Daily Market Report
15 Jul 2021
The dollar fell against all of its major rivals, although EUR/USD recovery has been moderated. The pair topped for the day at 1.1835, trading nearby at the end of the American session. The greenback got hit by comments from US Federal Reserve Chair Jerome Powell. In his Semi-Annual Monetary Policy Report’s testimony, Powell maintained a dovish stance. He said that the central bank would deliver powerful support until the economic recovery is complete. He added that inflation is expected to remain elevated in the upcoming months before easing. And acting prematurely would be a mistake.
The EU published May Industrial Production, which contracted 1% MoM and rose 20.5% YoY, missing the market’s expectations. The US has just published the June Producer Price Index, which rose 7.3% YoY, beating the market’s expectations. The US will publish the July NY Empire State Manufacturing Index, weekly unemployment claims, and June Industrial Production.
The EUR/USD pair trades near the daily high heading into the Asian opening, although its near-term bullish potential is limited. The 4-hour chart shows that a mildly bearish 20 SMA capped advances, still developing below the longer ones. Technical indicators recovered from intraday lows but lost their upward strength within just below their midlines. The risk remains skewed to the downside as long as it holds below 1.1920, a static Fibonacci resistance level.
Support levels: 1.1780 1.1735 1.1690
Resistance levels: 1.1835 1.1880 1.1920
The USD/JPY pair fell on Wednesday, bottoming at 109.94 and ending the day nearby. The slide accelerated ahead of US Federal Reserve Chair Powell’s testimony, as his dovish words weighed on government bond yields. The yield on the 10-year US Treasury note retreated from a daily high of 1.42% to 1.36%, as Powell insisted that inflationary pressures will likely be temporary and pledged to maintain financial support.
Japanese data missed the market’s expectations. Industrial Production was down 6.5% MoM in May, while the annual reading improved by 21.1%, slightly below the 22% expected. Capacity Utilization in the same month contracted 6.8%. On Thursday, the country will publish the May Tertiary Industry Index, previously at -0.7%.
The USD/JPY pair hovers around the 110.00 level and seems poised to extend its decline in the near-term. The 4-hour chart shows that the pair stabilized below all of its moving averages, as technical indicators entered negative territory, with the Momentum maintaining its bearish slope and the RSI now stable at around 38.
Support levels: 109.85 109.50 109.10
Resistance levels: 110.20 110.65 111.00
The GBP/USD pair peaked at 1.3891, retreating afterwards to settle in the 1.3860 price zone. The pair eased from tops despite the broad dollar’s weakness, as mixed UK data and coronavirus-related concerns undermined demand for the pound. Early in the day, the country published June inflation figures, with the Consumer Price Index increasing to 2.5% YoY. Producer Prices in the same month were down, while the Retail Price Index was up 3.9% in the same period.
Meanwhile, the UK reported over 42,300 new coronavirus cases and 49 new deaths. Prime Minister Boris Johnson is under fresh pressure from different sectors to keep the mandatory use of masks in closed spaces, as the government plans to lift most restrictions next Monday. On Thursday, the UK will publish its monthly employment figures. The ILO Unemployment rate is expected to remain steady at 4.7% in the three months to May. The Claimant Count Change is expected at -32.5K, while wages are foreseen up in June.
The GBP/USD pair is technically neutral, although the risk skews to the downside. The 4-hour chart shows that the price converges with directionless 20 and 100 SMAs, while the 200 SMA maintains its bearish slope well above the current level. However, technical indicators lost directional strength around their midlines, indicating absent buying interest.
Support levels: 1.3790 1.3740 1.3685
Resistance levels: 1.3940 1.3990 1.4035
The AUD/USD pair posted a modest advance on Wednesday, reaching a daily high of 0.7485, to finally settle a handful of pips below it. The greenback eased as the US Federal Reserve refuses to take a more aggressive monetary policy stance, despite mounting inflationary pressures. Gold prices were on the run, with the bright metal flirting with $1,830 a troy ounce for the first time since mid-June. Australian data was also supportive, as July Westpac Consumer Confidence improved to 1.5% from -5.2%.
Australia will publish June employment figures on Thursday, July 15. The country is expected to have added just 30,000 new jobs in the month, after a whopping 115.2K increase in the previous month. The soft number is a result of the latest regional lockdowns that affected the country, aimed to contain the spread of COVID-19. The Unemployment rate is foreseen rising from 5.1% to 5.5% while the Participation Rate is expected to have surged to 66.3% from 66.2%. The country will also publish July Consumer Inflation Expectations.
The AUD/USD pair consolidates daily gains near the daily high. The near-term picture is neutral-to-bullish, as the 4-hour chart shows that technical indicators crossed their midlines into positive levels, although with limited bullish strength. The price is trading a few pips above a mildly bullish 20 SMA but remains below the longer ones. Chances of a stronger advance seem limited, but the pair could extend gains beyond 0.7500, at least temporarily, on upbeat employment figures.
Support levels: 0.7455 0.7410 0.7370
Resistance levels: 0.7490 0.7530 0.7570
The price of gold climbed over 1% higher on Wednesday as the bulls took advantage of a weaker US dollar. XAU/USD rose from a low of $1,804.58 to a high of $1,829.88.
The focus on the day was with Federal Reserve Chair Jerome Powell who told Congress that the US economy was "still a ways off" from levels the central bank wanted to see before tapering its monetary support. At the beginning of his two-day testimony to Congress, Powell said the Fed is firm in its belief that current price, weighing on the greenback despite the prior day’s huge CPI beat and Wednesday’s PPI beat.
Meanwhile, the US dollar remains below its three-month high, near 93.50, albeit capped below 92.80 daily resistance. Technically, for gold, the bulls will have the 14 June lows of 1,844 in focus on a break of the 50% mean reversion for which is resisting the rally, for now. Should the price fail to move higher in the coming session, then the focus will be back on the downside and the newly formed support structure near 1,810.
Support: 1,823 1,803 1,789
Resistance: 1,837 1,857 1,876
The price of silver was up over 1% on the day with XAG/USD at $26.25 rising from a low of $25.94 and to a high of $26.46 on the day. Precious metals rose on the day as the greenback slipped despite inflationary data beating expectations over the past couple of days.
Instead, markets were fixated on the Federal Reserve’s Chairman, Powell, whose dovish tones weighed on the greenback. Powell told Congress that the US economy was "still a ways off" from levels the central bank wanted to see before tapering its monetary support.
Meanwhile, as for data, US producer prices also rose more than expected, posting their largest annual increase in more than 10-1/2 years. A day earlier, data showed June US inflation hit its highest in more than 13 years.
Despite the rally, the technical outlook has not changed. Technically, there are prospects of a retest of the daily highs in 26.77 and a deeper 50% mean reversion correction of the June sell-off near 26.91.
Support: 26.20 25.64 25.19
Resistance: 26.65 27.22 27.66
The price of oil was lower by 3% with West Texas Intermediate falling from a high of $75.42 to a low of $72.26. WTI futures were off by $2.12, or 2.82%, at $73.13 a barrel. Meanwhile, major global oil producers came to a compromise about supply and US data showed demand slacked off a bit in the most recent week.
Reuters reported Saudi Arabia and the United Arab Emirates reached a compromise that should unlock an OPEC+ deal to boost global oil supplies as the world recovers from the coronavirus pandemic. US government data showed implied gasoline demand declining considerably last week. The US Energy Information Administration said crude stockpiles declined more than expected, in their eighth consecutive draw, the drawdown was overshadowed by lagging gasoline demand.
Techcnailly, to the downside, with the price breaking 4-hour support near 74.20 and then 73.10, a case can be made for 69.60s as a prior resistance structure. That being said, a bullish M-formation is being formed and the bears might struggle below 72.20’s support.
Support: 71.32 67.97 65.16
Resistance: 74.14 77.49 80.30
Wall Street was mixed on the day as investors had a hard time trying to decode the Fed's language and what US data over the past couple of days might mean for their policy settings. Federal Reserve Chairman Jerome Powell told the House Financial Services Committee the US economic recovery continues to advance but will need to make "substantial further progress" before the Fed reduces its asset purchases. However, inflation data has come in hot, so there are prospects of a faster recovery and tightening from the central bank which weighs on stocks.
Meanwhile, the Dow Jones Industrial Average and the S&P 500 were modestly higher by 0.1% at 34,933.23 and 4,374.30, respectively. The Nasdaq Composite, on the other hand, was down 0.2% at 14,644.95. As for performers, the energy sector was the steepest decliner, while real estate stocks performed best among market sectors.
Techcnailly the outlook remains the same. A deeper retracement to the 38.2% Fibonacci level at 34,684 could be on the cards also. On a move to the upside, the bulls will be looking to the prior highs of 35,091.
Support: 34,636 34,379 33,888
Resistance: 35,384 35,875 36,366