Daily Market Report - 18th Aug 2020

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EURUSD

The EUR/USD pair slowly but steadily advanced this Monday, reaching a fresh one-week high of 1.1880 at the beginning of the US session. Investors kept dumping the greenback, amid persistent tensions between the US and China, and concerns about the coronavirus spread, not only in the US. The number of global cases keeps rising, with focus through all Europe and the US. Meanwhile, the market mood was sour, as Japan kick-started the week reporting its worst GDP on record, another consequence of the ongoing pandemic.

The macroeconomic calendar had little relevant to offer, as the US published the NAHB Housing Market Index, which improved to 78 in August from 72 in July, beating expectations. This Thursday, the macroeconomic calendar will remain scarce, with no reports coming from the EU. The US will publish July Housing Starts and Building Permits for the same month.

The EUR/USD pair retreated from the mentioned high, ending the day with modest gains in the 1.1860 price zone. The 4-hour chart indicates that bulls are still in control of the pair despite the lack of bullish strength. In the mentioned chart, the pair is developing above bullish 20 and 100 SMAs, while technical indicators remain within positive levels, although with uneven directional strength. The Momentum indicator continues easing, now nearing the 100 line but still above it. A pullback towards the 1.1790 won’t affect much bull’s determination, but a break below it should signal a steeper decline ahead.

Support levels: 1.1830 1.1790 1.1740

Resistance levels: 1.1915 1.1950 1.1990

USDJPY

The USD/JPY pair amid subdued dollar’s demand, now trading near a daily low of 105.93. Also, US Treasury yields fell further, with the yield on the benchmark 10-year Treasury note down to 0.67%, weighed by coronavirus concerns. The country has recorded over 5.4 million cases, while the death toll surpassed 170K. At the same time, the number of new cases has been decreasing but also testing, raising concerns about whether the numbers are reliable.

Japan published its Q2 Gross Domestic Product, which came in at -7.8% for the three months to June, down at an annualized pace of 27.8%, worse than anticipated and a record contraction. The country also reported June Industrial Production, which fell 18.2% YoY, and Capacity Utilization, which was up 1.9% in the month. The dismal growth figure dented the market’s mood throughout the day. Japan won’t publish relevant macroeconomic data this Tuesday.

The USD/JPY pair has stopped its intraday slump around the 38.2% retracement of its 106.18/107.04 rally at 105.95, bouncing just modestly from the level. The 4-hour chart, however, shows that the risk remains skewed to the downside, as technical indicators remain near daily lows without signs of downward exhaustion. The 20 SMA has turned south, well above the current level, while the pair is also developing below a bearish 200 SMA.

Support levels: 105.95 105.60 105.20

Resistance levels: 106.35 106.80 107.10 

GBPUSD

The GBP/USD pair has spent the first day of the day confined to a tight range around the 1.3100 figure. The Sterling was trapped between encouraging comments from BOE’s Chief Economist Andy Haldane and looming Brexit talks. Haldane repeated over the weekend that the UK economy is on the path to rapid recovery. “GDP is expected to rise by over 20% in the second half of the year,” he added. On the other hand, talks about the post-Brexit relationship with the EU will resume this Tuesday. Fisheries and UK’s financial sector access to the Union’s markets remain the hot issues.

At the beginning of the day, the UK released the Rightmove House Price Index, which resulted in -0.2% in August, matching the July estimate. When compared to a year earlier, the index was up 4.6%, better than the previous 3.7%. The UK won’t release macroeconomic data this Tuesday.

The GBP/USD pair is entering the Asian session trading at around 1.3110, maintaining its neutral-to-bullish bias. The 4-hour chart shows that a mildly bullish 20 SMA keeps providing intraday support, currently at around 1.3075. The larger moving averages, maintain their bullish slopes well above the shorter one, while technical indicators hold within positive levels, although the Momentum flat and the RSI barely advancing. Bulls can take their chances on a break above the 1.3190 static resistance level.

Support levels: 1.3075 1.3030 1.2980 

Resistance levels: 1.3150 1.3190 1.3240

AUDUSD

The AUD/USD pair surged to 0.7227 its highest in over a week, ending the day a handful of pips above the 0.7200 level. The Aussie woke up during US trading hours, getting a boost from resurgent gold prices as the bright metal surged to an intraday high of $1,990.73 a troy ounce. The broad dollar’s weakness added to the pair’s rally. Market players have put US-China tensions aside for now, although any negative headline on the issue could see the pair returning to the lower end of the 0.71 level.

Australia didn’t release macroeconomic data at the beginning of the week. This Tuesday, the Reserve Bank of Australia will publish the Minutes of its latest monetary meeting. Last month, the document showed that policymakers closed the doors to further easing. This month, the central bank kept rates at 0.25% and announced a fresh round of bond-buying. The country’s economic outlook has worsened after the latest Victoria lockdown, as it stands for 25% of the national economy.

The AUD/USD pair holds near the mentioned daily high as the US session comes to an end, technically bullish in the short-term, although with limited upside momentum. The 4-hour chart shows that the pair is developing above all of its moving averages, with the 20 SMA moving above the 100 SMA. Technical indicators, however, have lost directional strength, now consolidating within positive levels.

Support levels: 0.7190 0.7150 0.7110

Resistance levels: 0.7245 0.7280 0.7325

SILVER

As the USD index DXY extended its decline below the 93.00 level, Silver managed to erase most of its losses made last Friday. On the other hand, Gold to Silver ratio hangs around 73.00 signalling more room for Silver to advance compared to Gold. On the ETF side, silver ETFs printed strong inflows compared to Gold. Expectations of normalisation in industrial production is keeping the Silver inflows alive while the current monetary policies create the perfect environment for precious metals to advance.      

If Silver manages to stay over 27.00$, next targets upside might be followed at 29.28$ (March 2013 resistance), 30.00$ and 32.00$ levels. Below the 27.00$ level, the supports might be followed at 25.00$ and 24.00$ levels.

Support Levels: 27.00$ 25.00$ 24.00$

Resistance Levels: 29.28$ 30.00$ 32.00$

CRUDE WTI

WTI is trading in the upper level of its consolidation zone as the news from China hit the wires. China planned to ship large volumes of US crude in August and September despite the ongoing tensions between the world’s biggest economies. On the other hand, OPEC+ will have its meeting on Wednesday, which will be followed by the oil traders. Apart from the Chinese demand for US oil, also, the decline in the USD index DXY supported oil prices on Monday.   

If WTI manages to hold over 42.00$, next targets upside can be followed at 44.00$ (February 2020 low), 48.64$ (March 2020 high) and 50.00$. Below the 42.00$ level, supports can be followed at 41.00$ and 40.00$ consolidation zone.

Support Levels: 42.00$ 41.00$ 40.00$

Resistance Levels: 44.00$ 48.64$ 50.00$ 

DOW JONES

While Nasdaq hit a new all-time high on Monday trading while S&P is testing its all-time high as well, Dow Jones had a mixed-negative trading session ending the day in the negative zone. The rising number of daily cases in the coronavirus pandemic is weighing on the index companies. Also, Federal Housing Administration mortgages had the highest delinquency rate on record in the second quarter. At the same time, a federal forbearance program is preventing foreclosures for most to avoid a new mortgage crisis brewing. Trump was on the wires today about China stating that he will impose tariffs on companies that leave our nation to produce products overseas. The president also added that he is planning to create tax credits for companies that bring jobs back from China and strip federal contracts from companies that outsource critical industries.   

If Dow Jones keeps its stance over 27.000 level decisively, 27.583 (June 2020 high), 28.000 and 28.402 levels can be followed as resistances. Below the 27.000 level, the supports can be followed at 26.000, 25.210 (29.568-18.158 %61.80) and 24.690 (2020 April-May resistance) levels.     

Support Levels: 26.000 25.210 24.690

Resistance Levels: 27.583 28.000 28.402

GOLD

The latest sharp decline gave investors an excellent opportunity to increase their Gold portfolios and as the USD index DXY slid below 93.00 level Gold managed to extend its move up to 1.980$. Also, the US 10-year yield retraced to %0.68, which also caused the strong move in Gold on Monday. Apart from the perfect conditions for Gold to rally, also, Warren Buffet had taken a big stake in Barrick Gold mining company. As Gold trading saw volatile session starting from the previous week, CME Group, the world's leading and most diverse derivatives marketplace, today announced that Precious Metals markets reached a record average daily volume (ADV) of 1.55 million contracts on August 11, surpassing the previous record of 1.51 million set February 28, 2020. A record 397,000 Silver futures contracts were traded on August 11, 2020, surpassing the prior record of 329,000 set on August 7, 2020. 

As long as Gold stays over 1.950$, the targets upside can be followed at 1.980$ (previous all-time high), 2.000$ and 2.040$ levels. Below the 1.950$ the supports can be followed at 1.920$, 1.900$ and 1.825$ (2011 August close) levels.

Support Levels: 1.920$ 1.900$ 1.825$

Resistance Levels: 1.980$ 2.000$ 2.040$

MACROECONOMIC EVENTS

* All the Moving Average support and resistance levels are dynamic by nature. Means when the price approaches the Moving averages, slight variation occurs in the forecasted Moving Average support and resistance levels. Previous few days’ intraday levels are also signicant while trading the current day as the price tend to hover around these levels for some time. Levels in red indicate strong, critical or vital.

Please remember that trading financial markets carry a high degree of risk to your capital. It is possible to lose more than your initial stake. Leveraged products may not be suitable for all investors, therefore please ensure you fully understand the risks involved and seek independent advice if necessary.

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