Daily Market Report
08 Jan 2021

EURUSD

The American dollar extended its Wednesday’s gains against most major rivals, with EUR/USD falling to 1.2244, but pared gains during the US session. Wall Street kept running and reaching record highs, while US Treasury yields reached fresh multi-month highs. The market moved past US political turmoil and remained focused on hopes that immunization will revive economies in the second half of the year, also encouraged by monetary stimulus.

Tepid EU data added pressure on the shared currency. EU Retail Sales fell 6.1% MoM in November and contracted 2.9% from a year earlier, missing the market’s expectations. The preliminary estimate of the EU December inflation came in at -0.3% YoY, below expected. A positive headline came from the Economic Sentiment Indicator, which improved from 87.7 to 90.4. The US published its November Trade Balance, which posted a deficit of $68.1 billion, worse than expected. Initial Jobless Claims for the week ended January 1 came in at 787K better than anticipated. Finally, the December ISM Services PMI, previously at 55.9, improved to 57.2.

This Friday, attention will be on the US Nonfarm Payroll report. The country is expected to have added just 71K new positions in the month, while the unemployment rate is foreseen at 6.8%. Average hourly earnings are expected to have grown by a modest 0.2% MoM, while the annual figure is foreseen unchanged at 4.4%.

The EUR/USD pair stabilized around 1.2270, where it stands ahead of the Asian opening. The 4-hour chart shows that the pair settled below a flat 20 SMA, but it keeps developing above a bullish 100 SMA. Technical indicators have turned flat after pulling down from daily highs, the Momentum around its midline and the RSI at 46. The corrective decline will likely continue on a break below the mentioned 100 SMA, currently at 1.2230

Support levels: 1.2230 1.2190 1.2140

Resistance levels: 1.2285 1.2345 1.2390  

USDJPY

The USD/JPY pair trades near the 104.00 level by the end of Thursday, boosted by the renewed dollar’s demand coupled with rising equities and yields. The 10-year US Treasury yield extended its advance to 1.09% this Thursday, as investors welcomed Joe Biden’s confirmation as the next US President and Democrats’ victory in Georgia. As for Wall Street, the three major indexes posted substantial gains, with the DJIA above 31,000 points and the S&P flirting with 3,800.

Japan published November Labor Cash Earnings, which were down 2.2% YoY. The country also released foreign investment data that’s usually ignored by markets. This Friday, the country will release November Overall Household Spending, and the preliminary estimate of the Leading Economic Index for the same month, this last foreseen at 94.9 from 94.3 in the previous month.

The USD/JPY pair is trading in the 103.80 region, having reached overbought conditions in the near-term. The 4-hour chart shows that the pair is above all of its moving averages, with the 20 SMA advancing below the shorter ones. Technical indicators have reached overbought readings, losing their bullish strength but still far from signaling a reversal. Further gains are likely if the pair manages to extend its gains beyond 104.00.

Support levels: 103.45 103.00 102.60  

Resistance levels: 103.95 104.30 104.75

GBPUSD

The GBP/USD pair ended the day in the red around 1.3570, undermined by renewed dollar’s demand and the absence of UK news that could provide the pound with directional impulse. The currency remained under pressure after the latest total lockdown imposed by the government spurred concerns about potential economic fallout. This Thursday, the UK reported 52,618 new coronavirus cases, the first time the figure dropped this week, although the death toll reached a record of 1,162.

Markit published the December UK Construction PMI, which missed the market’s expectation and contracted to 54.6. On Friday, the UK will release Halifax House Prices.

The GBP/USD pair is at risk of extending its decline. The 4-hour chart shows that the pair met sellers around a bearish 20 SMA while holding above a bullish 100 SMA, this last around 1.3515. Technical indicators remain within negative levels but lack directional strength. Still, the near-term picture favors another leg south, although with limited scope amid intrinsic dollar’s weakness.

 Support levels: 1.3515 1.3470 1.3420

Resistance levels: 1.3620 1.3660 1.3710  

AUDUSD

The AUD/USD pair pulled back from around 0.7800 to end Thursday in the 0.7750 price zone, pressured by the persistent greenback’s demand and mixed Australian data. The country published its November Trade Balance, which posted a surplus of 5022 million, worse than the 6200 million anticipated. Exports shrank from 4.4% in the previous month to 3%, while imports increased from 2% to 10%. Building Permits in the same month were up 2.6% MoM, slightly better than anticipated.

Gold remained depressed, while Wall Street advanced, limiting the downside for AUD/USD. The Australian macroeconomic calendar will remain empty this Friday.

The latest decline seems corrective as the AUD/USD pair retains its bullish stance in the near-term. In the 4-hour chart, the pair has managed to hold above a bullish 20 SMA, which keeps advancing above the longer ones. Technical indicators are slowly resuming their advances within positive levels after correcting overbought conditions. Overall, the pair has room to extend its gains beyond its recent highs in the 0.7800 area.

 Support levels: 0.7725 0.7670 0.7630

Resistance levels: 0.7770 0.7815 0.7850  

GOLD

Gold faced a further decline in the aftermath of the historic events that happened in the US on Wednesday. In theory, the Blue Wave should support the precious metals in general due to the expectations of a bigger stimulus package. However, the USD index DXY is trying its best to regain the 90.00 level while the US 10-year yields continue to move up hitting 1.076% pressuring the non-yielding precious metals. Also, the capital flows seem to prefer Bitcoin carrying the cryptocurrency to $40,000 exceeding its market cap of one trillion USD. Despite the fundamentals looking bright for Gold in 2021, attractive yields in the US at the moment are stealing Gold’s charm for the long run.   

Gold managed to test $1,950 before the US session but then reversed its course testing $1,900 level. 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

Silver faced further selling pressure on Thursday alongside Gold as the USD index DXY managed to gain some ground trying to test 90.00 levels. Despite the historical events that happened in Washington on Wednesday, the US 10-year yields and the US indexes continued their move up. Long-term dynamics especially with the Blue Wave in the US will most likely support the precious metals. Therefore, the current pull-backs seen might be an opportunity to increase portfolios for precious metals. On the other hand, Biden administration’s clear support on the clean energies might give Silver extra boost due to its industrial demand especially for the solar panels.  

If Silver manages to stay over 27.00$, next targets upside might be followed at  29.28$ (March 2013 resistance) and 30.00$ levels. Below the 27.00$ level, the supports might be followed at 25.00$, 24.00$ and 23.38$ levels.

Support Levels: 25.00$ 24.00$ 23.38$

Resistance Levels: 27.00$ 29.28$ 30.00$


CRUDE WTI

Despite the move up seen in the USD index DXY, WTI continued to incline testing its highest levels since late February 2020 staying shy below $51.00. Oil prices are cheering the voluntary production cuts from Saudi Arabia and the vaccine roll-out on a global scale despite the current situation is far from controllable for the pandemic. Also, expectations of a bigger stimulus check from the Democrats as they acquire full control on both the Senate and Congress is supporting the black gold in terms of a rise in demand. Apart from the chaotic events that happened on Wednesday in the US, macro data sets continue to print better than expected readings giving WTI extra boost.

If WTI stays below 50.00$ level, the support levels can be followed at 46.96$ and 44.66$ levels. Over the 50.00$ level, the upside targets can be followed at 51.03$ (October 2019 low) and 53.00$ levels.

Support Levels: 46.96$ 44.66$ 44.47$

Resistance Levels: 50.00$ 51.03$ 53.00$

DOW JONES

It was a historic time for the US on Wednesday as Trump supporters raided the Congress which ended up with four casualties in a four-hour invasion. After the chaotic events, President Trump pledged an orderly transition while both his Twitter and Facebook account were deactivated. Also, Shopify took down Trump’s e-commerce websites offline. Despite the historic events, the US Congress formally certified electoral votes and declared Joe Biden the winner. 

Despite the risk events, Dow Jones refreshed its all-time high over the 31,000 level while the US 10-year yields continue to soar. The United States' goods and services deficit rose by $5 billion to $68.1 billion in November, the data published jointly by the US Census Bureau and the US Bureau of Economic Analysis showed on Wednesday. This reading came in worse than the market expectation for a deficit of $65.2 billion. "November exports were $184.2 billion, $2.2 billion more than October exports," the publication further revealed. "November imports were $252.3 billion, $7.2 billion more than October imports." On the other hand, There were 787,000 initial claims for unemployment benefits in the US during the week ending January 2, the data published by the US Department of Labor (DOL) revealed on Thursday. This reading followed the previous print of 790,000 (revised from 787,000) and came in better than analysts' estimate of 833,000. All eyes will be on the US NFP data set on Friday with the unemployment rate. 

From the technical point of view, if the index stays over 31,000, 32,000 and 32,500 levels can be followed as new targets high while below the 31,000 level, 30,000 and 29,500 levels can be followed as supports.

Support Levels: 31,000 30,000 29,500

Resistance Levels: 32,000 32,500 33,000  

MACROECONOMIC EVENTS