Daily Market Report - 26th Aug 2020

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EURUSD

The EUR/USD pair is ending yet another day around the 1.1800 level, as FX traders seem to lack motivation. Major pairs remained within familiar levels, despite some wild swings elsewhere. Markets were in a risk-on mood throughout the first half of the day, amid China and the US announcing good talks related to their trade deal. EUR/USD hit an intraday high of 1.1843, further supported by encouraging German data, as Q2 GDP was revised to -9.7% from a previous estimate of -10.1%. The IFO Business Climate improved to 92.6 in August from 90.4 in July. The assessment of the current situation and expectations also improved when compared to the previous month.

The greenback recovered some ground during US trading hours as the market sentiment deteriorated following the release of the US CB Consumer Confidence, which fell in August to a new pandemic low of 84.8, well below the previous 91.7. Wall Street took a turn to the worse, trimming most of its previous weekly gains. Other data coming from the US, however, were positive, as the Housing Price Index increased to 0.9% in June, while New Home Sales was up by 13.9% in July. This Wednesday, the US will publish July Durable Goods Orders, seen up 4.3%.

The EUR/USD pair is trading in the 1.1830 price zone by the end of the American session, with a neutral technical stance. In the 4-hour chart, the price has spent the day hovering around converging 20 and 100 SMA. The Momentum indicator advances above its midline, while the RSI heads nowhere around 50. Overall, the risk is skewed to the downside, with a bearish extension clearer on a break below 1.1790, while a bullish extension would have more chances if the pair breaks above 1.1885, quite unlikely in the current scenario.

Support levels: 1.1790 1.1750 1.1710

Resistance levels: 1.1840 1.1885 1.1920

USDJPY

The USD/JPY pair ends Tuesday with substantial gains in the 106.35 price zone, after peaking at 106.57. The pair holds on to intraday gains despite the poor performance of Wall Street, as while the S&P reached yet another record high, the DJIA closed in the red. US indexes were affected by a report indicating US consumer confidence plunged in August. Meanwhile, the pair found support in government debt yields, as Treasury yields were firmly higher, with that on the 10-year note reaching a one-week high of 0.72%.

Japan will open its macroeconomic calendar this Wednesday with the release of the July Corporate Service Price Index, previously at 0.8%. Also, the country will publish the final version of the June Leading Economic Index, expected unchanged at 85, and the Coincident Index for the same month.

The USD/JPY pair settled above the 61.8% retracement of its latest daily decline, measured between 107.04 and 105.09, at 106.29, now the immediate support level. In the 4-hour chart, the pair is now holding above all of its moving averages, which anyway lack clear directional strength. Technical indicators have lost their bullish potential, the Momentum turning lower and the RSI consolidating around 68. The rally will likely continue on an extension beyond 106.70.

 Support levels: 106.30 105.90 105.50

Resistance levels: 106.70 107.05 107.40

GBPUSD

The GBP/USD pair is up in range this Tuesday, holding on to some intraday gains despite disappointing UK data and a sour market mood in the last trading session of the day. The pair reached an intraday high of 1.3170 on the back of the market’s optimism. Investors ignored the August CBI Distributive Trade Survey on realized sales, which contracted to -6% from 8% in the previous month. The Pound is unaffected by the lack of progress in Brexit talks, with little over a month to reach a deal.

The UK won’t release relevant macroeconomic data in the upcoming 24 hours, although BOE’s Haldane is scheduled to offer a speech this Wednesday.

The GBP/USD pair trades in the 1.3140 price zone, with the latest recovery falling short of supporting further gains ahead. In the 4-hour chart, the pair is hovering around a directionless 20 SMA, while a few pips above an also flat 100 SMA. Technical indicators have recovered from daily lows, with the Momentum entering positive territory and the RSI already flat around 54, indicating limited buying interest.

Support levels: 1.3090 1.3050 1.3010

Resistance levels: 1.3170 1.3215 1.3250

AUDUSD

The AUD/USD pair is trading near a daily high of 0.7195, higher in range on this second day of the week. The Aussie refused to give up despite an increase in the dollar’s demand during US trading hours, which anyway decreased ahead of the US close. The lack of data coming from Australia is keeping the pair inside a well-limited range ever since the week started. This Wednesday, however, the country will publish the Q2 Construction Work Done, foreseen at -5.8% from -1% in the first quarter of the year.

The AUD/USD pair is mildly bullish in the short-term, as the 4-hour chat shows that the pair is holding at daily highs, and above all of its moving averages. In the mentioned time-frame, technical indicators head higher right above their midlines with the bullish potential limited. A relevant high at 0.7215 provides immediate resistance, with the bullish case probably becoming stronger once above it.

Support levels: 0.7135 0.7090 0.7050

Resistance levels: 0.7215 0.7250 0.7290 

GOLD

Gold ended Tuesday trading virtually unchanged despite the USD index DXY retraced back to 93.00 levels. The latest news that the US and China expressed their commitments to the existing trade deal lifted the risk appetite pushing gold down. Despite the retracement seen in the USD, 10-year yields in the US managed to keep its way up to %0.65. Gold will most likely find its next direction after the Fed Chair Powell’s Jackson Hole speech on Thursday. Despite the latest weak tone, as FED’s monetary policy will be the same at least until end of 2021, Gold will benefit the current sub-zero real rates.

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$

SILVER

Silver also had an indecisive trading session on Tuesday. Despite the weakness seen in the USD index DXY, precious metals also retreated with the renewed optimism about the phase one trade deal between the US and China. As an industrial compound, Silver is expected to outperform Gold in case of normalisation in the manufacturing sectors globally. However, current datasets show slower than expected recovery and fears of a second wave in the coronavirus pandemic is mounting.    

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$

CRUDE WTI

WTI found extra support as energy companies in the US cut oil production at the US Gulf Coast due to the possibility of a rare double storm in the region. According to Reuters, producers reduced the output by 1.5 million barrels per day, nearly 14% of the total US output. Tropical Storm Laura is moving toward the Gulf of Mexico and has recently turned into a hurricane due to the National Hurricane Center (NHC) report. On the other hand, Marco seems to have weakened and could dissipate on Wednesday before gathering further strength. Also, on Monday, US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier held a phone call. In a statement summarizing the conversation, White House said that both sides agreed to continue pushing forward the implementation of the phase-one trade deal and remain committed to taking necessary steps to ensure the success of the agreement. Hopes of normalisation in the dispute between the US and China lifted the market mood pushing precious metals down while supporting oil prices. 

WTI re-tested its highest level since March 2020 with the renewed optimism on Tuesday. 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

After the strong Monday session, Dow Jones gave away most of its gains on Tuesday along with strong housing data and weak US CB Consumer Confidence reading. New home sales even topped optimistic expectations, with overall sales rising 13.9% to a 901,000-unit pace, following a 15.1% jump the prior month. On the other hand, Consumer Confidence is lower now than it was in April and May at the height of the lockdowns. Still, confidence is not as battered as it typically might be during a recession. Consumer Expectations Index worsened to 85.2 from 88.9 and the Present Situation Index dropped to 84.2 from 95.9. Also, Dow Jones failed to capitalise the positive developments regarding the coronavirus vaccine and encouraging statements about phase one trade deal between the US and China diversed from Nasdaq and S&P. 

From the technical point of view, over the physiological 28.000 level, 28.400 can be followed as next resistance while below 27.770 level the supports can be seen at 27.400, 27.000 and 26.757 (24.680-27.400 %23.60) levels.

Support Levels: 27.700 27.400 27.000

Resistance Levels: 28.400 29.000 29.500

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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