Daily Market Report
27 Jul 2020
Market players continued to dump the greenback at the end of the week, sending EUR/USD to a fresh multi-month high of 1.1657, a level that was last seen in September 2018. Upbeat data elsewhere and increased concerns about the pandemic situation in the US has played against the greenback throughout the week and despite the risk-averse environment. Investors moved into other safe-haven assets, such as gold, the CHF, or the JPY.
The shared currency, on the other hand, continued to find support in the EU coronavirus recovery fund, agreed mid-week, and the preliminary estimates of the Markit July PMI, which were much better than anticipated. For the EU, the manufacturing PMI rose to 51.1 from 47.4 while services output jumped to 55.1 from 48.3. German indexes returned to expansion territory, also beating the market’s expectations. The Markit preliminary estimates for the US, on the other hand, missed the market’s expectations, with the Services PMI at 49.6 and the manufacturing index printing at 51.3.
This week, a US Federal Reserve meeting and Q2 GDP will catch investors’ eyes. Ahead of the events, Germany will publish this Monday the July IFO Business Climate, foreseen at 89.3 from 86.2 in the previous month, while the US will publish June Durable Goods Orders, seen up by 6.5% after advancing 15.7% in the previous month.
The EUR/USD pair has closed a sixth consecutive day with solid gains near the mentioned high, overbought but still bullish. In the daily chart, technical indicators are partially losing their bullish strength but hold well into extreme levels, while the 20 SMA turned heads north almost vertically, well below the current level. A corrective decline could take place, but the overall stance is bullish. In the shorter-term, and according to the 4-hour chart, the risk remains skewed to the upside, as the pair continues to develop above a bullish 20 SMA. The Momentum indicator diverges lower within positive levels, but the RSI maintains its strength around 69.
Support levels: 1.1630 1.1590 1.1545
Resistance levels: 1.1660 1.1695 1.1730
The USD/JPY pair collapsed to 105.67, a fourth-month low, as dollar’s weakness coupled with risk-aversion. The pair recovered from the mentioned level, ending the week in the 106.10 price zone. The slump was technical after the pair lost the 106.60 support. A dismal mood took over the financial world at the end of the week on the back of mounting tensions between the US and China. The US government included 11 companies last week in a list barring them from buying American technology and other products, also ordering the closure of a Chinese consulate in Houston. In response, Beijing ordered the closure of the US consulate in Chengdu. Authorities from both sides are engaged in a war of words, but so far, maintain progress towards a trade deal intact. Should the situation escalate, demand for the safe-haven yen will likely increase.
Japanese markets were close throughout the last part of the week, which means that the pair could start the week with a late reaction to Friday’s news, gapping lower. The Bank of Japan will publish the Summary of Opinions at the weekly opening, while the country will also publish the final reading of the May Leading Economic Index, foreseen unchanged at 79.3. It will also unveil the All Industry Activity Index for the same month, previously at -6.4%.
The USD/JPY pair daily chart indicates that further declines are likely as the pair has now detached from moving averages, trading well below all of them. Technical indicators, in the meantime, head firmly lower within negative levels. In the shorter-term, and according to the 4-hour chart, the pair is also at risk of extending its decline, as the latest bounce barely helped technical indicators to correct extreme oversold readings. The price, in the meantime, is developing far above all of its moving averages, with the 20 SMA now providing a dynamic resistance at around 106.75.
Support levels: 105.95 105.60 105.20
Resistance levels: 106.60 107.00 107.45
The GBP/USD pair surged on Friday to 1.2803, a fresh six-week high, amid the persistent dollar’s weakness and upbeat UK data. The kingdom published June Retail Sales at the end of the week, which jumped 13.9% in the month, much better than the 8.3% expected. Also, and according to preliminary estimates, the July Markit Manufacturing PMI rose to 53.6, while the Services Index improved to 56.6, both surpassing the market’s estimates.
However, and while other currencies hit multi-month highs against the dollar, GBP/USD added barely 60 pips on Friday, as the Sterling is at the mercy of Brexit-headlines. After the fifth round of talks failed last week, there are increased chances of a no-deal Brexit. EU chief negotiator Barnier said that a deal by the end of the year seems “unlikely,” adding that they are “still too far away.” UK negotiator David Frost agreed on the sharp differences but believes that a deal is still possible. The UK won’t publish macroeconomic data this Monday.
From a technical point of view, the GBP/USD pair is still bullish. The daily chart shows that it’s holding above a flat 200 SMA, which broke this past week, while the 20 SMA advances below the larger ones. Technical indicators, in the meantime, are neutral-to-bullish within positive levels. In the 4-hour chart, a bullish 20 SMA continues to provide intraday support, currently at 1.2735, while technical indicators lost there bullish strength, but remain within positive levels, indicating limited selling interest. June monthly high at 1.2812 is the immediate resistance, with further gains expected on a break above it.
Support levels: 1.2780 1.2735 1.2690
Resistance levels: 1.2815 1.2850 1.2895
The AUD/USD pair managed to close Friday unchanged at 0.7105, up for the fifth consecutive week. Australian data released at the beginning of the day offset the poor performance of equities, as the Commonwealth Bank preliminary July Manufacturing PMI rose to 53.4 from 51.2, slightly below expected, while the services index jumped to 58.5 from 53.1, leaving the Composite PMI at 57.9, the highest in over three years. As said a risk-off mood limited the pair’s advance, with worldwide equities closing in the red. The Australian macroeconomic calendar has nothing to offer this Monday.
The AUD/USD pair is has corrected from a multi-month high of 0.7182, and the daily chart suggests that the slide has been corrective, and may be completed, opening the doors for higher highs in the days to come. In the mentioned time-frame, technical indicators have eased within positive levels, but lack downward strength as the 20 SMA gains bullish strength below the current level. In the shorter-term, and according to the 4-hour chart, the risk is skewed to the downside, as the pair is below its 20 SMA, providing dynamic resistance around 0.7120, while the Momentum indicator heads south within negative levels. The RSI has stabilized around 54, somehow limiting the bearish potential. A recovery above the mentioned 0.7120 level should favour additional short-term advances.
Support levels: 0.7065 0.7030 0.6995
Resistance levels: 0.7120 0.7160 0.7200
Silver had a pause in its rally on Thursday but managed to pick up the pace on Friday testing shy of 23.00$ level. As industrial production is slowly getting back to normal, the demand for physical Silver is rising due to its industrial usage. Therefore, Silver will try to play catch-up with Gold and probably have a higher rate of values increase compared to Gold.
The daily RSI(14) is over 80.00 level signalling an overbought market. Therefore, a correction might be on the table before further advances. If Silver continues to stay over 22.19$ (2014 high) level, the resistances can be followed at 23.00$, 25.15$ (2013 August high) and 26.23$ (2011-2012 multi-year support). Below the 22.19$ (2014 high) level, the supports can be followed at 21.50$ and 21.00$ levels.
Support Levels: 22.19$ 21.50$ 21.00$
Resistance Levels: 23.00$ 26.23$ 26.23$
Dow Jones continues to lose its grip as the index failed to overcome 27.000 level. Depending on a report by the Financial Times, the much-awaited stimulus announcement from the US Senate is now delayed until next week as the policymakers jostle over the plan. The news quotes comments from the Republican leader in the US Senate Mitch McConnell and Chuck Schumer, the Senate’s top-ranking Democrat to justify the news. As the number of new cases continues to break higher in the US, the USD index DXY continues to decline to test sub-95.00 levels. On the other hand, the tensions between the US and China continue to escalate as the US ordered China to close its Houston consulate and China responded by ordering the US to close its consulate in Chengdu. It will be a busier week than the previous one in terms of macro data releases. On Monday, Durable Goods Orders(Jun) and Nondefense Capital Goods Orders ex Aircraft(Jun) data sets will be followed in the US. On Wednesday, FED’s interest rate decision and monetary policy statement will be followed while no change in the interest rates is expected. However, the main focus will be on the FOMC press conference. On Thursday, the weekly Initial Jobless Claims 4-week average(Jul 24) and Gross Domestic Product Annualized(Q2) PREL data sets will be followed while on Friday Non-Manufacturing PMI(Jul) and NBS Manufacturing PMI(Jul) will be followed in China.
Technically speaking, over the 26.000 level, the resistance can be followed at 27.000, 27.583 (June 2020 high) and 28.000 levels. On the other hand, below the 26.000 level, targets downside can be followed at 25.210 (29.568-18.158 %61.80), 24.690 (2020 April-May resistance) and 23.863 (29.568-18.158 %50.00).
Support Levels: 26.000 25.210 24.690
Resistance Levels: 27.000 27.583 28.000
Gold finally tested 1.900$ with an impressive rally as the yellow metal clearly on its path for a new all-time high. While the extreme liquidity condition pressures the USD pushing DXY below 95.00 level which is lowest in 22 month period. Also, the escalating tensions between the US and China creating a risk event. Earlier last week, the US ordered China to close its Houston consulate and China responded by ordering the US to close its consulate in Chengdu. On the other hand, thanks to the cash poured markets, Wall Street is not far away from its high levels despite the worsening situation in coronavirus pandemic in the US.
It is more likely that the rally seen in Gold will continue through 2.000$ as a new all-time high. Above 1.850$ level, Gold will most likely to test 1.900$, 1.920$ (all-time high) and 1.950$. On the downside, below the 1.825$ (2011 August close), 1.800$ and 1.750$(December 2012 peak) levels can be targeted.
Support Levels: 1.825$ 1.800$ 1.750$
Resistance Levels: 1.900$ 1.920$ 1.950$
WTI carried its consolidation level from 40.00$ to 41.00$ trying to keep its status quo. Crude Oil Stocks Change in the US was +4.9 million barrels in the week ending July 17th, the weekly report published by the US Energy Information Administration (EIA) revealed on Wednesday. This reading came in higher than the market expectation for a decline of 2.1 million barrels. The rally seen in WTI is capped since the start of June as the number of new cases in the US forcing some states to re-impose of lockdown measures which are slowing the economic activity and the demand for oil. On the other hand, the tensions between the US and China continues to incline as both parties are making salvos against each other. OPEC’s efforts to at least keep oil prices in a stable state seems to be working at the moment as the cartel decreased the production cuts.
As long as WTI holds over 41.00$ level, the resistance levels can be followed at 42.00$, 46.57$ (March decline start) and 50.00$ levels. Below the 41.00$ level, the supports can be followed at 40.56$ (65.62$-0.00$ %61.80) and 39.00$ levels.
Support Levels: 41.00$ 40.56$ 39.00$
Resistance Levels: 42.00$ 46.57$ 50.00$