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Daily Market Report
11 Jun 2020

EURUSD

A weaker dollar was the theme of the day, at least throughout the first half of it, with the EUR/USD pair reaching fresh multi-week highs at 1.1389. Caution ahead of the US Federal Reserve monetary policy meeting kept stocks seesawing within familiar levels, with European indexes edging lower, and Wall Street trading mixed. The US published the final readings of May inflation data, which was worse than initially estimated. According to the official report, the annual CPI was at 0.1%, while the core reading printed at 1.2%. The market ignored the headline, as the focus remained on the Federal Reserve’s decision.

As expected, the Federal  Reserve announced that it left the benchmark interest rate unchanged at 0%-0.25% as widely expected.  Among other things, the statement showed that policymakers will continue to buy Treasuries and mortgage-backed securities “at least at the current pace” over the coming months. The dot-plot showed that rates will remain at current levels until 2022.  Powell reiterated that the central bank is ready to use its full range of tools to support the US economy. The GDP is seen falling by 6.5% this year, yet rising 5.0% in the next.  The dollar fell with the news with EUR/USD extending its rally to fresh multi-month highs above the 1.1400 level.

This Thursday, the US will publish the May Producer Price Index, seen at -1.2% YoY, and US Initial Jobless Claims for the week ended June 5, seen at 1.55 million. During the European session, the focus will be on the Eurogroup Meeting and the EcoFIn Meeting.

The  EUR/USD pair heads into the Asian session trading around 1.1400 after hitting 1.1422, retaining its bullish stance in the short term. The 4-hour chart shows that an intraday downward knee-jerk met buyers around the 20 SMA, which provides dynamic support at around 1.1320. Technical indicators, in the meantime, have resumed their advances after correcting overbought conditions, with the Momentum at fresh weekly highs, supporting another leg north towards the 1.1460 price zone, a long-term static resistance level.

Support levels: 1.1380 1.1340 1.1300    

Resistance levels: 1.1425 1.1460 1.1500

USDJPY

The USD/JPY pair traded as low as 106.98, ending the day a couple of pips above this last. The greenback came under selling pressure after the US Federal Reserve monetary policy announcement but managed to recover some ground against its European rivals as equities reacted negatively to the headlines. In turn, the poor performance of Wall Street maintained the yen stronger against its American rival. Furthermore, US Treasury yields extended their declines, with the yield on the 10-year note returning to its April/May levels.

Early on Wednesday, Japan published its May Producer Price Index, which fell by 2.7% YoY, worse than anticipated. Also, Machinery Orders fell by 12% MoM in April and were down by 17.7% when compared to a year earlier. During the upcoming Asian session, the country will only release minor figures related to foreign investment, hardly a market mover.

The USD/JPY pair is trading at the lower end of its daily range and is still at risk of falling. The 4-hour chart shows that it has spent most of the day developing below the 200 SMA, which provided intraday resistance within Powell’s presser, currently at 107.50. The 20 SMA heads firmly lower well above the larger one, while technical indicators have barely bounced from oversold levels. The risk of a steeper decline should increase on a break below 106.95 and dilute if the pair recovers beyond 107.90.

Support levels: 106.95 106.60 106.25

Resistance levels: 107.50 107.90 108.25  

GBPUSD

The persistent dollar weakens helped GBP/USD reach an intraday high of 1.2802 ahead of the Fed’s announcement, despite mounting tensions in the Brexit front. According to a leaked document, the European Parliament could veto any trade deal between the UK and the EU that fails to ensure fair competition and strong standards on the environment and workers’ rights. The UK’s macroeconomic calendar will have nothing to offer until Friday.

Meanwhile, UK PM Johnson eased restrictive measures further allowing adults who live alone and single-parent families to mix with another household as long as one is a single-adult household. The rule of social distancing persists but not within this context.

The Pound lagged post-Fed, as GBP/USD extended its previous rally for a few pips, to 1.2812, but was unable to retain gains beyond 1.2800. Holding below the figure, the short-term picture is anyway bullish as, in the 4-hour chart, the pair has continued to develop above a bullish 20 SMA. The 100 SMA has crossed above the 200 SMA, both roughly 400 pips below the current level. Meanwhile, technical indicators head north, but within familiar levels.

Support levels: 1.2720 1.2670 1.2620  

Resistance levels: 1.2820 1.2865 1.2900

AUDUSD

The AUD/USD pair peaked at 0.7063 within the Fed’s monetary policy announcement, retreating afterward as US indexes were unable to hold on to their initial momentum. Discouraging Australian and Chinese data released at the beginning of the day had a limited impact on the pair, which fell to an intraday low at 0.6923. The Australian June Westpac Consumer Confidence printed 6.3%, down from 16.4% in May. Home Loans in April fell by 4.4%, while Investment Lending for Homes declined by 4.2%, both much worse than the previous monthly figures.

As for China, inflation in the country was down by 0.8% in the month, and up by 2.4% when compared to a year earlier. The Producer Price Index in the same month was down by 3.7%. This Thursday, Australia will publish Consumer Inflation Expectations, foreseen in June at 4.2% from 3.4% in May.

The AUD/USD pair is trading around 0.7010 as the US session comes to an end, offering a neutral-to-bullish stance. The 4-hour chart shows that the pair held above a mildly bullish 20 SMA, while well above the larger ones. Technical indicators head higher, although the Momentum remains within neutral levels. Bulls will likely insist and buy the dips as long as the pair holds above the 0.6900 price zone.

Support levels: 0.7010 0.6970 0.6920

Resistance levels: 0.7060 0.7100 0.7140

GOLD

While the Federal Reserve has kept its benchmark interest rate unchanged as expected, Jerome Powell’s speech guided the markets for what to come in the aftermath of the pandemic. While Wall Street and the USD index DXY faced downside pressure with the statement of Powell, Gold picked up the pace and lifted almost 30$ after testing 1.708$ on Wednesday. FED forecasted a 6.5% contraction for 2020 with the unemployment level at 9.3% by year-end. On the other hand, the bank has reaffirmed its commitment to maintaining the overnight funds' rate near zero until, at least 2022 and the pace of bonds purchases at least at the current levels, that is $80 billion per month in Treasuries and $40 billion per month in agency and mortgage-backed securities giving a long term picture to traders. Confirmed low-interest rates for the next three years is expected to support Gold in the long run as today’s move is an example of a non-risk event but monetary-based trading conditions for the yellow metal.

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 also benefited the decline in the USD index DXY amid Powell’s statement and monetary policy projection for the next three years. As FED is planning to keep the interest rates at almost zero levels, Gold and Silver faced demand from the traders. Silver tested mid-17.00$ level on Wednesday before Powell’s speech and lifted to 18.16$ level at the time of the writing. In the long run, silver is expected to normalize its ratio against Gold. Therefore, Silver has a higher margin to the upside in low-interest-rate conditions.

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, over the 17.60$ (%38.20 14.29$-19.65$) resistance, 18.38$ (%23.6 14.29$-19.65$), 18.90$ (January and February peak zone) and 19.67$ (2019 peak) can be followed as targets up. 

Support Levels: 16.97$ 16.33$ 15.55$

Resistance Levels: 18.38$ 18.70$ 18.90$


CRUDE WTI

WTI is still trying to correct its decline on last Monday while another surprise build in crude inventories weighs on the oil price. Oil inventories by 8.4 million BDP (API report on Tuesday) and 5.7 million BDP (EIA report released on Wednesday). Meanwhile, domestic oil production declined by 100,000 barrels per day (BPD) to 11.1 million BPD. The downside trend in the U.S. oil production continues which is not surprising since the number of rigs drilling for oil keeps decreasing. WTI failed to pass 40.00$ barrier despite the extension agreement of the existing production cut agreement. In the long run, OECD (Organization for Economic Cooperation and Development) stated that the world economy will contract by 6.0% in 2020 while the U.S. economy will shrink by 7.3%. The contraction in the US economy will most likely affect the demand for oil and pressure the prices.  

40.56$ (65.62$-0.00$ %61.80) tested as an important resistance on Monday as WTI is decisively on its way to recovery after the plunge in April. 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

Dow Jones continued its technical correction after an impressive rally. Following the Federal Open Market Committee's (FOMC) decision to keep the policy rate unchanged within the target range of 0-0.25%, Powell stated that they are planning to keep the rates at the same level until the end of 2022. He also stated that it is likely that there will be a significant portion of people who are jobless even once the recovery takes hold and the next few months will be very important in learning what the real story will be for the US economy. As Powell focused more on the issues in the labour market, he also highlighted the record decline in economic activity in Q2. With Powell’s statement, the USD index DXY and Wall Street increased their decline and Gold lifted from 1.708$ to 1.738$ as the first market reaction.

Dow Jones slid a tick below 27.000 level after Powell’s speech. The 27.700 level will be followed closely by the investor to see if Dow Jones will complete the recovery and push for new all-time highs. Over this level, 28.400 can be followed as new record highs while below 27.770 level the supports can be seen at 27.000, 26.757 (24.680-27.400 %23.60), 26.360 (24.680-27.398 %38.20) and 26.000  (24.680-27.398 %50.00).

Support Levels: 27.000 26.757 26.360

Resistance Levels: 27.700 28.400 29.000

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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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