Daily Market Report - 19th Aug 2020

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EURUSD

The EUR/USD pair hit a fresh two-year high of 1.1965 this Tuesday, as the market kept dumping the greenback. There was no specific catalyst for the dollar’s rout, but persistent turmoil in the US, exacerbated by the upcoming elections and polls showing improved numbers for Republicans. The pair retreated from the mentioned daily high as the greenback recovered some ground during US trading hours, as usual.

The macroeconomic calendar remained empty in the EU, although the IS released some encouraging news. Building Permits in the country increased 18.8% in July, while Housing Starts were up by 22.6%. Things are getting busier starting this Wednesday, as the EU will unveil July inflation data, foreseen at 0.4% YoY, while Economic Ministers will have a virtual meeting. The US, on the other hand, will publish the FOMC Meeting Minutes.

The EUR/USD pair has eased ahead of the close but holds above the previous year high at 1.1915 by the end of the day, an immediate support level. Technical readings in the 4-hour chart indicate that bulls retain control, as the pair is developing well above bullish moving averages, with the 20 SMA now around 1.1855. Technical indicators, in the meantime, have partially lost their bullish strength but hold within overbought levels. Overall, the risk is skewed to the upside, with room for an extension towards 1.1995 a relevant weekly high from May 2018.

Support levels: 1.1915 1.1860 1.1820

Resistance levels: 1.1960 1.1995 1.2020

USDJPY

The USD/JPY pair fell to 105.27, its lowest for this month, recovering just modestly ahead of the close. Falling Treasury yields continued to weigh on the pair, with the yield on the benchmark 10-year note reaching sliding to 0.66%, amid mounting political and economic concerns in the US.

Japan didn’t release macroeconomic data this Tuesday, but will unveil some figures in the upcoming Asian session, starting with the July Merchandise Trade Balance Total, foreseen at ¥-77.6 B from ¥-268.8 B in June. The country will also release June Machinery Orders, seen at -17.6% YoY in June, worsening from the previous -16.3%.

The USD/JPY pair is trading in the 105.40 price zone, and still at risk of extending its decline as per holding near the 61.8% retracement of its July/August advance. The 4-hour chart shows that technical indicators are correcting extreme oversold conditions, but still well into the red, as the pair remains below all of its moving averages. A bearish 20 SMA has accelerated south below the 200 SMA, reflecting a strong selling interest around the pair.

Support levels: 105.25 104.85 104.40

Resistance levels: 105.60 105.95 106.35

GBPUSD

The GBP/USD pair advanced to 1.3244 its highest since Jan 1^st when the pair set this year high at 1.3266. As it has been happening lately, the advance was the result of the dollar’s sell-off, as speculative interest lacks a solid reason to beat on the pound. Meanwhile, EU-UK trade talks resumed this Tuesday. Ahead of the meeting in Brussels, news indicated that British negotiators would not accept any deal that ‘constrains’ the UK to the EU’s rules and infringes sovereignty, somehow hinting another round of failed talks.

At the same time, EU representatives suggested that talks could be unlocked if the UK maintains the bloc’s laws on tax breaks and state subsidies as part of the “level-playing field.” Talks are set to conclude on Friday. This Wednesday, the UK will publish July inflation figures. The CPI is expected to drop 0.1% MoM following June’s 0.1% increase. Annual inflation is expected to be unchanged at 0.6%, while core annual CPI is projected to slip to 1.3% from 1.4% in June.

The GBP/USD pair is trading a few pips below the mentioned daily high, en route to the mentioned 1.3266, as long as Brexit-related headlines don’t give bulls a reality check. The 4-hour chart shows that the pair has advanced above a bullish 20 SMA, currently at 1.3120, while technical indicators are pulling lower from overbought readings, not enough at the time being to suggest upward exhaustion. A bearish corrective decline can become clearer on a break below 1.3185, the former August high and a relevant support level.

Support levels: 1.3185 1.3130 1.3070

Resistance levels: 1.3265 1.3300 1.3350

AUDUSD

The AUD/USD pair rallied to a fresh year high of 0.7264, but Wall Street’s slump dragged it lower early in the US session. As equities stabilized so did the pair, currently trading in the 0.7240 price zone. The Reserve Bank of Australia released the Minutes of its latest meeting at the beginning of the day, which was unable to trigger a market’s reaction. Also, gold continued to recover, settling above $2,000 a troy ounce and providing additional support to the Australian currency.

As expected, Australian policymakers reaffirmed that “there was no need to adjust the package of measures in Australia in the current environment,” although they agreed to “continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.” Instead, the pair rallied on the usual dollar’s weakness. This Wednesday, the country will publish the Westpac Leading Index for July, previously at 0.44$.

 The AUD/USD pair is trading a few pips below the mentioned year high, still biased higher according to intraday technical readings. The 4-hour chart shows that moving averages continue to advance below the current level, while technical indicators have stabilized near overbought readings. Overall, the risk remains skewed to the upside, with a test of the 0.7300 figure now on the table.

Support levels: 0.7190 0.7150 0.7110

Resistance levels: 0.7245 0.7280 0.7325

GOLD

Gold successfully rebounded to 2.000$ on Tuesday after testing 1.860$ last week. The sharp rebound is mostly supported by the decline seen in the USD index DXY which slid below the 93.00 level to the 92.30 zone as two year low. Also, the US 10-year yield continued its decline with a loss of %2.00 to %0.669. Renewed US-China tensions on the Huawei issue on the other hand fueling the risk aversion in favour of Gold. The extreme liquidity is pressuring the USD and capital flow is helping Wall street to renew its all-time highs almost everyday. Therefore, as the current monetary policies will likely to continue for a longer term, Gold will most likely to extend its bullish run throughout the year.   

Over the 2.000$ level, next targets upside can be followed at 2.100$ 2.200$ and 2.400$. Below the 2.000$ threshold, 1.980$, 1.950$ and 1.920$ levels can be followed as supports.

Support Levels: 1.980$ 1.950$ 1.920$

Resistance Levels: 2.100$ 2.200$ 2.400$ 

SILVER

Silver tested mid-28.00$ level on Tuesday but failed to sustain its move and retreated a tick below 28.00$. The industrial “safe-haven” is lacking catalysts from the manufacturing sectors all around the world. The normalisation process takes longer than expected, and the demand for Silver remains limited at the moment. On the other hand, statistically, Silver prices have underperformed Gold for most of the time since 2011. Annual average Gold prices rose more than those of Silver every year from 2012 through 2019 except for 2016, and into the first quarter of this year. However, the extreme bear market this year allowed investors to invest in Silver as it was apparent that the white metal will play catch-up with Gold.     

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 failed to test 43.00$ on Tuesday as the resurfacing tensions between the two leading economies overshadowed the optimism about China ramping up its US oil purchases. Today’s OPEC+ meeting will be most likely to have an impact on oil prices as the decision on the oil output policy will be announced. On the other hand, the decline seen in the USD index DXY was not enough to support WTI.

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

Dow Jones failed to sustain its move up as the index underperforms compared to S&P and record-breaker Nasdaq. On Tuesday, the USD index DXY hit a new two-year low and also the 10-year yield continued to decline. On the data front, building permits in the US increased 18.8% in July, while Housing Starts were up by 22.6% both above the expectations. Today all eyes will be on FOMC to monitor all the details on FED’s outlook on the coronavirus pandemic hit economy. On the other hand, Democrats are willing to cut their demands in the COVID-19 relief to reach an agreement, US House Speaker Nancy Pelosi told Politico in an online interview on Tuesday.   

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

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.

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