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Daily Market Report
04 Aug 2020

EURUSD

The American dollar remained on the winning side throughout the first half of Monday, paring its advance after Wall Street’s opening and the release of encouraging US data. The ISM Manufacturing PMI rose to 54.2 in July, beating the market’s estimate. Stocks were on the rise since early London, with European indexes closing with solid gains. As for the greenback’s early advance, there was no particular reason behind it, but positions adjustments at the beginning of the month. It didn’t take long until the better mood took its toll on the dollar.

Markit published the final versions of the July Manufacturing PMIs for both economies. EU figures were mostly positive, as the German’s index was confirmed at 51 from an initial estimate of 50, while for the whole Union, manufacturing output reached 51.8, better than the flash 51.1. The US manufacturing PMI, however, was downwardly revised to 50.9 from 51.3, also missing the market’s expectations. This Tuesday, the EU will publish the June Producer Price Index, while the US will unveil June Factory Orders, seen up by 5% after advancing 8% in the previous month.

The EUR/USD pair bottomed for the day at 1.1695, bouncing later to the 1.1760 area, where it stands as the day comes to an end. The pair briefly pierced the 23.6% retracement of its July rally at 1.1736 but is ending the day above it. The 38.2% retracement of the same rally comes at around 1.1630, a line in the sand for the latest bullish trend. From a technical point of view, and in the short-term, the bearish potential seems limited, as technical indicators recovered from daily lows, now struggling with their midlines. The 20 SMA has capped advances ever since the day started, providing a dynamic resistance at around 1.1790, the level that the pair needs to surpass to recover its bullish potential.

Support levels: 1.1735 1.1690 1.1650

Resistance levels: 1.1790 1.1825 1.1860

USDJPY

The robust performance of equities and a firmer dollar have helped USD/JPY to recover some ground at the beginning of the week. The pair traded as high as 106.46, now comfortably trading around 106.00.  Speculative interest moved into high-yielding assets at the beginning of August, with no particular reason behind the move. In fact, the usual concerns related to the future of major economies remain firmly in the background.  Richmond Fed President Thomas Barkin said that coronavirus resurgence is dampening the pace of the US economic momentum and the path of the economy depends critically on the path of the virus.

In the data front, Japan published the Q2 GDP, which came in at -0.6% QoQ, matching the previous estimate. Also, the July Jibun Bank Manufacturing PMI was out at the beginning of the day, bouncing from 42.6 to 45.2, beating expectations. Early Tuesday, the country will publish July Tokyo inflation, foreseen at 0.4% YoY. The core reading, which excludes fresh-food prices, is foreseen at 0.2% YoY, unchanged from the previous monthly figure.

 The USD/JPY pair is up for a second consecutive day, although its bullish potential seems limited. The daily chart shows that the pair met sellers around a bearish 20 DMA, while in the 4-hour chart, the pair has the 100 DMA around its daily highs. In this last time-frame, technical indicators have eased just modestly from intraday highs, holding well into positive levels, somehow anticipating another leg higher on a clear advance beyond the 105.45 price zone.

Support levels: 105.90 105.55 105.20  

Resistance levels: 106.45 106.90 107.20

GBPUSD

The GBP/USD pair is trading in the 1.3070 price zone ahead of the Asian opening, barely down for a second consecutive day, and up from an intraday low of 1.3004. The UK Markit Manufacturing PMI was downwardly revised to 53.3 in July, missing the market’s expectations and below the preliminary estimate of 53.6. The soft figure exacerbated Pound’s decline particularly as the greenback was trading with a firmer tone. The pair’s bounce from the mentioned daily low had more to do with speculative interest moving away from the dollar and into high-yielding assets.

Meanwhile, UK PM Johnson´s spokesman hit the wires this Monday, indicating that there has been good progress in trade talks with Japan. However, tensions with the Union remain the same. The fishing industry has urged the government to provide guidance as the Brexit transition period comes to an end, without definitions for the sector. The UK won’t publish relevant macroeconomic data this Tuesday.

The GBP/USD pair is showing signs of easing bullish potential, but a bearish extension still seems unclear. The 4-hour chart shows that the price is hovering around a firmly bullish 20 SMA, while technical indicators have eased within positive levels, with the Momentum still heading lower but the RSI stable around 57. The upcoming direction will continue to depend on the greenback, with bulls having more chances on a recovery above 1.3110.

Support levels: 1.3030 1.2995 1.2950

Resistance levels: 1.3110 1.3160 1.3220

AUDUSD

The Australian dollar weakened against its US rival, although AUD/USD settled in the 0.7120 price zone after trading as low as 0.7075. Data coming from Australia and China was not enough to support the Aussie, undermined by the expansion of coronavirus in Victoria and the curfew announced to the area. For the record, the AIG Performance of Manufacturing Index improved in July to 53.5 from 51.5, while the Commonwealth Bank Manufacturing PMI surged to 54 from 53.4. Also, the TD Securities Inflation rose by 0.9% MoM and 1.3% YoY in July.  China published the July Caixin Manufacturing PMI, which resulted in 52.8, beating the expected 51.3 and the previous 51.2.

Stocks’ advance and gold prices holding near record highs have limited the pair’s decline, but considering the broad greenback’s weakness, it seems that the Aussie is not yet done with falling. This Tuesday, Australia will publish June Retail Sales and the Trade Balance for the same month. Also, the Reserve Bank of Australia is having a monetary policy meeting. The central bank is expected to maintain its current policy unchanged, particularly after the latest coronavirus developments in the country. Nevertheless, it’s too early for policymakers to show signs of worrying. Instead, it seems they would align with their overseas counterparts and maintain a wait-and-see stance.

 The AUD/USD pair is at risk of extending its decline, according to the 4-hour chart, as the pair has extended its decline below a now bearish 20 SMA. A mildly bullish 100 SMA provides support at around 0.7070. Technical indicators in the mentioned chart have bounced from near oversold readings but already lost their strength upwards well below their midlines, indicating limited buying interest.

Support levels: 0.7070 0.7030 0.6990

Resistance levels: 0.7150 0.7180 0.7225

  

GOLD

Gold once again inched its all-time level on Monday hitting 1.987$ level. Gold finished its 8th consecutive week with gains and since Nixon lifted the Gold standard in 1971, Gold had four times with more than eight consecutive weeks with gains followed with technical corrections downside. On the other hand, as the yellow metal gets closer to 2.000$ level, the momentum fades away showing signs of exhaustion. The USD index DXY is trying to pick up some pace moving closer to the mid-93.00 level. Also, Wall Street had gained ground after the mega-tech earnings boosted the indexes last Friday. Fed’s money flows into the markets combined with the negative real rates continues to dominate the markets. Therefore, upswings in Gold will likely continue in the rest of the year until the Fed decides to tighten their balance sheet.  

After the impressive rally seen in Gold, the yellow metal had a technical correction. As the 2.000$ level is on sight now, as long as Gold stays over 1.950$, the targets upside can be followed at 1.980$ (new all-time high), 2.000$ and 2.040$ levels. Below the 1.950$ the supports can be followed at 1.920$, 1.900$ and 1.825$ (2011 August close) levels.

Support Levels: 1.920$ 1.900$ 1.825$

Resistance Levels: 1.980$ 2.000$ 2.040$


SILVER

While Gold is trying to protect its ground testing a new all-time high almost every day, Silver is trying to hold over 24.00$. The Gold to Silver ratio is hovering around 81.00 level while the average in the last 10 years is at 69.00. Also, The Gold to S&P 500 ratio is still down by %64 from the highs made in August 2011 while Silver/S&P 500 ratio is down by %81 cent from the highs indicating how the indexes are overpriced. Silver will most likely join Gold’s impressive rally as the industrial demand normalises. Therefore, any pullback seen in Silver might be an opportunity to buy.

Over the 24.00$ level, Silver can target 25.11$ (August 2013 high), 26.23$ (2011-2012 multi-year support) and 28.00$ levels. 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: 25.11$ 26.23$ 28.00$  


CRUDE WTI

WTI tested sub-40.00$ on Monday as the momentum of the new coronavirus cases increases worldwide. Possible countermeasures that will reimpose the lockdown measures will most likely limit the demand for oil pressuring the prices. On the other hand, as the demand increases, OPEC+ is set to reduce its output to 7.7 million BPD from August to December. At this point, there are not enough fundamentals that will support oil prices as WTI stock between 40.00$ and 41.00$.

WTI found a balance between 40.00$ and 41.00$ almost in the whole of July. However, as the black gold failed to extend its incline, the prices retraced with a lack of an extra catalyst. If WTI manages to hold over 40.56$ (65.62$-0.00$ %61.80) level, the targets upside can be followed at 41.00$, 46.57$ (March decline start) and 50.00$ levels. Below the 40.00$, the supports can be followed at 39.00$ and 32.81$ (65.62$-0.00$ %50) levels.

Support Levels: 40.00$ 39.00$ 32.81$ 

Resistance Levels: 41.00$ 46.57$ 50.00$


DOW JONES

Dow Jones started the week with a bullish gap but failed to test the 27.000 level. While Wall Street was saved at the last minute with the help of mega-tech revenues, the Democrats and Republicans tried to seal a deal on the coronavirus relief bill as the congress missed the deadline last Friday. On the other hand, it is reported that the US might have to re-impose lockdown measures as the number of new cases inclines at a fast pace. The economic activity in the US' manufacturing sector expanded at a stronger pace in July than it did in June with the ISM's Manufacturing Purchasing Managers' Index (PMI) improving from 52.6 to 54.2. This reading came in better than the market expectation of 53.6. As a result, the USD managed to lift itself to the mid-93.00 level.       

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

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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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