Daily Market Report
15 Jan 2021
The EUR/USD pair stretched lower on Thursday and hit a fresh 1-month low at 1.2110 at the beginning of the American session, although it managed to cut losses afterwards and climbed back to the 1.2150 area. The dollar strengthened broadly amid higher US yields on prospects that President-elect Joe Biden is set to announce a covid relief plan, which is reported to amount around $2 trillion, at his speech at the beginning of the Asian session. Meanwhile, Federal Reserve Chairman, Jerome Powell, sounded somewhat optimistic about the economic recovery. Still, Powell noted time to raise interest rates is no time soon and that the central bank would not alter its monetary policy for the foreseeable future, which however, came as little surprise and had limited impact on the greenback.
On the data front, US Initial Jobless claims rose to 965K last week, the highest level since August and above the 795K expected.
The ECB Meeting Accounts were published on the other side of the pond, which showed the Governing Council is concerned about the euro’s exchange rate and its potential negative impact on the inflation outlook.
On Friday, data includes Eurozone trade balance figures. In the US it will be a busy day, with Producer Price Index, Retail Sales, Industrial Production and Consumer Confidence numbers due
In the 4-hour chart, the technical picture looks slightly bearish for the EUR/USD after today’s fall. Even though the RSI and Momentum indicators are hovering in positive territory, the price trades below its main moving averages, while the 50 and 100 SMAs have completed a bearish cross at the same time that the 20 and 200 SMAs plotted the same pattern. The EUR/USD slid briefly below the 1.2130 significant support, but it managed to rebound back above. A decisive breakdown of this level could push the pair to the 1.2100 psychological level. On the other hand, the pair needs to regain the 1.2170-80 zone to ease the immediate pressure.
Support levels: 1.2130 1.2100 1.2080
Resistance levels: 1.2170 1.2220 1.2285
The USD/JPY is about to post another close around 103.80. On the upside, it failed again to hold above 104.00 while on the flip side, found support above 103.50. Fed’s Powell mentioned it is not appropriate even to begin talking about slowing down the asset purchase program. After Powell’s remarks, US yields turned to the upside. The 10-year climbed to 1.26% and kept dollar’s losses limited, weakening the yen at the same time. Still, USD/JPY was about to end the day lower, not far from 104.00, moving without a clear direction.
The focus now turns to US President-elect Biden. At the beginning of the Asian session, he will provide details of a wide stimulus package. On Friday, data on retail sales, producer inflation and consumer sentiment are due in the US.
The USD/JPY continues to be unable to move off the 103.80 area. On the downside, the 103.50 has become even stronger support now coinciding with the 20-day SMA. A break lower would point to weakness ahead, suggesting an end to the rally that started from the 102.50 bottom. Ahead of the Asian session, the pair lacks direction, and technical indicators offer mixed signs. Upside moves will likely be unstable while below 104.60/70, an area of converge of an eight-month downtrend line and the 100-day SMA; if the dollar breaks higher it would open the door to more gains over the medium term.
Support levels: 103.50 103.15 102.70
Resistance levels: 104.15 104.70 104.90
The GBP/USD jumped to 1.3709, reaching the highest intraday level since May 2018 and pulled back later. The move higher was boosted by a decline of the US dollar following Federal Reserve Powell's comments. He mentioned it is not time to talk about an exit strategy and warranted that the central bank will be very transparent when it starts to reduce QE. Market participants await the US President-elect Biden stimulus package presentation. Wall Street was mixed, holding near record highs.
Economic data from the US came in weaker-than-expected with initial jobless claims rising unexpectedly to 965K, the highest since August. Market sentiment was unaffected. On Friday, economic data to be released includes trade and industrial production in the UK and retail sales and producer inflation in the US.
The pound recovered momentum on Thursday and also rose versus the euro. The UK's vaccination outlook is a positive development for the pound that could gain momentum if EUR/GBP breaks under 0.8860.
The GBP/USD pair trades between 1.3650 and 1.3700. It is about to post the highest daily close in years, but it does not show yet strong signs of a break above 1.3700. On Thursday, the rebound gave the pound the needed momentum for a new test of the 1.3700/20 barrier. A consolidation above could trigger volatility and more gains. The positive tone will last while above 1.3610/20 (Dec 13 and 14 low). A slide below would target 1.3585 first, in a move that could extend to the 1.3545 support area.
Support levels: 1.3620 1.3545 1.3470
Resistance levels: 1.3710 1.3755 1.3755 1.3820
The AUD/USD rose to a fresh 1-week high of 0.7805 during Thursday’s New York session, rebounding from a daily low of 0.7728. The greenback failed to retain its early strength and retreated across the board during the American session weighed by disappointing US jobless claims data and following Fed’s Powell speech. At the same time, the Australian dollar benefitted from the somewhat optimistic mood in markets. On Friday, Australian data includes Home Loans numbers, while in the US a series of economic reports will be published. Still, the main event will be the US President-elect Biden speech at 00:15 GMT.
From a technical standpoint, AUD/USD perspective remains bullish according to the 4-hour chart, with indicators pointing north above their midlines. Still, the RSI holds around 58, leaving room for further advances in the upcoming sessions. Meanwhile, the 20 and 50 SMAs are poised to concrete a bullish cross at the 0.7750 zone, which lines up as immediate support for the pair. On the upside, a decisive break above the 0.7800 area would pave the way for a retest of its multi-year high at 0.7820, which if broken, would put the 0.7850-60 area in focus.
Support levels: 0.7750 0.7730 0.7665
Resistance levels: 0.7800 0.7820 0.7850
Gold found a lifeline with Powell’s speech as the USD index DXY tested sub 90.00 levels supporting Gold’s incline on Thursday. Powell’s dovish tone put pressure on the USD index but the US 10-year yields continued to move up at 1.12%. Powell made it clear that the monetary conditions will be in favour of precious metals for a longer period. However, inflation and the US yields will play a key role on the fate of the Gold in the short run. On the other hand, the event of the day will be Biden’s fiscal stimulus plan announcement which will be made early Friday hours. He is expected to propose a stimulus of as much as $2 trillion on Thursday. The government approved nearly $900 billion in additional relief at the end of December. Thursday’s initial jobless claims data was supportive to additional stimulus as the labour data readings continue to be worse than expected.
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 also had a positive day in the aftermath of Powell’s dovish speech trying to test $26.00 levels. Powell’s speech was not a surprise as the chairman repeated that the easing measures will continue for a longer period. The USD index DXY put under pressure with Powell’s speech while the US 10-year yields continue its move up after the retracement seen on Wednesday. Also, Gold to Silver ratio declined through 72.00 levels indicating the better performance from Silver. While the expected bigger stimulus from biden administration will most likely to support precious metals in the long run, return of the industrial activity with the support of vaccine roll-out in a global scale will give extra boost to Silver.
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
WTI tried to re-gain its lost ground made on Wednesday after refreshing its 11 month high. WTI started 2021 with a strong rally fueled by the supply-side fundamentals. Saudi Arabia announced in the beginning of the year that they will do a voluntary production cut in February to balance the decline in demand. OPEC+ released its monthly oil market report and the cartel did not change their demand growth forecast for 2021 forecasting that global demand would rise by about 5.6M barrel per day on a YoY basis. On the other hand, Energy Information Administration’s (EIA) Short-Term Energy Outlook, which downgraded its forecast for world oil demand growth by 220K barrels per day. Powell’s dovish statement put extra pressure on the USD index DXY on Thursday and WTI also had an extra boost from the decline seen in the USD.
If WTI keeps its position below $52.00 level, $51.03 (October 2019 low), $50.60 (June/August 2019 support) and $50.00 levels can be followed as new targets. Over the $53.00 level, the resistances might be followed at $53.93 ($63.33-$51.03 %23.60), $55.73 ($63.33-$51.03 %38.20) and $57.13 ($63.33-$51.03 %50.00).
Support Levels: $51.03 $50.60 $50.00
Resistance Levels: $53.00 $53.93 $55.73
Dow Jones inched its all-time higher on Thursday despite the ongoing political turmoil in Washington and the ongoing decline seen in the labour market. Powell’s dovish speech gave markets a relief despite the chairman repeating himself about the monetary policy in terms of verbal guidance. There has been a fair bit of discussion from Fed speakers of late about an exit strategy and tapering. The Fed is currently buying US$120bn of US Treasury bonds and mortgage-backed securities every month but at some point, this spending will be tapered back. However, Powell stated that now is not the time to be talking about a Fed exit. Later on Thursday night, president-elect Biden will unveil his administration’s much waited fiscal stimulus plan. However, separate reports allege that Biden will look to make a deal with the Republicans (indeed, he will need 60 votes in the Senate to pass his bill), rather than trying to force something through that they do not like. The Republicans are highly unlikely to support a $2T package. On the political side, on Wednesday, the House voted to impeach US President Trump for the second time (first time a President is impeached twice) as expected and it is now up to the Senate to decide whether to declare him guilty or not. However, markets ignored the developments as the US indexes continued their incline. The risk appetite also ignored worse than expected initial jobless claims reading too. There were 965,000 initial claims for unemployment benefits in the US during the week ending January 9, the data published by the US Department of Labor (DOL) revealed on Thursday. This reading followed the previous print of 784,000 (revised from 787,000) and came in worse than the market expectation of 795,000.
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