels.  

Support Levels: 14.29$ 13.00$ 12.00$

Resistance Levels: 15.00$ 15.55$ 16.33$


CRUDE WTI

WTI literally exploded on Monday despite the risk appetite on the markets declined due to escalating tensions between the US and China. WTI rallied more than %20 on a daily base hitting 23.76$. Extra support for crude prices came after the speculative community pushed net longs to the highest level since early August 2018 during the week ended on April 28th, as per the latest CFTC report. Also, driller Baker Hughes reported on Friday the seventh consecutive drop in US oil rig count, this time by 53 to 325 active oil rigs. Later in the week, the API and the EIA will publish their reports on crude oil inventories on Tuesday and Wednesday, respectively as the physical stock problem was one of the biggest burdens on WTI prices. The optimism surrounding a better June in terms of demand as most countries started easing of lockdowns after China is pushing the prices at the moment. 

Below the 23.00$, the supports can be seen at 22.00$ and 20.00$ (2020 dip). Over the 24.00$ the resistances can be followed at 24.75$ (2002-2003 double support) and 26.00$ (2016 dip).

Support Levels: 23.00$ 22.00$ 20.00$

Resistance Levels: 24.00$ 24.75$ 26.00$


DODOWM

Despite the retracements seen on European equity markets, Wall street manage to at least protect its ground while the risk appetite declined on the markets. President Trump continued to blame China for the coronavirus pandemic stating that they have solid proof that the virus is originated at the Wuhan located Laboratory for research into diseases. On the other hand,  Buffett’s annual meeting was rather negative as Buffett gave up on airliners, emphasized the uncertainty that remains from COVID-19 and seems to prefer holding cash and wait for the next downturn. Buffett ended by saying “Never bet against America”, but he seems poised to wait a while before putting his record pile of cash to work.

Dow Jones had a limited trading range on Monday barely holding in the positive zone after retracing heavily on Friday. 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  


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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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