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Daily Market Report
22 May 2020

EURUSD

The EUR/USD surged 1.1008, a fresh three-week high, but closed the day in the red around 1.0950. The market’s sentiment remained sour throughout the day, although risk-aversion during US trading hours benefited the greenback. The dismal mood was triggered by comments from Chinese speaker for the National People’s Congress, Zhang Yesui, who said that China will firmly defend its interest if the US does something to undermine the country’s core interests.  

In the data front, Markit released the preliminary estimates of May’s PMI for the Union and the US. In the EU, the manufacturing index improved from 33.4 to 39.5, while services output rose from 12 to 28.4. Despite upbeat figures, the European economy “remained stuck in its deepest downturn ever recorded,” according to Markit. In the US the manufacturing PMI recovered from 36.1 to 39.8, while the Services PMI recovered to 36.9 from 26.7. Initial Jobless Claims for the week ended May 15, which resulted at 2.43 million, slightly worse than the 2.4 million expected.

Friday is a quiet day in terms of data, as the ECB will publish the Minutes of its latest meeting, while the US won’t release relevant macroeconomic figures. The focus will remain on mounting tensions between Washington and Beijing and coronavirus-related headlines.

The EUR/USD pair bottomed at 1.0936, above a static support level at 1.0920. The decline seems corrective after the test of the critical 1.1000 price zone. The 4-hour chart shows that the pair met buyers on a test of a sharply bullish 20 SMA, while technical indicators gyrated sharply lower, the Momentum now flat around its mid-line and the RSI at around 58. Overall, the bearish potential seems limited, but it could gather a firmer pace on a break below 1.0920 the immediate support level.

Support levels: 1.0920 1.0890  1.0850

Resistance levels: 1.0975 1.1010 1.1045  

USDJPY

The USD/JPY pair recovered the ground lost on Wednesday during the last few sessions, ending the day at around 107.60. The pair peaked at 107.84 during Asian trading hours, later easing on the back of rising risk aversion. Japanese data released at the beginning of the day was mixed, as the April Merchandise Trade Balance came in at ¥-930.4B much worse than anticipated. Exports were down by 21.9% while imports decreased by 7.2%.

Also, the preliminary estimate of the Jibun Bank Manufacturing PMI came in at 38.4 in May after printing at 41.9 in April, indicating a sharper drop in output and hinting a steeper downturn ahead.  On a positive note, the government decided to lift the state of emergency in three prefectures this Thursday, amid decreasing coronavirus cases.

 This Friday, the BOJ will have a special monetary policy meeting, in which they will probably announce another set of measures to support the local economy. The country will also publish its National inflation figures for April. The annual CPI ex-fresh food is foreseen at -0.1% from 0.4% previously.

The USD/JPY pair is losing its bullish stance, despite holding near its recent highs. The 4-hour chart shows that the pair is barely holding above its 20 SMA, which maintains its bullish slope above the larger ones. The Momentum indicator, in the meantime, crossed its mid-line into negative territory, while the RSI is directionless at around 55. The pair would need to break below 107.30 to be able to extend its slide this Friday.

Support levels: 107.30 106.90 106.65

Resistance levels: 108.00 108.40 108.80

GBPUSD

The GBP/USD pair started the day on the backfoot, although it met buyers at 1.2185, to end the day pretty much unchanged in the 1.2230 area. Comments from BOE’s Governor Bailey, saying that the central bank is considering negative interest rates as an option weighed on the Pound, overshadowing better-than-expected UK data. The preliminary estimates of the Markit PMIs for May were better than anticipated, with the manufacturing index rising to 40.6 and the services PMI printing at 27.8. Still, the numbers indicate that the pace of contraction is the steeper on record.

The UK also published the CBI Industrial Trends Survey on orders, which fell to a record low of -62 in April. This Friday, the kingdom will unveil April Retail Sales, seen falling by 16% in the month, and by 22.2% when compared to a year earlier.

The GBP/USD pair has bottomed near a Fibonacci support level at 1.2170, and as long as the pair remains above the level chances of a bearish move are limited. In the 4-hour chart, the pair is battling around a still bullish 20 SMA, but technical indicators are stuck directionless around their midlines. The 100 SMA is gaining bearish strength, currently at around 1.2330, suggesting an increasing selling interest.

Support levels:  1.2205 1.2170  1.2130

Resistance levels: 1.2285 1.2310 1.2350

AUDUSD

The Australian dollar retreated from its recent highs against the greenback, as the poor performance of global equities weighed on the commodity-linked currency. The Aussie was undermined at the beginning of the day by local data, as the May preliminary Commonwealth Bank Manufacturing PMI contracted further, printing at 42.8. The services index was slightly better than the previous, reaching 25.5. Tensions between the US and China over their trade relationship and the origins of COVID-19 also hurt the AUD.

RBA Governor Lowe gave a speech during Asian trading hours, although he didn’t surprise market players. Among the most important details, Lowe said that the cost of negative interest rates do exceed the benefits, suggesting that further rate cuts are out of the table for now. The country won’t release relevant data this Friday.

The AUD/USD pair holds on to its positive stance, as it holds on to most of its latest gains. The 4-hour chart shows that it is bouncing from a bullish 20 SMA, which provided support throughout the day. Technical indicators, in the meantime, bounce from their midlines, and after correcting overbought conditions reached earlier in the week. The risk remains skewed to the upside as long as the pair holds above 0.6530, a static support level.

Support levels:  0.6530 0.6490  0.6445

Resistance levels: 0.6615 0.6650 0.6685

GOLD

Markets faced an interesting trading day on Thursday as both risk assets and safe havens faced declines while the USD index DXY managed to at least hold its ground close to mid-99.00 level. While the preliminary data in the US showed that the May figures are still in a deep contraction zone after April readings bottomed, with the initial jobless claims hit to a catastrophic 38.6 million in 9 weeks total.  Also, China started a counter-attack against the US regarding the coronavirus sanctions. On the other hand, any retracement seen in gold might be considered as an opportunity to buy since stimulus programs and declining treasury yields will most likely support Gold prices in the mid to long-term.       

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

Once again, Silver failed to break its important resistance at 17.60$ and tried to hold over 17.00$ on Thursday. Apart from the industrial demand of Silver, white metal’s ETF holdings have been highly correlated to Gold's lately signalling its precious metal etiquette is intact. On the other hand, the peak Gold to silver ratio still signals a big break up in Silver prices is brewing which is also supported by the historic data.    

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

The rally started from 25.14$ carrying WTI to 34.64$ in just six trading days. The bull-run was mostly supported by the increasing demand and the normalisation in global oil stockpiles. Also, the extra production cut measures by OPEC+ helped to lift the black gold to its current level. The escalating tensions between the US and China regarding the possible coronavirus pandemic sanctions. On the data side, the Energy Information Administration (EIA) showed on Wednesday, the US crude inventories unexpectedly fell by 5 million barrels last week. Meanwhile, the latest API data showed that the US crude inventories fell by 4.8 million barrels to 521.3 million barrels in the week to May 15. WTI is on its way to re-gain its pandemic losses as President Trump announced lockdown should be lifted in the US. The energy demand around the globe is already getting close to its pre-pandemic times.

A decisive move over 32.81$ (65.62$-0.00$ %50) might carry WTI to 40.56$ (65.62$-0.00$ %61.80), 50.00$ and 54.00 levels. Below the 32.81$ level, 31.00$, 27.40$ (9th of March dip) and 26.00$ levels can be targeted.

Support Levels: 31.00$ 27.40$ 26.00$

Resistance Levels: 40.56$ 50.00$ 54.00$


DOW JONES

Wall Street entered into a wait and see mode with Dow Jones failed to overcome the 24.600 zone once again on Thursday. Another big increase in the initial jobless data is ignored by the markets alongside the preliminary PMI data set for May which was better than expected although the readings stayed in the contradiction zone. On the other hand, the tensions between the US and China will most likely be a new risk event especially as the elections in the US are coming closer. Chinese speaker for the National People’s Congress, Zhang Yesui stated that China will firmly defend its interest if the US does something to undermine the country’s core interests for possible sanctions regarding the coronavirus pandemic. Dow Jones created a consolidation zone between 23.200 and 24.600 after its deep dive to 18.300 level.    

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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