Daily Market Report - 14th Dec 2020

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EURUSD

The EUR/USD pair retreated on Friday on risk aversion, finishing the day and the week in the red just above the 1.2100 level. Investors remained cautious amid the lack of a Brexit deal and no progress in the US over a fiscal stimulus package in the near-term. The US surpassed the 16 million coronavirus cases on Saturday after reporting 1 million new cases in four days. The virus is out of control in the country and regional lockdowns are being applied, making fiscal aid more urgent. The American currency will likely remain weak as long as this situation persists, although the country will kick-start vaccination this Monday.

Data wise, Germany published on Friday the final figures of November inflation, which was confirmed at -0.7% YoY. The US released the November Producer Price Index, which rose by 1.4% YoY, missing expectations, and the Consumer Sentiment Index from the University of Michigan rose to 81.4, beating the 76.5. This Monday, the EU will unveil October Industrial Production figures.

The EUR/USD pair is trading near a 2020 high of 1.2177 with a limited bearish scope. The daily chart shows that the pair continues to develop above bullish moving averages, with the 20 DMA maintaining a firmly bullish slope. Technical indicators are stable near overbought readings, with the RSI easing just modestly. The 4-hour chart presents a neutral stance, as the pair hovers around a flat 20 SMA, while technical indicators lack directional strength around their midlines.

Support levels: 1.2075 1.2030 1.1990

Resistance levels: 1.2130 1.2180 1.2230 

USDJPY

The USD/JPY pair closed a third consecutive week little changed around the 104.00 level, easing on Friday on the back of the ruling dismal market’s mood. European indexes closed in the red, amid persistent Brexit tensions, while US indexes were mixed, with only the DJIA able to post some modest gains. US Treasury yields fell, providing support to the safe-haven yen, with the yield on the benchmark 10-year note falling to 0.87%, its lowest for this month.

 Japan didn’t publish relevant macroeconomic data on Friday but will start the new week by releasing the Q4 Tankan report. The Large Manufacturing Index is foreseen at -15 from -27 in the previous quarter.

The USD/JPY pair is technically bearish, despite the lack of directional progress in the last few weeks. The daily chart shows that it has been unable to recover above a bearish 20 DMA, while the longer ones maintain their downward slopes far above the current level. Technical indicators turned south and currently stand within negative levels. In the shorter-term, and according to the 4-hour chart, the pair is neutral-to-bearish. It is developing below flat moving averages, while technical indicators also lack directional strength. A steeper decline will be clearer on a break below the 103.50 support level.

Support levels: 103.85 103.50 103.10

Resistance levels: 104.30 104.75 105.10

GBPUSD

Diminished chances of a Brexit deal had hit the Sterling Pound last week, resulting in GBP/USD plummeting to 1.3133, its lowest in almost a month. The pair bounced ahead of the weekly close to settle in the 1.3220 price zone, still at risk of collapsing on a no-deal between the UK and the EU. By the end of the week, UK PM Boris Johnson said that it is “very, very likely” that the UK will have to trade with the EU on WTO terms, while EU’s Ursula Von Der Leyen told EU leaders that a no-deal is the most likely outcome.

Both parts set a deadline for this Sunday to find an agreement, although, at the time being, no progress has been reported. Johnson and Von der Leyen agreed to continue discussions this week ahead of January 1, while the pair is expected to remain under selling pressure. The United Kingdom won’t publish relevant data this Monday.

In the daily chart, the GBP/USD pair is poised to extend its decline, as it has broken below its 20 DMA and approached the 100 DMA, which provides support at 1.3090. Technical indicators have crossed their midlines into negative territory, maintaining their bearish slopes. In the 4-hour chart, the risk of a bearish extension is even higher, as the pair has broken below all of its moving averages, while technical indicators stand near oversold readings without signs of downward exhaustion.

Support levels: 1.3210 1.3165 1.3120

Resistance levels: 1.3255 1.3300 1.3345

AUDUSD

The AUD/USD pair reached a fresh multi-year high of 0.7571 on Friday, closing the week with substantial gains in the 0.7530 price zone. The pair rallied on Thursday after breaking through the 0.7500 threshold, finding additional support in rising iron ore. The broad dollar’s weakness maintained the pair near its highs, while the poor performance of gold and equities kept the upside limited.

Australia didn’t release macroeconomic data at the end of the last week, and it won’t release relevant figures this Monday. On Tuesday, the RBA will unveil the Minutes of its latest meeting.

The AUD/USD pair is bullish but also overbought in its daily chart. There are no signs of an imminent decline as the pair keeps developing well above its moving averages, with the 20 DMA providing dynamic support at 0.7385. Technical indicators consolidate at weekly highs, with the RSI currently at 72. In the shorter-term, and according to the 4-hour chart, the risk of a bearish extension is well-contained, as technical indicators corrected overbought conditions to stabilize within positive levels, as the pair remains above bullish moving averages.

Support levels: 0.7415 0.7375 0.7330

Resistance levels: 0.7450 0.7490 0.7530

GOLD

Gold failed to sustain its move up on Friday while the vaccine optimism fuels the risk appetite, Brexit and stimulus uncertainty supports the risk aversion. The USD index DXY failed to surpass the 91.00 level on Friday. The US Food and Drug Administration (FDA) announced the much-awaited authorization of Pfizer and BioNTech's jointly developed coronavirus vaccine for emergency use (EUA) late Friday after the UK and Canada. This comes after the vaccine advisers to the US medical regulator voted 17 to 4 Thursday, recommending the approval of the vaccine for emergency use. On the other hand, FED may step in if there will be no stimulus deal since 12 million Americans are about to lose their aid soon. As there is still a long path to ending the pandemic despite the vaccination, any deal on stimulus package will boost the precious metals and pressure the USD in the short term. However, most of the action might be bought already with hopes of a partial deal next week.

Apart from the EU and UK negotiations next week, Chinese retail sales and more important industrial prodıction readings will be followed on Tuesday. Wednesday will be busy in terms of economic events as retail sales data set with Fed interest rate decision will be followed. As the rates will remain unchanged, FOMC press conference and economic projections will be closely monitored by the traders. On Thursday, weekly labour data results will be followed in the US.

From the technical point of view, below the $1,860 level, the supports can be followed at $1,800, $1,763 ($1,451-$2,075 61.80%) and $1,700 levels. Over the $1,860 level, the resistances can be followed at $1,900 with $1,956 ($1,451-$2,075 38.20%) and $2,000 levels.

Support Levels: $1,800 $1,763 $1,700

Resistance Levels: $1,900 $1,956 $2,000

SILVER

Silver also had a lifeless trading session on Friday as markets are in a wait and see mode stock between the vaccine news and stimulus uncertainty. The expected stimulus deal will most likely have two effects on the markets. The USD will most likely stay under pressure due to the extreme amount of liquidation and inflation might pick up the pace in the US. Therefore, precious metals will benefit this scenario in the long run. Also, Silver will have another boost in the post-pandemic era with rising industrial activity and green energy demands.

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 

DOW JONES

Dow Jones also entered into wait and see mode as the index spent the majority of the Friday stuck in a very tight range ending the week a tick below the 30,000 level. The daily death toll continues to break records in the US while the FDA finally approved the emergency use of Prizer&BioNTech vaccine in the US after the UK and Canada. There were 853,000 initial claims for unemployment benefits in the US during the week ending December 5th, the data published by the US Department of Labor (DOL) revealed on Thursday. This reading followed last week's print of 716,000 (revised from 712,000) and missed the market expectation of 725,000 by a wide margin. On the other hand, Inflation in the US, as measured by the Consumer Price Index (CPI), was 0.2% in November, the report published

by the US Bureau of Labor Statistics showed on Thursday. On a yearly basis, the CPI stayed unchanged at 1.2%. Further details of the publication showed that the Core CPI, which excludes volatile food and energy prices, remained steady at 1.6% on a yearly basis and came in line with analysts' estimates. Congress once again failed to reach an agreement on the stimulus bill while around 12 million Americans are on their way to losing the aid they are getting by the end of the year. In that sense, the week ahead will be very important as the Fed might step in to provide extra liquidity to markets.

On Wednesday, Fed interest decision will be followed as the policymakers are expected to keep their status quo. More importantly, FOMC press conference and economic projections will play a key role due to uncertainty in the stimulus deal.     

From the technical point of view, if the index stays over 29,000, 29,500 and 30,000 levels can be followed as new targets high while below the 28,400 level, 28,000 and 27,770 can be followed as supports.

Support Levels: 28,400 28,000 27,770

Resistance Levels: 29,500 30,000 30,500

WTITYITYIITITI

WTI retraced slightly from its 7-months high on Friday as markets, in general, had an indecisive and limited range trading session. The risk appetite in the markets is going back and forth between vaccine optimism and stimulus uncertainty at the moment. The USD index DXY failed to gain traction and started below 91.00 level. Also, Brexit drama keeps its uncertainty as both sides are heading for a no-deal split. On the supply side, OPEC+ Joint Ministerial Monitoring Committee will be meeting on the 17th of December (next Thursday) and will review secondary data and current crude oil market conditions before making a policy recommendation to OPEC+. Last week, the headline EIA inventory report limited the gains for WTI as Crude stocks rose 15.189M barrels last week versus expectations for a drop of 1.424M. This took total US crude oil inventories to 503.2M barrels, about 11% above the average over the last five years.

Next supports can be seen at 45.00$, 43.88$ and 43.00$ respectively while the resistances can be followed at 47.00$ and 48.50$.

Support Levels: 45.00$ 43.88$ 43.00$

Resistance Levels: 46.00$ 47.00$ 48.50$ 

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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