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Daily Market Report
13 May 2020

EURUSD

Sentiment continued to set the tone for currencies this Tuesday, with the greenback up during Asian trading hours but giving up later in the day. The EUR/USD pair hit a daily high of 1.0885, as recovering equities coupled with poor US inflation figures. According to the official release, consumer prices sank 0.8% MoM in April, the biggest decline since 2008. Annual inflation was up a measly 0.3%, while the core annual CPI came in at -0.4%, amid plummeting oil prices.

A dismal market mood led throughout the first half of the day, amid reports of new cases of coronavirus cases in Wuhan, and comments from US President Trump on China. Trump stated that he opposes renegotiating phase one of the trade deal with China, while he accused the country again for being responsible for the pandemic.

This Wednesday, the EU will publish March Industrial Production, seen plummeting in the month by 12.1%.  The US will release the April Producer Price Index, while Fed’s head Powell will offer a speech about the current economic issues. His words will be closely watched in search of hints for future monetary policy decisions.

The EUR/USD hovers around 1.0860 by the end of the day, partially losing its bullish strength although still with room to extend its advance. The 4-hour chart shows that the pair is comfortable above its 20 and 100 SMA, although sellers capped the upside around the 200 SMA. All moving averages, remain directionless, reflecting the absence of a clear trend. Technical indicators, in the meantime, have turned flat within positive levels, suggesting decreasing buying interest as the pair nears the 1.0900 price zone.

Support levels: 1.0830 1.0790 1.0755  

Resistance levels: 1.0890 1.0920 1.0950

USDJPY

The USD/JPY pair eased this Tuesday amid a dismal market’s mood, although ti held at the upper end of Monday’s range. The pair trades in the 107.20 price zone after being unable to advance beyond the 107.70 strong static resistance area. The Japanese yen appreciated at the beginning of the day on the back of rising concerns about a possible second wave of coronavirus after China reported at least six new cases in Wuhan. During US trading hours, falling Treasury yields and Wall Street turning red added pressure on the pair.

Japanese data released at the beginning of the day was extremely disappointing, as the preliminary estimate Leading Economic Indicator fell to 83.8 in March from 91.9, the biggest monthly drop on record. The Coincident Index for the same period, dropped to 90.5 from 95.4, the fastest pace of decline in almost a decade. During the upcoming Asian session, Japan will publish the March Trade Balance, and the April Eco Watchers Survey.

The 4-hour chart shows that the pair retreated from a bearish 200 SMA, although it continues developing above the 20 and 100 SMA, with the shortest about to cross above the larger one. Technical indicators, in the meantime, eased from overbought levels, heading lower within positive levels. Bears seem cautious at the time being, with a steeper decline expected on a break below 106.90, now the immediate support.

Support levels: 106.90 106.50 106.20

Resistance levels: 107.70 108.00 108.40 

GBPUSD

The GBP/USD pair lost the 1.2300 level, closing in the red for a second consecutive day. The confusing message from UK PM Johnson on Sunday alongside the lack of progress in Brexit talks finally took their toll on Sterling.  It’s still unclear when and how the UK will return to “normal,” although it seems there’s a long way ahead, as UK finance minister, Rishi Sunak, announced the furlough scheme would be extended until the end of October. That means that the government will continue to support roughly 7.5 million people at the cost of £14bn a month, although Sunak added that the government would ask companies to “start sharing” part of such cost starting next August.

During the upcoming Asian session, the UK will release the BRC survey on retail sales,  with activity seen declining by 1.3% in April after falling 3.5% in March. Later in the day, the kingdom will publish March Industrial Production and Manufacturing Production, both seen sharply down when compared to February. The UK will also release the preliminary estimate of Q1 GDP, seen down by 2.5%.

The GBP/USD pair is trading near its daily a few pips above a daily low of 1.2266, and at risk of falling further. The 4-hour chart shows that attempts to advance were rejected by sellers aligned around 1.2355, where the pair has a bearish 20 SMA and the 23.6% retracement of its late March daily advance. Technical indicators in the mentioned time-frame have stabilized well into negative levels, with no signs of downward exhaustion. The next relevant support and a possible bearish target is the 1.2170 price zone, where the pair has the 38.2% retracement of the mentioned rally.

Support levels: 1.2245 1.2200 1.2170

Resistance levels: 1.2310 1.2355 1.2390  

AUDUSD

The AUD/USD pair is ending Tuesday unchanged around 0.6490, although it posted a lower high and a lower low daily basis, a sign of increasing selling interest. The Aussie advanced despite news indicating a deepening economic downturn in Australia. The NAB’s Business Confidence for April came in at -46, while the March figure was downwardly revised to -65. The NAB’s Business Conditions Index for the same period plunged to -34 from -22 previously. Also, the Chinese Foreign Ministry said that his country halted some Australian beef imports to protect consumers. China has threatened to halt buying of Australian products last week, amid an inquiry into the origins of the coronavirus outbreak.

This Wednesday, Australia will release the May Westpac Consumer Confidence index, previously at -17.7%. The country will also publish the quarterly Wage Price Index. In the three months to March, wages are seen up by 0.5% matching the previous quarterly figure. When compared to the first quarter of 2019, wages are seen rising by 2.1%, slightly below the previous 2.2%.

The AUD/USD pair offers a neutral short-term stance, as, in the 4-hour chart, it´s hovering around its 20 SMA, which lost strength upwards. The larger moving averages remain below the current level, with modest bullish slopes. Technical indicators, in the meantime, have turned lower within neutral levels. A cleared bearish picture will surge should the pair break below 0.6445, the immediate support.

Support levels: 0.6445 0.6405  0.6370

Resistance levels: 0.6520 0.6550 0.6590  

GOLD

Gold is eager to protect its status quo in the light of re-opening of global economies. After the move up yesterday, the US 10 year yields lost 4 bps and retraced to 68 bps while the fall in consumer prices in the US printed its largest drop since 2008 while Wall Street faced limited profit-taking. The USD index DXY slid below 100.00 level again which supported Gold to regain its 1.700$ level. During the aftermath of the pandemic, historic low rates which will stay below the inflation will most likely support Gold prices in the long run. Also, the disruption in mining activities is pressuring the physical supply of the yellow metal. On the other hand, the number of new cases started to emerge in Wuhan as China started its normalization period fueling fears of a second wave of the pandemic on the way.       

From the technical point of view, as long as Gold decisively stays over 1.700$, the resistances might be followed at 1.738$ (April double top) 1.750$(December 2012 peak) and 1.785$ (2012 multi-time peak). Below the 1.700$, the supports might be followed at 1.650$ and 1.615$.

Support Levels: 1.700$ 1.650$ 1.615$

Resistance Levels: 1.738$ 1.750$ 1.785$


SILVER

Silver is stuck in a narrow range since last Friday waiting for a new catalyst. The patience in Silver prices can still be considered as a buying opportunity due to the big gap in Gold to Silver ratio. Also, the current COT data indicates a better sentiment for silver compared to Gold. As we look at the historic events, Silver always outperformed Gold during a Gold rally. Also, speaking about the Gold-Silver ratio, when Hitler triggered WWII with the invasion of Poland the rate peaked (98:1), and in 1991 at the time of the Gulf War (100:1) respectively. Also, it was around 80 at the time of the GFC in 2008-2009. Compared to those historic events, the rate peaked 120 and currently hovering around 109 level indicating the big gap for a possible rally.

As long as Silver stays over 15.00$ levels, 15.55$ 16.33$ and 17.00$ 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: 15.55$ 16.33$ 17.00$


CRUDE WTI

The June contract for WTI is trying to keep its advance supported by the re-opening of global economies and further production cuts. Saudi Arabia said on Monday that it would cut production by a further 1 million BPD in June and cut its total output to 7.5 million BPD which would mark a 40% decline from April's total output. The United Arab Emirates and Kuwait also said they take out another 180,000 barrels per day of supply from the market. These output cuts will be in addition to the deal signed by OPEC+, a group of Saudi Arabia and Russia, in April to cut production by 9.7 million barrels per day while the normalization period is expected to increase demand for energy. On the other hand, driller Baker Hughes reported on Friday another drop in US oil rig count, while the speculative community (COT) trimmed its net longs in the commodity to new 3-week low during the week ended on May 5th. 

The first support is watched at 25.00$ level. Below this level, 24.75$ (2002-2003 support) and 17.05$ (2001 dip) levels can be followed. Over the 30.00$ level, the resistances can be followed at 33.17$ (12-13 March 2020 resistance) and 36.20$ (11 March 2020 peak) levels.

Support Levels: 25.00$ 24.75$ 17.05$

Resistance Levels: 30.00$ 33.17$ 36.20$

DOW JONES

Wall Street failed to sustain its positive daily opening on Tuesday. Markets are focused on re-opening of the economy in the US while fear of the second wave in the coronavirus pandemic still lingers over the markets. Trump was on the wires today accusing China of hiding data from WHO regarding the pandemic. Also, President Trump stated that he is against a Chinese company to invest in a retirement fund in the US and criticized China about the situation of the Uyghurs in camps. As President Trump hit the wires, the sell-off intensified right before the closing pushing Dow Jones well below 24.000 level. Earlier in the day, Dallas Fed President Robert Kaplan voiced his opposition to the use of negative interest rates. In the meantime, St. Louis Federal Reserve President James Bullard argued that the economic shutdown cannot continue for too long while another FED official stated that they might block banks to pay dividends this year to support their capitals. Also, Dr Anthony Fauci and other health officials will testify before the Senate Health Committee. Data wise, consumer prices sank 0.8% MoM in April, the biggest decline since 2008 in the US. Annual inflation was up 0.3%, while the core annual CPI came in at -0.4%, supported by the plummeting oil prices. On Wednesday, Powell’s speech which will give insights about the current economic situation will be followed by the markets.

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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