Daily Market Report
02 Dec 2020
The EUR/USD pair soared to fresh 2020 highs this Tuesday, as optimism and dismal US data hit the greenback. The pair reached 1.2054, a level that was last seen in May 2018, following news that a group of US bipartisan lawmakers offered a new $908 billion COVID-19 relief package. Talks between House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell stalled ahead of the presidential election. The November US ISM Manufacturing PMI contracted to 57.5 from 59.3, worse than anticipated and adding pressure on the greenback. The employment sub-component plunged to 48.4 from 53.2 in October.
Market players ignored soft European data, as the annual EU’s CPI fell to -0.3% YoY in October, while Markit downwardly revised the German’s Manufacturing PMI, but upgraded the EU index. This Wednesday, Germany will publish October Retail Sales, foreseen increasing by 1.2% MoM, while the US will release the ADP Employment report, with the private sector expected to have added 420K new job positions in November.
The EUR/USD pair is trading near the mentioned daily high as the US session comes to an end, maintaining its bullish bias in the near-term. From here, it has room to extend its gains to 1.2083, May 2018 monthly high. In the 4-hour chart, technical indicators consolidate near their daily highs and at overbought levels, far from supporting an upcoming decline. The 20 SMA accelerated north far below the current level yet above the larger ones, all of them reflecting the strong buying interest.
Support levels: 1.1920 1.1880 1.1840
Resistance levels: 1.2085 1.2130 1.2175
The USD/JPY pair has shown little progress this Tuesday, ending the day in the 104.30 price zone. However, the pair posted a higher high and a higher low for the day, somehow lifting odds of recovery. The persistent dollar’s weakness put a cap to the pair’s advance, despite a generalized optimism. Progress in coronavirus vaccines and increased efforts to begin emergency use as soon as this December boosted investors’ mood.
Japanese data published at the beginning of the day was generally positive. The November Jibun Bank Manufacturing PMI was upwardly revised from 48.3 to 49. The October Unemployment Rate came in at 3.1% as expected, while the Jobs/Applicants Ratio improved to 1.04. The country will publish this Wednesday, November Monetary Base and the Consumer Confidence Index for the same month, this last seen at -4.4% from -6.3% in the previous month.
The USD/JPY pair maintains a neutral stance in the near-term, and according to the 4-hour chart. In the mentioned time-frame, the pair is trapped within moving averages, with a mildly bearish 200 SMA providing resistance around 104.55. Technical indicators remain directionless just above their midlines, reflecting the absence of speculative interest.
Support levels: 103.85 103.50 103.15
Resistance levels: 104.55 104.90 105.20
The GBP/USD pair hit 1.3442, its highest since early September after news indicating that trade talks between the UK and the EU may be at the final stages of a deal. According to the news, the EU's chief Brexit negotiator, Michel Barnier, has stopped internal debriefs to the wider EU after delivering the last one last Friday. An agreement could be announced by the end of the week. Sources from both UK and EU Brexit teams poured some cold water on the market’s enthusiasm, as one told a Sky reporter that "negotiations cannot become any more intense."
Data wise, Markit released the final version of the November UK Manufacturing PMI, which came in better than previously estimated at 55.6. The UK won’t publish relevant macroeconomic data this Wednesday.
The GBP/USD pair holds on to most of its intraday gains, trading in the 1.3420 price zone. The pair is bullish in the near-term, as the 4-hour chart shows that it’s comfortably developing above all of its moving averages. The longer ones accelerated north below the 20 SMA, which slowly gains bullish traction. Technical indicators have neared overbought reading, losing upward momentum as the day comes to an end. September high at 1.3481 is the level to break to confirm another leg north this Wednesday.
Support levels: 1.3390 1.3340 1.3300
Resistance levels: 1.3485 1.3530 1.3580
The AUD/USD pair keeps trading in tight intraday ranges, posting a modest advance this Tuesday. The pair trades in the 0.7360 price zone, unable to retake the 0.7400 level amid Wall Street retracing a good bunch of its early gains. Earlier in the day, the RBA made a monetary policy decision, and as widely anticipated, left its cash target rate unchanged at 0.1%. The Board also left the government bond purchasing program unchanged and repeated that it expects the recovery to be uneven, despite the economic comeback has been better than expected.
Australia will publish its Q3 Gross Domestic Product this Wednesday. The economy is expected to have grown 2.6% in the three months to September, after falling by 7% in the previous quarter. The annualized reading is foreseen at -4.4% from -6.3% in the previous month. Also, RBA’s Governor Philip Lowe is due to testify before the House of Representatives Standing Committee on Economics.
AUD/USD short-term technical outlook
The AUD/USD pair is neutral in the short-term, as the 4-hour chart shows a directionless 20 SMA has contained the upside. Technical indicators lack directional strength and remain around their midlines. In the same time-frame, however, the pair is trading well above its 100 and 200 SMA, a sign that long-term sellers remain side-lined. The pair still needs to surpass the year high at 0.7413 to gain bullish potential.
Support levels: 0.7330 0.7290 0.7250
Resistance levels: 0.7370 0.7415 0.7450
Gold rallied more than 2.10% on Tuesday after hitting its lowest level in the last five months. Precious metals were hit by the coronavirus vaccine optimism lately. However, the current reality is pressuring the markets forcing major central banks to intervene in the markets with stimulus packages. Powell stated on Monday that the U.S. is entering a "challenging" few months, while a potential vaccine faces challenges of production and mass distribution before its economic impact becomes clear. The expectations of a more stimulus pressured the USD index DXY on Tuesday sending the index to 91.00 levels. At this point, pricing the vaccine optimism might seem like a long shot as markets need to overcome serious pandemic complications before the normalisation.
From the technical point of view, below the $1,860 level, the supports can be followed at $1,800, $1,763 ($1,451-$2,075 61.80%) and $1,700 levels. Over the $1,860 level, the resistances can be followed at $1,900 with $1,956 ($1,451-$2,075 38.20%) and $2,000 levels.
Support Levels: $1,800 $1,763 $1,700
Resistance Levels: $1,900 $1,956 $2,000
Silver outperformed Gold on Tuesday as both precious metals rallied as the USD index DXY declined. The Gold to Silver ratio slipped to 75.00 levels indicating the better performance of the white metal. Silver tested $24.00 but failed to sustain its move over the physiological level. Speaking about the risk appetite, the US indexes continued their bullish run while the USD was the biggest loser driven by the stimulus expectations from the Fed.
Below the $22.90 level ($11.63-$29.86 38.20%), the supports can be followed at $20.75 ($11.63-$29.86 50.00%) and $18.42 ($11.63-$29.86 61.80%). Over the $22.90 level, the targets up can be followed at $25.21 ($11.63-$29.86 23.60%), $26.00 (August-September support), $27.00 and $28.00 levels.
Support Levels: $22.90 $20.75 $18.42
Resistance Levels: $25.21 $26.00 $27.00
OPEC+ disappointed the markets as they failed to reach an agreement on the production cuts. The formal OPEC+ meeting was reportedly delayed until Thursday to allow for more time for negotiations, with the UAE at present signalling that it is not on board with the otherwise widely supported proposal for a three-month extension of current output cuts. Meanwhile, Saudi Arabia is reportedly considering stepping down as the co-chair of the OPEC+ JMMC, which could signal that the country is unhappy with how things are going. That, some suggest, raises the risk of another price war, although this is just speculation. The next round of the meeting is scheduled on the 3rd of December. While the vaccine euphoria still remains, there is still a long way to go before the normalisation of the markets. Therefore, there is still a chance for pullbacks before the full resolution of the pandemic.
If WTI manages to hold over $42.00, next targets upside can be followed at $44.00 (February 2020 low), $48.64 (March 2020 high) and $50.00. Below the $42.00 level, supports can be followed at $41.00 and $40.00 consolidation zone.
Support Levels: $42.00 $41.00 $40.00
Resistance Levels: $44.00 $48.64 $50.00
As the factory growth in China hit a ten-year high, the application to deliver Covid-19 vaccine this year to Europe by Pfizer and BioNTech lifted the mood on Tuesday. The US 10-year yield jumped to 0.94% while the USD index DXY retraced sharply to 91.00 levels. FOMC Chairman Jerome Powell reiterated on Tuesday that the Federal Reserves remains committed to using all of its tools to support the economy through the coronavirus crisis. "We will continue to provide strong support," Powell told the US Senate Banking Committee and noted that it is likely they will need more fiscal support. "Inequality is an important problem in our economy, it holds our economy back," Powell added. The chairman also added that there is still a long road for recovery. Dow Jones once again tested 30,000 but failed to sustain its move over the physiological level. On the data side, The ISM's Manufacturing PMI in November declined to 57.5 in November from 59.3 and fell short of analysts' estimate of 58. Further details of the publication revealed that the New Orders Index declined to 65.1 from 67.9 in October and the Employment Index slumped to 48.4 from 53.2.
From the technical point of view, if the index stays over 29,000, 29,500 and 30,000 levels can be followed as new targets high while below the 28,400 level, 28,000 and 27,770 can be followed as supports.
Support Levels: 28,400 28,000 27,770
Resistance Levels: 29,500 30,000 30,500