Daily Market Report
01 Feb 2021
The EUR/USD pair saw little action on Friday, ending the week with modest losses, but within familiar levels in the 1.2130 price zone. Investors’ attention remained on equities, these last subject to the turmoil related to the $GME scandal, and brokerage apps halting trading. Global indexes fell at the end of the week, with Wall Street reaching fresh January lows.
The dismal market mood was exacerbated by vaccine-related headlines, as the one-shoot from Johnson & Johnson has proven 66% effective in phase three trials, while Pfizer’s CEO said that "there is a high possibility that future variants will elude vaccines." On a positive note, the number of new coronavirus contagions keeps decreasing globally after peaking at 845K early in January to roughly 500K reported on Saturday. Despite delayed delivery, vaccines are rolling out and hopes are that immunity will boost growth in the second half of this year.
Data wise, Germany published the preliminary estimate of Q4 GDP, which came in slightly better than anticipated at 0.1%. The US published December core PCE inflation that rose 1.5% YoY from 1.4% in the previous month. This Monday, Markit will publish the final readings of its Manufacturing PMI for January, while the US will release the official January ISM Manufacturing PMI, foreseen at 59.5 from 69.7 previously.
The EUR/USD pair has spent the week trading between Fibonacci levels. It found support around the 38.2% retracement of the November/January rally at 1.2060, while sellers defended the 23.6% retracement of the same advance at around 1.2175. In the daily chart, the pair is neutral-to-bearish, as the 20 SMA caps advanced, converging with the mentioned Fibonacci resistance while technical indicators aim modestly higher but below their midlines. In the near-term, and according to the 4-hour chart, the upside seems limited, as the pair trades between bearish moving averages, while technical indicators lack directional momentum just above their midlines.
Support levels: 1.2095 1.2060 1.2025
Resistance levels: 1.2180 1.2225 1.2260
The USD/JPY pair jumped to 104.93 last Friday, a level that was last seen mid-November, to close the day with substantial gains in the 104.70 price zone. Demand for the American currency offset the poor tone of equities in a risk-averse scenario, boosting the pair. Additionally, US Treasury yields advanced, with the yield on the benchmark 10-year note settling at 1.07%, underpinned by encouraging US data released on Thursday.
Japan published January Tokyo inflation, which resulted upbeat, printing at -0.5% YoY. Industrial Production in the year to December fell by 3.2%, better than the -3.5% expected. Finally, the Consumer Confidence Index contracted to 29.6 in January from 31.8 in the previous month. At the beginning of the week, the country will release the January Jibun Bank Manufacturing PMI, previously at 49.7.
The USD/JPY pair has settled above its 100 SMA in the daily chart for the first time since June last year. The 20 SMA has turned north below it, while technical indicators advance within positive levels, supporting a continued advance. In the near-term, and according to the 4-hour chart, bulls are in charge. Moving averages head firmly higher below the current level while technical indicators barely retreated from extreme overbought conditions.
Support levels: 104.40 103.95 103.50
Resistance levels: 104.95 105.20 105.50
The GBP/USD pair closed the week with modest gains just below the 1.3700 level and not far from a fresh multi-year high of 1.3758. The pair spent the week consolidating amid a scarce UK calendar, while the pound was quite resilient to the dollar’s demand on risk-aversion.
Easing pandemic pressure provided support to the UK currency. Following a peak of almost 70K contagions per day, the number of daily new cases has averaged 25K this past week, taking off some pressure on the health system. Even further, nearly eight million people in the kingdom had already gotten their first shot, leaving the UK among the top-three larger vaccinated nations. On a down note, the EU imposed export restrictions on vaccines Friday after accusing the British- AstraZeneca of favoring its home market, in detriment of its contracts with the EU. On Monday, Markit will publish the UK final January Manufacturing PMI, foreseen unchanged at 52.9.
The GBP/USD pair has eased within range, maintaining its bullish stance in the daily chart, as a bullish 20 SMA continues to provide support, advancing above the larger ones. Technical indicators have lost their directional strength but hold within positive levels. In the 4-hour chart, the pair settled below its 20 SMA but above the 100 SMA, both directionless. Technical indicators hover around their midlines, lacking directional strength. A daily ascendant trend line coming from December 22 low provides support at around 1.3625, while the weekly low comes at 1.3609. A break below this last should open the doors for a steeper decline.
Support levels: 1.3655 1.3605 1.3560
Resistance levels: 1.3715 1.3760 1.3810
Commodity-linked currencies were among those most affected by the poor performance of equities, with AUD/USD finishing the week in the red at 0.7641. The pair may accelerate its slump at the weekly opening, amid weekend news indicating a 5-day lockdown in the Pert area, due to a hotel worker infested with COVID-19. Authorities are concerned it may be one of the more contagious strains coming from the UK and South Africa.
Ahead of the opening, China published the January official NBS Manufacturing PMI, which resulted at 51.3, while the services index for the same month resulted at 52.4, both missing the market’s expectations. Australia will publish the January AIG Performance of manufacturing index, previously at 52.1, and the TD Securities Inflation report for the same month.
The AUD/USD pair bottomed for the week at 0.7591, and the daily chart indicates that it’s gaining bearish momentum. The pair broke below its 20 SMA which now stands at around 0.7720. Technical indicators stand below their midlines with uneven directional strength, but still favoring another leg lower. In the near-term, and according to the 4-hour chart, the pair is below all of its moving averages, while technical indicators hover within negative territory, also supporting a bearish continuation in the near-term.
Support levels: 0.7605 0.7570 0.7530
Resistance levels: 0.7685 0.7720 0.7770
Gold had another volatile session on Friday in the aftermath of anarchy in the Wall Street and vaccine news. The yellow metal tested $1.875 testing its highest level since 8th of January. However, the move did not sustain and Gold retraced back to $1.846 ending the week in the negative zone. While doubts over the vaccine supply in Europe pressure the market sentiment, new trial results from Johnson & Johnson’s coronavirus vaccine disappointed some investors despite above average results fueling risk aversion. The USD index DXY managed to end the week at a tick over 90.50 level with some marginal gains while the US 10 year-yields continued its move up after declining from recent highs. On the CFTC side, hedge funds and money managers increased their net long positions while Warren Buffet is also reported to add more Gold to his portfolio for hedge purposes. The big story on the markets is the battle between retail traders and hedge funds in the US. Therefore, Biden’s stimulus plan approval seems a bit sidelined at the moment while developments about the pandemic are creating extra market volatility.
The week will start with ISM Manufacturing PMI (Jan) data set in the US with the Fed’s Rosengren’s speech. On Tuesday, Fed’s William’s speech will be followed while on Wednesday ADP Employment Change (Jan) and ISM Services PMI (Jan) data set will be followed in the US. On Thursday, weekly labour data readings with Nonfarm Productivity (Q4) PREL and Factory Orders (MoM) (Dec) data will be followed. Finally, on Friday, the NFP data set will be closely followed by the markets.
Gold is expected to keep its current range between $1,800 and $1,900 for the coming term. 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 continued its erratic movement partly driven by the battle between the retail traders and hedge funds. The sudden move was seen in Silver outperforming Gold pushed Gold to Silver ratio to 68.50 levels which were last seen in April 2017 while the median level stands around 66.00 levels. Gold failed to sustain its move up and retraced back while Silver managed to keep its gains a tick below $27.00 level while Silver trading volume hit all-time highs. Also, Silver ETF SLV is up more than 2% and Silver mining company First Majestic Silver Corp (AG) is up another 10% having posted gains of more than 20% on Thursday. On the other hand, risk aversion dominated the markets in the light of vaccine developments while Johnson & Johnson final vaccine trials failed and logistics problems hit Europe for vaccine distribution. At this point, it is still not clear for how long the retail trade frenzy will continue. Therefore, the price of Silver might consolidate in the short term to find balance with Gold.
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 still keeps its indecisive trading schema managing to hold close to its recent peak levels. While the chaos continues between the retail traders and hedge funds, markets had a depressive session on Friday driven by the vaccine-related issues. At this point, WTI is lacking further fundamental support and needs an extra catalyst to move further up while Saudi Arabia’s voluntary production cut is WTI’s last stand against further declines. Also, WTI found support last week with the surprise decline on US inventories. The report published by the US Energy Information Administration (EIA) revealed on Wednesday that crude oil stocks in the US declined by nearly 10 million barrels in the week ending January 22.
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 faced a strong sell-off on Friday as the chaotic fight between the retail traders and hedge funds continues. The public outrage sparked a massive short- squeeze and with FOMO (Fear Of Missing Out) action, more and more retail traders joined the buying wave creating a big shock wave in the markets. Apart from the market turmoil, disruptions on the vaccine roll-out and supply also pressured the markets. Johnson & Johnson’s single-shot and easily refrigerated final trial results considered as an above-average success while the vaccine supply issues continue in Europe.
The week ahead will be busy in terms of data releases in the US with a series of PMI releases followed by NFP data sets. On Monday, ISM Manufacturing PMI (Jan) data set in the US with the Fed’s Rosengren’s speech will be followed while on Tuesday, Fed’s William’s speech will be followed. On Wednesday ADP Employment Change (Jan) and ISM Services PMI (Jan) data set will be followed. On Thursday, weekly labour data readings with Nonfarm Productivity (Q4) PREL and Factory Orders (MoM) (Dec) data will be followed. Finally, on Friday, the NFP data set will be closely followed by the markets.
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