Daily Market Report - 13rd Oct 2020

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EURUSD

The EUR/USD pair spent the day hovering around the 1.1800 level, unable to attract investors. The market’s mood was mostly sour at the beginning of the day, amid resurgent coronavirus cases in Europe and new restrictive measures announced, and the absence of progress in a US coronavirus aid package. Still, the sentiment improved throughout the day, with most European indexes posting daily gains. US markets were closed due to a local holiday, but stocks futures rose, putting pressure on the greenback and preventing EUR/USD from falling.

This Tuesday, Germany will publish the final version of September inflation data, seen as previously estimated at -0.2% YoY. The country will also release the October ZEW Survey, with the Economic Sentiment expected to have deteriorated, also in the Union. The US will release the final reading of September CPI, foreseen at 1.4% YoY.

The EUR/USD pair is trading around 1.1810, retaining its bullish stance, as per trading above a daily ascendant trend line coming from late September, currently around 1.1760. In the 4-hour chart, the pair continues to develop above all of its moving averages, with the 20 SMA still advancing. Technical indicators, in the meantime, have stabilized within positive levels. Further gains are to be expected on a break above 1.1830, the immediate resistance level.

Support levels: 1.1760 1.1720 1.1680

Resistance levels: 1.1830 1.1870 1.1915

USDJPY

The USD/JPY pair edged lower at the beginning of the week, falling to 105.23 to finish the day in the 105.30 price zone, on the back of the broad dollar’s weakness. BOJ’s Governor Kuroda was on the wires at the beginning of the week, although he said nothing new that could impress the market’s participants. He said that policymakers will closely monitor the coronavirus impact on the economy and that they won’t hesitate to ease further if necessary.

Japanese data was mixed, as Machinery Orders were up by 0.2% in August, beating expectations, while the September PPI fell 0.8% YoY in September missing the market’s forecast. Also, the preliminary estimate of September Machine Tool Orders fell in September 15% YoY, better than the -23% expected. Early Tuesday, the country will publish September Money Supply.

The USD/JPY pair is bearish heading into the Asian opening. In the 4-hour chart, it’s trading below all of its moving averages, which anyway lack directional strength. At the same time, technical indicators hover near oversold readings, partially losing their bearish momentum but still favoring a bearish extension, particularly on a break below the 105.00 figure.

Support levels: 105.00 104.65 104.20

Resistance levels: 105.80 106.25 106.60 

GBPUSD

The GBP/USD pair surged to an over one-month high of 1.3082, holding nearby as the day comes to an end. News coming from the UK were far from optimistic, as the number of new coronavirus contagions in the UK has led to new restrictive measures. PM Boris Johnson announced a three-tier system of restrictions for England with Liverpool region under strictest tier 3, which means household mixing will be banned, and all pubs and bars will be closed, alongside other indoors leisure centres. The lowest level, that covers most of England, includes a curfew for pubs at 10 pm and limited household mixing.

BOE’s members were on the wires this Monday, with Haskel saying that the central bank keeps an “absolutely open mind” on the suitability of negative rates. Governor Bailey added later that they are not thinking about negative rates in terms of a policy decision now, also indicating that they are not near addressing whether they should use them. The headline supported the pound alongside the broad dollar’s weakness.

This Tuesday, the UK will publish its latest employment data. The ILO Unemployment for the three months to August is foreseen at 4.3% from 4.1% previously, while Overage Earnings Including Bonus are seen down 0.5% in the same period.

The GBP/USD pair seems poised to extend its advance, facing its next relevant resistance area at the 1.3100 threshold. The 4-hour chart shows that the pair is comfortable above all of its moving averages, with the 20 SMA about to cross above the 200 SMA. Technical indicators have approached overbought readings, with the Momentum still advancing and the RSI stable at around 67, supporting a bullish continuation in the near term.

Support levels: 1.3040 1.2995 1.2950

Resistance levels: 1.3100 1.3150 1.3190

AUDUSD

The AUD/USD pair gapped lower at the weekly opening, stabilizing afterwards around 0.7210 where it currently stands. The Aussie came under selling pressure at the beginning of the week after China set the yuan fixing at 6.7126, weaker than expected, while the PBOC lowered the FX risk reserve ratio to zero. The Australian dollar fell despite the greenback was under pressure against most other rivals, also ignoring a substantial advance in Wall Street’s futures.

The Australian macroeconomic calendar had nothing to offer this Tuesday, although China will publish its September Trade Balance, expected to post a surplus of $59.98B.

The AUD/USD pair has lost its bullish momentum, but the risk of a steeper decline is limited. The 4-hour chart shows that it settled below a flat 200 SMA, but also that it holds above a bullish 20 SMA. Technical indicators retreated from overbought levels, but remain well above their midlines. Bears would have better chances on a break below 0.7170, the immediate support level.

Support levels: 0.7170 0.7130 0.7095

Resistance levels: 0.7240 0.7280 0.7315

GOLD

Gold faced a technical retracement on Monday after Friday’s strong move-up. As the dead-lock on the coronavirus relief bill continues, mixed reports from the US are keeping hopes alive and supporting the risk appetite. The USD index DXY managed to keep its 93.00 level virtually unchanged while the US indexes had a strong day. On the other hand, the hedge funds remain long on Gold futures while options barely changed their positions according to the latest COT-commitment of traders data. Also, net USD shorts dropped to their lowest level since June.   

If Gold tests $1,950, the targets upside can be followed at $1,980, $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 Monday as the Bond markets in the US were closed due to Columbus Day in the US. Mixed reports regarding the stimulus package in the US are supporting the risk appetite for now and the USD index DXY kept its lowest levels in three weeks around 93.00. On the other hand, silver continues to outperform Gold in a risk-on environment dragging Gold to Silver ratio to mid-76.00 levels. 

Silver managed to hold its $25.00 level in a limited range trading day barely holding on the positive zone. Below the $22.90 level ($11.63-$29.86 38.20%), the supports can be followed at $20.75 ($11.63-$29.86 50.00%) and $18.42 ($11.63-$29.86 61.80%). Over the $22.90 level, the targets up can be followed at $25.21 ($11.63-$29.86 23.60%), $26.00 (August-September support), $27.00 and $28.00 levels.

Support Levels: $22.90 $20.75 $18.42

Resistance Levels: $25.21 $26.00 $27.00

CRUDE WTI

WTI intensified its decline on Monday sliding below $40.00 levels. The rising number of coronavirus cases around the globe pressuring the sentiment for oil due to fears of a slump in demand in case of further travel bans. On the other hand, apart from the strike in Norway and Hurricane on the US coast, the rise in production in Libya due to ceasefire pressured oil prices with oversupply fears. A possible surprise meeting from OPEC+ might revise the current tapering programme due to reports. Therefore, WTI might face further volatile sessions in the short term. 

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 $40.00, the supports can be followed at $39.00 and $32.81 ($65.62-$0.00 50.00%) and $31.00 levels.

Support Levels: $39.00 $32.81 $31.00 

Resistance Levels: $41.00 $46.57 $50.00

DOW JONES

Dow Jones hit to its highest level since the start of September on its way to historic high at 29,000 zones. Renewed optimism on the stimulus talks in the US despite mixed reports is the main driver behind the latest bull run as the USD index DXY is hovering near its lowest level in three weeks. Also, hopes of stronger earning results from the banking section in the US this week is lifting the stocks. On the data side, inflation data set on Tuesday might be affected by the expiry of $600 weekly unemployment benefits.     

From the technical point of view, over the physiological 28,000 level, 28,400 with 29,000 and 29,500 can be followed as next resistance while below 27,770 level the supports can be seen at 27,400, with 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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