Daily Market Report - 7th Sep 2020

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EURUSD

The EUR/USD pair closed the week in the red, unchanged for a second consecutive day in the 1.1830 price zone. The greenback retained its strength following the release of the US Nonfarm Payroll report, which showed that in August, the country recovered 1.37 million jobs, slightly below the 1.4 million expected. Still, almost 300K of those positions were temporary government positions and those workers are scheduled to be laid off at the end of September. The unemployment rate, however, improved to 8.4% much better than the previous 10.2%, while the Labor Force Participation Rate increased by 61.7%.

Wall Street came under selling pressure, despite its European counterparts closing in the green, although government debt yields recovered, offsetting the dollar’s momentum ahead of the close. This Monday, Germany will publish July Industrial Production figures, while US markets will remain closed as the country celebrates Labor Day.

The EUR/USD pair managed to hold around a flat 20 DMA in the daily chart, although, in the same time-frame, technical indicators maintain their bearish slopes, the Momentum already within negative levels. The 4-hour chart offers an increased bearish potential, as technical indicators pared their recoveries within negative levels, while the pair kept meeting sellers around its 100 SMA, as the 20 SMA accelerates lower above the larger one, and is about to cross below it. The main support continues to be the 1.1760 price zone, where the pair bottomed by the end of August.

Support levels: 1.1810 1.1760 1.1710

Resistance levels: 1.1890 1.1940 1.2000

USDJPY

The USD/JPY pair closed Friday little changed at 106.24, up weekly basis after falling in the previous two. The pair, however, lacked follow-through. The main lead for the pair were Treasury yields, which started the day on a down note, amid a dominant negative sentiment, but later surged on the back of encouraging US employment data. The yield on the benchmark 10-year Treasury note bottomed at 0.63% on Friday, to close the week at 0.72%. The sour tone of Wall Street put a cap to the pair’s rally at the end of the week.

Over the weekend, Yoshihide Suga, the favorite to replace Shinzo Abe, said in an interview that he "highly appreciates" the massive quantitative easing program from the BOJ, supporting Kuroda. Japan will publish this Monday the preliminary estimate of the Leading Economic Index for July, seen recovering to 84.6 from 84.4. The Coincident Index for the same period is expected at 79 from 76.6.

The USD/JPY pair is neutral-to-bearish according to the daily chart, as the pair is developing around a flat 20 DMA, but below mildly bearish 100 and 200 DMA. Technical indicators, in the mentioned time-frame, are hovering around their midlines, lacking directional strength. In the 4-hour chart, the pair is holding above all of its moving averages, which anyway remain confined to a tight range, while technical indicators remain flat just above their midlines, reflecting little interest around the pair. Bulls could have better chances on a break above 106.70.

Support levels: 105.90 105.50 105.10

Resistance levels: 106.35 106.70 107.10

GBPUSD

The GBP/USD pair bottomed at 1.3175 last Friday, recovering ahead of the close to end the day little changed at 1.3280. The pound was hit during European trading hours by a worse than expected August Construction PMI, which resulted in August in 54.6 from 58.1 in July. Also, comments from BOE’s MPC Michael Saunders pressured the UK currency, as he said that further monetary easing may be needed to support the economy. As many other policymakers from around the world, Saunders noted that economic outlook will largely depend on dynamics of the pandemic, remarking that uncertainties are high at present.

The UK will publish this Monday the Halifax House Price Index for August, and BCR Like-for-Like Retail Sales for the same month, seen at 5.7% from 4.3% in the previous month.

The risk of a steeper decline seems limited for the GBP/USD pair in its daily chart. It shows that it bounced from a mildly bullish 20 DMA, which remains well above the larger ones, as technical indicators corrected overbought conditions to turn flat within positive levels. In the shorter-term and according to the 4-hour chart, the pair is above bullish 100 and 200 SMA but below a bearish 20 SMA, as technical indicators recovered from oversold readings, indicating decreased selling interest at the end of the day. The risk of a steeper decline will increase on a break below the 1.3190 support.

Support levels: 1.3230 1.3190 1.3140

Resistance levels: 1.3300 1.3350 1.3395

AUDUSD

The Australian dollar edged lower against its American rival last week but held not far from the multi-year high set at 0.7413. In fact, the pair closed Friday unchanged in the 0.7280 price zone, despite generally encouraging US employment data and another bad day in Wall Street. The Aussie came under selling pressure at the beginning of the day, as July Retail Sales in the country were downwardly revised to 3.2% from a preliminary estimate of 3.3%.

At the beginning of the new week, Australia will publish the AIG Performance of Services Index for August, previously at 44. China, on the other hand, will release the August Trade Balance, seen posting a surplus of $50.5B.

The daily chart for the AUD/USD pair shows that it bounced from its 20 DMA, while the 100 DMA advances above the 200 DMA, both far below the shorter one. Technical indicators corrected from overbought readings but lost bearish potential within positive levels. In the 4-hour chart, technical indicators recovered from oversold readings, but remain within negative levels with limited bullish strength. The 20 SMA, in the meantime, heads lower above the current level, increasing the risk of a bearish extension ahead.

 Support levels: 0.7265 0.7220 0.7170

Resistance levels: 0.7305 0.7340 0.7380  

SILVER

Silver had a slightly better trading session on Friday as NFP reading created a bit of volatility in the markets. The Gold to Silver ratio eased through sub 72.00 levels waiting for its long lost support of industrial demand. On the other hand, Silver outperformed even the fast- rallying Nasdaq on a yearly base. After bottoming on March 18 at $11.6 in the Covid-19 selloff, the metal has rallied to $30. Despite the latest pull-backs, Silver managed to build a base over 26.00$ zone. Global manufacturing PMI data show that the industrial sector is getting back to work. Manufacturing PMI data in the US and Asia have been robust, and even the Eurozone was doing well until August. The improved manufacturing backdrop suggests that Silver demand for industrial uses will improve over the coming months pushing the white metal’s price higher.     

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 shed a big portion of its gains on Friday diving to its lowest level since July 30th. The US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 9.4 million barrels from the previous week. At 498.4 million barrels, US crude oil inventories are about 14% above the five year average for this time of year. On the other hand, the reduction of the oil demand for 2020 is expected to stand around 9-10 million barrels per day (BPD), Russian energy minister Alexander Novak said on Friday, as reported by Reuters. The situation of the pandemic is still not clear as the second peak of the first wave is intact while fears of a second wave pressures markets. The USD index DXY tried to hold its ground ending the week a tick below 93.00 level also pressured WTI prices. 

If WTI manages to hold over 40.56$ (65.62$-0.00$ %61.80) level, the targets upside can be followed at 41.00$, 46.57$ (March decline start) and 50.00$ levels. Below the 40.00$, the supports can be followed at 39.00$ and 32.81$ (65.62$-0.00$ %50) levels.

Support Levels: 40.00$ 39.00$ 32.81$ 

Resistance Levels: 41.00$ 46.57$ 50.00$

DOW JONES

Dow Jones had a volatile session on Friday with the help of much-anticipated NFP data set. A fall of the US unemployment rate to 8.4% and an increase of 1.371 million jobs, within expectations, first pushed Wall Street to their daily highs. The headline unemployment rate has dropped to 8.4% from 10.2% in July – falling faster much earlier than projected. However, that figure is achieved when counting fewer people in the workforce. The participation rate is at 61.7%, still well past the pre-crisis levels of around 63% and under 61.8% projected. However, the move is not sustained and before the long weekend caused by Labour Day in the US, the indexes slid back to negative territory. On the other hand, the headline number may slow down fiscal stimulus talks as Republicans may now feel relieved and opt not to provide new stimulus. And that may add additional pressure to stocks in the short term.       

Markets in the US will be closed on Monday due to Labor Day. On the other hand, on Friday the US inflation data set will take the stage.

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

GODLDLLD

Gold had a volatile trading session on Friday due to NFP reading release widely. The latest NFP report showed that the US economy added 1.371 million jobs in August as compared to 1.4 million expected. Moreover, July's reading was also revised lower to 1.734 million from 1.763 million. Slightly softer data results pushed the USD index DXY a bit lower and Gold benefited from the move and tested its intraday high of 1.950$. However, the move faded and DXY re-gained its lost ground dragging Gold lower. On the other hand, the sell-off continued in Wall Street while WTI shed big portions of its recent gains. On a wider perspective, the Central Bank’s appetite for higher inflation will most likely force them to keep the interest rates lower for a longer time span. Therefore, it is hard to stay bearish for Gold for the longer term.

The week ahead will start with the Chinese trade balance data set on Monday which might spark volatility as the readings indicate the momentum of the global economic activity as the markets in the US will be closed due to Labor Day. On Tuesday, the EU Q2 GDP data set might have an indirect effect on Gold as the readings will most likely move USD against EUR. On Wednesday, Chinese inflation data set will be followed. Following that, on Thursday, ECB’s ECB Monetary Policy Statement and Press Conference will most likely create movement in USD and Gold while on Friday the US inflation data set will take the stage.

Gold takes a breather on its way to 2.000$ finding balance close to the edge of its trading range. 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.

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