Daily Market Report
22 Jul 2021

EURUSD

The EUR/USD pair recovered some ground, hitting a daily high of 1.1804 on the back of a better market’s mood. The pair finished the day around the 1.1800 mark, as the looming European Central Bank’s decision keeps bulls side-lined. Global indexes posted gains, with Wall Street entering positive territory for the first time in the week. Government bond yields were sharply higher, reflecting decreased demand for safe-haven assets.

The macroeconomic calendar was scarce, as the US only published MBA Mortgage Applications for the week ended July 16, which declined 4% after a previous 16% advance. On Thursday, the US will publish weekly unemployment figures and the June Chicago Fed National Activity Index. As said, the ECB will announce its latest monetary policy decision. No changes are expected to rates and the facilities programs, but the market expects a dovish tilt in the statement, with the focus on the pandemic-related risk and changes in the forward guidance.

The EUR/USD pair trades with modest gains, but without signs of bullish potential. The pair keeps developing inside a descendant channel coming from June 25 high at 1.1974. In the 4-hour chart, technical indicators turned flat after crossing their midlines into positive levels, offering a neutral stance. The pair stands a few pips above a mildly bearish 20 SMA, while the longer ones keep heading lower above the current level. The risk remains skewed to the downside, with a test of March low at 1.1703, on the table.

Support levels: 1.1755 1.1720 1.1685

Resistance levels: 1.1840 1.1885 1.1920

USDJPY

The USD/JPY pair advanced to 110.38, its highest for the week, underpinned by soaring government bond yields and equities, which posted substantial gains in the European and American sessions. Meanwhile, the yield on the 10-year US Treasury note topped 1.30% after plummeting to 1.124% on Monday, a multi-month low.

On the data front, Japan published the June Merchandise Trade Balance Total, which posted a surplus of ¥383.2 billion, missing expectations. However, exports were up 48.6% while imports increased by 32.7%. much better than anticipated. The country won’t publish macroeconomic data on Thursday, as local markets will be closed amid the celebration on Marine Day.

The USD/JPY pair is technically bullish but holding below a critical resistance area. The 4-hour chart shows that the pair met buyers around a directionless 20 SMA but was unable to extend gains beyond the 100 SMA, which is also flat. The Momentum indicator heads firmly higher near overbought readings, while the RSI consolidates gains around 61. The pair would need to break above 110.45 to sustain the bullish potential and recover towards the 111.00 region.

Support levels: 109.80 109.40 109.05  

Resistance levels: 110.45 110.90 111.25

GBPUSD

The GBP/USD pair holds on to gains as Tuesday’s trading comes to an end, after reaching an intraday high of 1.3722 The pair advanced as the market’s mood improved, to the detriment of the American currency. The macroeconomic calendar was scarce in the UK, as the country published June Publish Sector Net Borrowing, which came in at £22.02 billion, better than expected.

Meanwhile, Brexit-related tensions persist. The EU rejected the UK's demand for a new approach to the Northern Ireland Protocol. UK Prime Minister Boris Johnson said that there are practical steps they can take to do that, but it does not seem the Union will convene to any change.  On Thursday, BOE’s Broadbent is scheduled to speak.

The GBP/USD pair holds on to intraday gains, trading near its daily high. However, its bullish potential is limited. The 4-hour chart shows that it stands above a bearish 20 SMA, while technical indicators are losing their bullish strength around their midlines. The longer moving averages maintain their bearish slopes well above the current level. The pair has a strong static resistance level at 1.3760, with additional gains possible on a break above it.

Support levels: 1.3675 1.3630 1.3580

Resistance levels: 1.3760 1.3805 1.3850

AUDUSD

The AUD/USD pair fell to a fresh 2021 low of 0.7288 but finished the day with gains in the 0.7360 price zone. The pair recovered on a better market mood, although gains were modest, as demand for the aussie remains subdued. Australian data released at the beginning of the day was discouraging, as the June Westpac Leading Index printed at -0.06% in June, down from the previous 0.04%.  

Additionally, the preliminary estimate of June Retail Sales printed at -1.8% worse than anticipated. On Thursday, Australia will publish NAB’s Business Confidence for the second quarter of the year, foreseen at 21 from 17 in Q1.

The AUD/USD pair has limited bullish potential. The 4-hour chart shows that it is trading a handful of pips above a firmly bearish 20 SMA, while the longer ones maintain their downward slopes far above the current level. Technical indicators have decelerated their advances after nearing their midlines, with the Momentum standing around its 100 level and the RSI consolidating around 47. The recovery failed to confirm a bullish extension, and the pair may resume its decline on a break below 0.7290, the immediate support level.

Support levels: 0.7290 0.7260 0.7215

Resistance levels: 0.7365 0.7400 0.7440

GOLD

XAU/USD was ending the New York session trading at $1,803.23 and down some 0.4% on the day after falling from a high of $1,813 to a low of $1,794.66.

Gold rebounded from the lows on the day when the safe-haven dollar fell back from more than three-month highs, with risk appetite back up with stocks higher. The S&P 500 was up 0.8% by the closing bell on earnings strength weighing on the greenback. The dollar index, a measure of its value against six major currencies, was slightly lower by 0.19% at 92.788 DXY. The high on the day was 93.191. On Tuesday, the index hit a more than three-month high.

On one hand, investors remain cautious due to inflation fears and concerns about the highly contagious coronavirus variant. On the other hand, high US inflation is keeping the door open for the Federal Reserve to taper stimulus which is pressuring gold prices as investors seek the carry opportunities elsewhere for which fruits gold does not bear. This plays into the US dollar smile theory and is a headwind for gold prices for the foreseeable future. 

Technically, the low of 1,794 would likely be upsetting the bulls. Meanwhile, from a weekly perspective, the bears could be looking to engage in droves from below the confluence of the 20 and 10 EMAs, 1,811, a prior structure dating as far back as summer 2020 bar November's business. This area is also reinforced by the 50% mean reversion. This makes for a potentially strong resistance between 1,811/30.  The counter-trendline support and confluence of the -272% Fibo for the current correction's range near 1,730 could come under pressure on a break of the current daily lows of 1,750.

Support: 1,791 1,770 1,748

Resistance: 1,812 1,833 1,855

SILVER

The price of silver was higher on Wednesday, correlated to the bounce in US equities and feeling the love from a rebound in risk apatite. XAG/USD was 1.3% higher at $25.26 by the New York close and travelled from a low of $24.75 to a high of $25.31. 

Nevertheless, the US dollar, despite struggling on Wednesday to move even highs, remains better-bid from both a technical and fundamentally basis. Technically, DXY’s cup & handle formation on the weekly chart is bullish and would be expected to result in a high thigh in the coming sessions. Fundamentally, the dollar is benefitting from both inflation expectations and expectations of tapering from the Fed as well as from better economic data, lower offshore yields and fears of the delta variant spreading around the world. This is a bullish cocktail for the US dollar and a bearish mix for precious metals. 

Technically, according to the weekly chart, silver’s bullish trend could well have met its apex and be set for a significant downturn in the coming weeks ahead. The price has dropped below the dynamic weekly support line and from a daily perspective, the price is below the June-July support between 25.75 and 25.52. The retracement that has been expected and mentioned in yesterday notes is already underway. The dynamic counter-trendline could be tested in a 61.8% Fibo near 26 the figure. Before there, however, the 38.2% Fibonacci has a confluence with the 29 June last support at 25.45 and this would be expected to act as the first resistance. 

Support: 25.04 24.49 23.39

Resistance: 25.36 25.91 26.22

CRUDE WTI

West Texas Intermediate (WTI) crude was higher by more than 5.7% in early Asia following an early bid in New York's open.  Improved risk appetite set off an exodus of speculative shorts, providing support despite data showing an unexpected rise in US oil inventories. 

WTI crude futures rose $3.16, or 4.7%, to $70.36 a barrel, a 4.7% gain.WTI CFDs spot was back above $70 after rallying from a low of $66.42 to test bearish commitments at $70.50, an area of confluence in resistance. The correction and level were earmarked in prior analysis and notes earlier this week.

Meanwhile, the rise in US crude stockpiles for the first time since May is something that could hamstring the short covering and correction for the sessions ahead. Crude inventories rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, the US Energy Information Administration data showed today. Analysts had expected a 4.5 million-barrel drop. 

Techcnailly, there are now prospects of a retest of the downside, albeit a move that would be in contrast to bullish demand-side fundamentals, such as air and road travel increasing around the world at a fast clip. However, the monthly 61.8% Fibonacci retracement in the 64.50/60s support area si compelling on a break of $65 the figure. To the upside, 70.80 and 71.10 are hourly targets which would be expected to come from a fresh wave of demand following an imminent 38.2% Fibo retracement of the hourly impulset to 69.50 for the day ahead. 

Support: 69.41 67.40 64.37

Resistance: 72.44 74.46 77.49

DOW JONES

On Wednesday, US stocks built on their corrective gains from the prior session, supported by the positive corporate earnings results and printing one-week highs which are just shy of recent records. The Dow Jones Industrial Average and the S&P 500 gained 0.8% each to 34,798 and 4,358.69 respectively, while the Nasdaq Composite advanced 0.9% to 14,631.95. As for performers, energy and financials were among the biggest gainers while utility and real estate stocks lagged.

As for company news, Chipotle Mexican Grill (CMG) and Interpublic Group (IPG) led gainers on the S&P 500. Among the worst performers on the S&P 500 was Netflix (NFLX), with shares down 3.3%. In other earnings reflective of the health of the US economy, Verizon Communications (VZ) beat on second-quarter earnings and operating revenue, and also lifted its guidance above consensus.

The Dow rallied again in a strong correction of the huge bearish weekly stick, adding to gains that were made the prior sessions when the index sliced through both the 38.2% Fibo comes in at 34,260 and the 50% mean reversion all the way to a 61.8% Fibonacci retracement of 34,577. On Wednesday, the bulls pushed to close the gap at 34,647 and extended the index all the way to the 78.6% Fibo at 34,800. 

Support: 34,527 34,366 34,084

Resistance: 34,808 35,250 35,411

MACROECONOMIC EVENTS