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Daily Market Report
20 May 2020

EURUSD

The EUR/USD pair is ending Tuesday with modest gains, after trading as high as 1.0975 during the European session. The pair rallied throughout the first half of the day amid the persistent positive sentiment, also backed by encouraging European data. The German ZEW Survey, which showed that the Economic Sentiment in the EU improved to 46 in May, much better than the -12.1 forecast, while for Germany it also improved to 51 from 28.2, although the assessment of the current situation in the country plunged to -93.5 from -91.5.

Asian equities rallied, but European indexes struggled to gain ground, ending the day mixed, as the mood softened. The French Finance Minister Bruno Le Maire said that the European Union recovery fund proposed by Germany and France, probably will not be available until 2021.  Wall Street also ended mixed, as US housing data disappointed with April’s  Building Permits falling by 20.8% and Housing Starts declining by 30.2% in the same month.  Fed’s chief Powell testified before the Congress but failed to impress, centring its testimony in the need for financial aid throughout the crisis.

This Wednesday, the EU will publish its April inflation data, foreseen at 0.4% YoY and the preliminary estimate for the May’s Consumer Confidence, expected to have slid to -24 from -22.7 in April. The US will publish the Minutes of the latest FOMC’s meeting.

The EUR/USD is trading in the 1.0930 price zone, and still has room to extend its advance, according to intraday charts. The 4-hour chart shows that the pair is comfortable well above all of its moving averages, with the 20 SMA about to cross above the larger ones, all of them around the 1.0850/70 area. Technical indicators, in the meantime, are stable around overbought levels, although fr from suggesting an upcoming side. The risk could turn to the downside on a break below 1.0890, and especially if the market’s sentiment continues to deteriorate.

Support levels: 1.0920 1.0890 1.0860  

Resistance levels: 1.0950 1.0985 1.1010

USDJPY

The USD/JPY pair hit a 5-week high of 108.08, retreating from the level but holding on to intraday gains. The pair jumped after the Bank of Japan called for an unscheduled monetary policy meeting on May 22, meant to discuss new measures to support small and medium business. The pair lost momentum as US Treasury yields eased from early highs and as Wall Street struggled to trade in the green.

Earlier in the day, Japan released March Industrial Production, which fell by 3.7% MoM and by 5.2% when compared to a year earlier, meeting the market’s expectations. Capacity Utilization in the same month contracted 3.6% worse than anticipated. The figures support fears about a steeper economic contraction in the country. This Wednesday, Japan will publish March Machinery Orders, seen contracting sharply from the previous month.

The USD/JPY pair maintains its positive technical stance. In the 4-hour chart, it finally broke above its 200 SMA, while the 20 SMA continues to advance just below the larger one. The Momentum indicator heads higher nearing overbought readings, while the RSI eases from overbought levels, currently at around 64. The pair will retain its positive tone as long as it holds above 107.30, the immediate support.

Support levels: 107.30 106.90 106.65

Resistance levels:  108.00 108.40 108.80

GBPUSD

The GBP/USD pair is trading near its weekly high of 1.2296, holding on to gains this Tuesday. In one hand, the greenback remained out of the market’s favour, while the Sterling surged on the back of a mixed employment report. People filing for unemployment surged to 856.5K in April, much worse than the 150K expected, while the ILO unemployment rate for the three months to March unexpectedly fell to 3.9% from 4.0%. The surge in the Claimant Count Change is the result of the coronavirus-related lockdown, and it didn’t surprise investors.

Also, the UK announced a new post-Brexit tariffs regime, expected to come into effect from January 2021. The plan includes cutting some tariffs on imports to near zero but will maintain a 10% levies on cars, agricultural products and the ceramics industry.  The UK will release April’s inflation numbers this Wednesday, with the annual CPI foreseen at 0.9% from 1.5% previously. The core reading is seen at 1.5% from 1.6% previously.

The GBP/USD pair is bullish in the short-term, although it’s yet to be seen if the rally could be sustained in time, as the pair remains at the lower half of its monthly range. The 4-hour chart shows that the pair has recovered above the 38.2% retracement of its late March/early April rally at 1.2170, while the 20 SMA, turns marginally higher, just above the mentioned Fibonacci level. Technical indicators, in the meantime, continue to head firmly north well above their midlines. The pair has room to extend its advance towards the 1.2350 region where it has the 23.6% retracement of the mentioned rally.

Support levels: 1.2240 1.2200 1.2170  

Resistance levels: 1.2285 1.2310 1.2350

AUDUSD

The AUD/USD pair surged to 0.6584, a level that was last seen on March 10. Commodity-linked currencies were the best performers against the greenback, despite the sour tone of equities. Even further, the Aussie rallied despite an early slump, triggered by news coming from China. The Asian giant imposed punitive tariffs of more than 80% on barley imports from Australia, and market talks suggest that the movement could extend to wine, seafood and dairy. The move was a response to the Australian call for an investigation into the origin of the coronavirus.  

The Reserve Bank of Australia released the Minutes of its latest meeting, which included no surprises. Policymakers are concerned about the unprecedented economic contraction triggered by the coronavirus pandemic, although they are also confident about the measures taken to bare with it. During the upcoming Asian session, the country will publish the Westpac Leading Index for April, previously at -0.85%.

The AUD/USD pair is trading near the mentioned high in the 0.6560 region as the day comes to an end. The 4-hour chart shows that it continues to develop above all of its moving averages, with the 20 SMA crossing above the 100 SMA, both around 0.6480. Technical indicators continue to head higher near overbought readings, all of which maintains the risk skewed to the upside.

Support levels: 0.6530 0.6490 0.6455  

Resistance levels: 0.6585 0.6610 0.6645

GOLD

Mixed market environment caused a choppy trading session for Gold on Tuesday. The markets cheered the positive developments about vaccines and Powell’s statement about how determined is FED to defend the economy on Monday. However, with the profit-taking, most of the equity markets had negative closings on Tuesday. Also, the USD index DXY lept its level around mid-99.00. FED officials were on the wires today as Powell stated said that the virus and more specifically employment will weigh on the economy for years. If there is the additional stimulus it would depend on the path of the economy and the Fed must ask themselves if what they have done is enough for the economy in the months ahead. That was not all from the US central bankers as Mr Predictable (Kashkari) said the Fed has other tools to use if before it uses negative rates and strong US GDP growth is probably two years away, nothing we have not heard before. On the other hand, from the White House, US treasury secretary Mnuchin stated the job numbers are likely to get worse before they get better. However, there was some good news as Economic Advisor Kudlow said the WH is looking at a corporate tax cut to support the coronavirus pandemic hit businesses. Gold will likely benefit from risk aversion as no matter what good news comes up, traders are still willing to hold a portion of Gold in their portfolios.    

1.750$(December 2012 peak), 1.785$ (2012 multi-time peak) and 1.800$ levels can be followed as resistances as Gold keeps its decisive move over the 1.700$ level. Below the 1.738$ (April double top), next targets downside can be followed at 1.700$ and 1.650$.

Support Levels: 1.738$ 1.700$ 1.650$

Resistance Levels: 1.750$ 1.785$ 1.800$   


SILVER

Silver prices might get a big boost until the supply and demand finds a balance in the coming weeks. As most of the global economies are planning a re-opening, industrial demand will likely soar for the white metal while the supply side is still disrupted by lack of mining activities. Therefore, with the first shock, Silver prices might face a strong rally. Due to the recently released Industrial Production and Capacity Utilization report for April, which saw the biggest-ever drop in industrial production (11.2%) including a 6% drop in mining for the month, the supply side of the equation will unlikely to match the demand side. Also, Silver is still trying to benefit the Gold rallies but mostly driven by the expected normalisation in industrial activity.    

As 16.97$ (%50.0 14.29$-19.65$) stands as critical support, below this level, a test of 16.33$ (%61.8 14.29$-19.65$) and 15.55$ (%76.40 14.29$-19.65$) can be targeted. On the top side, the resistances are lined at 17.60$ (%38.20 14.29$-19.65$), 18.38$ (%23.6 14.29$-19.65$) and over that 18.70$.

Support Levels: 16.97$ 16.33$ 15.55$

Resistance Levels: 17.60$ 18.38$ 18.70$


CRUDE WTI

As the market is heading towards contract expiry for June, WTI faced a resistance in halfway of its big decline from 65.62$ to 0.00$ for May contract. Oil demand in the world’s top oil importer, China, has rebounded to the pre-coronavirus levels which have underpinned this sizable move in the energy complex. According to Bloomberg’s sources on Monday, "China’s gasoline and diesel consumption are already back to the pre-virus levels , which is a bullish sign for the oil market. "China's oil demand had dropped by 20% In February and in early March due to the full lockdown and extended factory shutdowns and holidays. Over the past few weeks, more and more encouraging signs have emerged that China’s demand is recovering and helping lift global oil demand from the lows of the ‘Black April.’ Alongside the optimism about recovery in the demand side, also the stockpiles are easing abound the globe with extra production cut measures taken by OPEC+.

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, 32.79$ (9th of March decline %38.20) and 34.45$ (9th of March decline %50.00) can be followed as resistances.

Support Levels: 31.00$ 27.40$ 26.00$

Resistance Levels: 32.79$ 34.45$ 36.12$ 


DOW JONES

Dow Jones could not extend its move-up on Tuesday, failing for the third time around 24.600 level. FOMC Chairman Jerome Powell and Treasury Secretary Mnuchin will testify in a hearing entitled “The Quarterly CARES Act Report to Congress” before the Senate Banking Committee on Tuesday. Powell stated in his speech that the problems in the labour market will pressure the economy longer than expected.On the other hand, from the White House, US treasury secretary Mnuchin also stated that the job numbers are likely to get worse before they get better. On the other hand, Economic Advisor Kudlow said the WH is looking at a corporate tax cut to support the coronavirus pandemic hit businesses. As the equity markets around the globe faced profit taking, Gold advanced its move up while the USD index DXYfaced a marginal setback. Early in the morning the interest rate decision will be followed from PBoC. Also, during the US session, FOMC minutes will be followed. At this point, markets need an extra catalyst to keep their move up. Despite the risk appetite, investors are still not convinced for a recovery soon.

The index tested levels last seen in mid-March on Monday. If the index continues to stay below the 24.000 level, 23.500 and 23.000 levels might be seen as new targets. Over the 25.000 level, the resistances might be followed at 25.500 level and 26.000 levels.

Support Levels: 24.000 23.500 22.000

Resistance Levels: 25.000 25.500 26.000

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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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