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Daily Market Report
05 Aug 2020

EURUSD

The American dollar seesawed between gains and losses throughout the day, with major pairs confined to familiar levels. The EUR/USD pair peaked at 1.1805 during London trading hours but is ending the day with modest gains in the 1.1790 price zone. The US Congress seems unable to find common ground on the next aid package, a headline that affected the market’s mood. During the American afternoon, Senate Democratic leader Chuck Schumer says talks with the White House were finally moving in the right direction, boosting the market’s mood despite adding that they remain far apart on some issues, mentioning that the gap between the two parties is “about priorities and about scale.”

In the data front, the EU published the June Producer Price Index, which rose 0.7% in the month, and declined by 3.7% when compared to a year earlier, better than anticipated. The US, on the other hand, published the IBD/TIPP Economic Optimism Index, which improved to 36.8 in August from 44 in the previous month, and June Factory Orders, which roe 6.2%, beating the market’s estimate.

This Wednesday, Markit will publish the final versions of its July Services PMIs for most major economies, mostly expected to suffer upward revisions from preliminary estimates. The EU will also unveil June Retail Sales, seen up 5.5% in the month while the US will release the July ADP survey on private employment and the ISM Non-Manufacturing PMI, foreseen at 55 in July from 57.1 in June.

The EUR/USD pair is trading uneventfully for a second consecutive day, yet holding above the 23.6% retracement of its July rally at 1.1735, with slides below the level quickly attracting buyers. The long-term perspective keeps favouring the upside, although, in the shorter-term, the bullish potential remains limited. The 4-hour chart shows that a flat 20 SMA kept capping gains, while technical indicators recovered from daily lows, but remain within negative levels. Lacking strength upwards. The dollar has a limited bullish potential, which means that the market will likely continue seeing dips as buying opportunities.

Support levels: 1.1735 1.1690 1.1650

Resistance levels:  1.1825 1.1860 1.1900

USDJPY

The USD/JPY pair has spent the day trading within Monday’s range, ending it in the red around 105.75. The pair looked at yields for direction, ignoring the positive tone of equities during US trading hours, as the dollar’s demand remained absent. Political turmoil in the US added to the greenback weakness, as lawmakers are unable to reach an agreement on the next aid package, after benefits ended last week. The yield on the benchmark 10-year Treasury note fell to its recent multi-month low of 0.51%.

 At the beginning of the day, Japan published July Tokyo inflation, which came in better than expected, up by 0.6% YoY, while the core reading surged 0.4%, both better than anticipated. This Wednesday, the country will release the final July Jibun Bank Services PMI, previously estimated at 45. Later in the day, BOJ’s Governor Kuroda is due to speak about central banking in the COVID-19 era.

The4-hour chart for the USD/JPY pair shows that the pair remains below a bearish 100 SMA yet above a bullish 20 SMA, this last at around 105.55. Technical indicators in the mentioned time-frame have eased from daily highs, the Momentum heading lower but above its 100 level, as the RSI stabilizes around 51. Bulls will likely remain side-lined as long as the pair holds below the 106.45 price zone, which has become a strong static resistance level.

Support levels: 105.55 105.20 104.80

Resistance levels: 106.10 106.45 106.90 

GBPUSD

The GBP/USD pair reached a lower low for the week at 1.2980 but recovered from the mentioned low to settle once again around 1.3060. The decline and the later recovery were once again about the dollar, as speculative interest continues to ignore UK news. Given the lack of progress in trade talks with the EU, the UK has shifted its attention to other economies. The kingdom is now in talks with the US, although little progress has been made on that front, particularly ahead of US elections by the end of the year.

Earlier on the day, UK PM Johnson announced another round of stimulus, focused in home construction and infrastructure, aimed to boost the economy. The report suggested investment of around £900 million, £360m of which would be allocated towards delivering 26,000 new homes on brownfield land. Nevertheless, the latest lockdown in the London area amid resurgent coronavirus cases cooled down demand for Sterling.

The UK didn’t release relevant macroeconomic data this Tuesday. Wednesday’s calendar includes the final version of the final July Markit Services PMI, foreseen unchanged at 56.6.

The GBP/USD pair has made little progress since the latest update, pretty much unchanged for a third consecutive day. In the short-term picture, the risk remains skewed to the downside, as, in the 4-hour chart, the pair is trading below its 20 SMA, which loses bullish strength. The Momentum indicator, in the meantime, resumed its decline within negative levels, while the RSI has stabilized within neutral readings. Broad dollar’s weakness prevents the pair from falling, and it would take a strong shift in that situation to see the Pound giving up to local news.

Support levels: 1.3020 1.2980 1.2935

Resistance levels: 1.3090 1.3125 1.3160

AUDUSD

The AUD/USD pair is ending Tuesday with modest gains near a daily high of 0.7158, underpinned by rising equities and the sour tone of the greenback. Australian data released at the beginning of the day was mixed, as Retail Sales rose 2.7% MoM in June, beating expectations. However, and in the second quarter of the year, retail volumes were down 3.4% when compared to the previous quarter, the largest seasonally adjusted decline in two decades. The country’s Trade Balance posted a surplus of 8202 million in June, below the 8800M expected. Also, the RBA had a monetary policy meeting, leaving the cash rate at 0.25% as expected. Policymakers said the worst of the global economic contraction has passed, although adding that the outlook remains “highly uncertain”.

 The country will publish this Wednesday the AIG Performance of Construction Index for July, previously at 35.5, and the Commonwealth Bank Services PMI for the same month, foreseen unchanged from the previous estimate at 58.5. Later in the day, the country will unveil June Home Loans and Investment Lending for Homes.  

From a technical point of view, the bullish potential for the AUD/USD pair remains limited in the short-term. The 4-hour chart shows that the pair is hovering around a flat 20 SMA, while technical indicators recovered from intraday lows, but turned flat, the Momentum within negative levels and the RSI in neutral territory. A bullish extension will have more chances if the pair extends the ongoing recovery beyond 0.7180, the immediate resistance.

Support levels: 0.7110 0.7070 0.7030  

Resistance levels: 0.7180 0.7225 0.7260

GOLD

Gold finally broke 2.000$ level printing a new all-time high. After breaking 1.800$ level, it took only two weeks for Gold to advance its move with an impressive rally. While the US treasury bond rates are negative in practical if the inflation rate is subtracted from them, the FED’s extreme liquidity move to support the economy is creating the perfect environment for Gold apart from the risk events like the second wave in the pandemic and the tensions between the US and China. As the Fed’s Chair Jerome Powell has even stated the FED isn’t even “thinking about thinking about raising rates...”, markets the bull run seen in Gold is far from over until FED decides to shrink its balance sheet.

As Gold cleared its 2.000$ level, next targets upside can be followed at 2.040$, 2.100$ and 2.200$. On the downside, 1.980$, 1.950$ and 1.920$ levels can be followed as supports.

Support Levels: 1.980$ 1.950$ 1.920$

Resistance Levels: 2.040$ 2.100$ 2.200$ 


SILVER

As Gold surpassed 2.000$ for the first time in history, Silver also had an impressive rally testing a tick below 26.00$ on Tuesday. Silver printed a whooping %34 incline in July which is the biggest monthly gain since 1979. On the other hand, the USD index DXY failed to keep its incline and retraced to 93.00 zones again. In case if the indıstrial production normalises globally, silver might find another bıllish catalyst and push the Gold to Silver ratio back to its normal levels around 60.00.

Over the 25.00$ level, Silver might test 26.19$ (July 2020 high), 27.00$ and  29.28$ (March 2013 resistance) levels. Below the 25.00$ level, the supports might be followed at 24.00$ and 23.38$ levels.

Support Levels: 25.00$ 24.00$ 23.38$

Resistance Levels: 26.19$ 27.00$ 29.28$


CRUDE WTI

WTI made an attempt to test 42.00$ as hopes of a stimulus package emerge. The upbeat macroeconomic data releases from the US helped the WTI push higher during the American session. The US Census Bureau reported that Factory Orders increased by 6.2% on a monthly basis in June and beat the market expectation of 5%. Additionally, the IBD/TIPP Economic Optimism Index improved from 44 to 46.8 and the ISM-NY Business Conditions Index jumped to 53.5 and surpassed analysts' estimate of 15.8 by a wide margin.  On the other hand, OPEC+ tries to balance the prices by limiting the production cuts hoping that the demand will increase with the normalisation of economies. Despite the efforts, WTI still failed to start a decisive move through 50.00$ waiting for 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

Wall Street managed to end the day with gains supported by positive data releases in the US. The IBD/TIPP Economic Optimism Index, improved to 36.8 in August from 44 in the previous month, while June Factory Orders rose to 6.2%, beating the market’s estimate. On the other hand, as the deadline reached last Friday, Congress failed to reach an agreement for the additional stimulus package. The rising tensions between the US and China reached another level with the possible sale of TikTok as President Trump’s demand that TikTok is sold to US buyers. At this point, both Microsoft and Apple are interested in the purchase while China’s media outlets called the US a “rogue country” and called the forced sale “theft of a Chinese Technology company.”  

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


MACROECONOMIC EVENTS

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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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