Daily Market Report - 22th July 2020

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EURUSD

The greenback was the worst performer this Tuesday, plummeting against all of its major rivals. The EUR/USD pair retook the 1.1500 level, surging to levels last seen in January 2019, when the pair topped at 1.1569. The main market motor was again sentiment, which turned upbeat. EU leaders finally agreed on a coronavirus recovery fund, of €750 billion, which will include €390 billion in grants. The news lifted European equities, which retreated ahead of London’s close to post modest intraday gains. US indexes, on the other hand, traded mixed, with the NASDAQ struggling to post gains.

Meanwhile, investors kept monitoring coronavirus developments. The number of cases continues to rise in the US, with over 10,000 new daily cases in Florida. The death toll across the country somehow decreased. Additionally, China reported that its CanSino potential vaccine had shown promising results in early stages of testing, now moving into phase three. That would be then the third vaccine entering such a stage.

The macroeconomic calendar had nothing relevant to offer, as the US only published the June Chicago Fed National Activity Index, which resulted at 4.11 versus 3.24 expected. This Wednesday will also be a data-light day, as the EU won’t publish figures, while the US will only release June housing data.

The EUR/USD pair traded as high as 1.1539, establishing nearby ahead of the Asian session. The pair is overbought, but given that it preserves its positive momentum by the US close, chances are of another leg higher coming up. The 4-hour chart shows that the 20 SMA has turned north far below the current level, while still above the larger ones. Technical indicators, in the meantime, have turned flat after reaching overbought readings. Overall, the risk remains skewed to the upside, with room to test the mentioned January high.

Support levels: 1.1470 1.1420 1.1365

Resistance levels: 1.1530 1.1570 1.1610

USDJPY

The USD/JPY pair plunged to 106.67, the base of these last weeks’ range, on the back of the broad dollar’s weakness. The greenback has been under pressure pretty much since the day started, undermined by encouraging news coming from Europe, as the Union’s leader finally agreed on a recovery fund. Speculative interest dumped the American currency in favor of high-yielding assets, although safe-haven rivals also got lifted.

Japan published at the beginning of the June National CPI which came in at 0.1%, better than the 0% expected. The core reading, which excludes fresh food prices, came in flat at 0%, better than the -0.1% expected. Early Wednesday, Japan will publish the preliminary estimate of the July Jibun Bank Manufacturing PMI, foreseen at 39.6 from 40.1 in June.

The USD/JPY pair trades in the 106.70 price zone, still holding above the critical 106.60 support level. Nevertheless, the risk is skewed to the downside, with scope to test the 105.90 region during the upcoming sessions. Technical readings in the 4-hour chart support a bearish extension, as the pair plunged below all of its moving averages, while technical indicators head south within negative levels.

Support levels: 106.60 106.20 105.90

Resistance levels: 106.95 107.45 107.80 

GBPUSD

The GBP/USD pair surged with the flow, reaching a six-week high of 1.2764 and finishing the day nearby, as investors sold-off the greenback. News coming from the UK hovered around the tense relationship of the country with China. Foreign Secretary Raab announced the UK would suspend the extradition treaty with Hong Kong, as a consequence of the national security law recently imposed. The news came after the UK decided last week to strip the Chinese firm Huawei of any role in the UK's 5G network from 2027 onwards amid security concerns.

Meanwhile, US Secretary of State Mike Pompeo visited the UK to meet with PM Johnson and Raab, to discuss a trade deal between the two economies. Pompeo said that he hopes an agreement can be done “as soon as possible.” Both countries have been negotiating for over two months already, and despite the encouraging headline, Pompeo added that more work needs to be done before signing a trade deal. The UK won’t publish relevant macroeconomic data this Wednesday.

The GBP/USD pair is bullish in the short-term, heading towards 1.2812, the June monthly high. Technical readings in the 4-hour chart support a bullish extension, as the pair continues to develop firmly above its moving averages, with the 20 SMA accelerating north some 150 pips below the current level. The Momentum indicator heads firmly higher, despite being in overbought territory, while the RSI indicator is currently consolidating around 72, in line with further gains ahead.

Support levels: 1.2720 1.2680 1.2640

Resistance levels: 1.2770 1.2815 1.2850

AUDUSD

The AUD/USD pair soared to 0.7146, a level that was last seen in April 2019. At the beginning of the day, the Reserve Bank of Australia published the Minutes of its latest meeting, which were cautiously optimistic, reiterating that things had been “less bad than initially feared,” although acknowledging the risks that lay ahead. Among other things, the document showed that inflation will likely stay low for quite some time while adding that it's possible to lower the cash rate to 10bps. Also, governor Lowe said that the AUD is trading broadly in line with the fundamentals.

Meanwhile, gold soared to a fresh multi-year high of $1,843.46 a troy ounce, providing additional support to the commodity-linked currency. Early on Wednesday, Australia will publish the preliminary estimate of June Retail Sales, seen up by 7.1%, and the Westpac Leading Index for June previously at 0.19%.

The AUD/USD pair is trading near the mentioned high, poised to extend its advance despite being overbought in the short-term. The 4-hour chart shows that technical indicators head firmly north in extreme levels, as the pair develops far above all of its moving averages. The pair could now extend its rally towards the 0.7200 figure before meeting selling interest.

Support levels: 0.7065 0.7020 0.6975

Resistance levels: 0.7160 0.7200 0.7245 

GOLD

Gold is keeping its impressive rally as the yellow metal getting closer to its all-time high. The USD index DXY continues to retrace testing 95.00 level while Wall Street also rallied with positive earnings and optimism caused by the positive news about possible vaccines. On the other hand, the EU finally had an agreement for a total of 750 billion Euro with a major part as a giveaway. Also, the US Congress is working on a second stimulus package to support the economy. As the USD is getting cheaper, the money flow is running to the stock market and also commodities are getting an extra lift like oil. Central Banks also still in favour of Gold as the Turkish Central Bank overtook Russia as Gold purchaser. Turkey’s central bank purchased 148 tons between January and May in 2020 while Russia is holding around 2.300 tons in total.

Gold is at its highest level since September 2011 as 1.920$ was tested as all-time high back then. Above 1.850$ level, Gold will most likely to test 1.900$ and 1.920$ (all-time high). On the downside, below the 1.825$ (2011 August close), 1.800$ and 1.750$(December 2012 peak) levels can be targeted.  

Support Levels: 1.825$ 1.800$ 1.750$

Resistance Levels: 1.850$ 1.900$ 1.920$

SILVER

Silver also had an impressive trading day on Tuesday alongside Gold as the USD index DXY kept on declining. The index is now testing 95.00 level in extreme liquidity conditions. Silver is making a great comeback, especially in last month closing the gap in Gold to Silver ratio. Gold is now at 1.840$ while it’s all-time high is at 1.920$. However, silver surpassed 21.00$ on Tuesday while it’s all-time high is at 50.00$. Therefore, with the industrial production picking up the pace, Silver will most likely to continue its rally pushing the Gold to Silver ratio to its normal levels around 60.00.   

21.00$ level was tested a couple of times back in 2013, 2014 and 2016. If Silver manages to stay over the 21.00$ level, the next target upside can be followed at 21.50$, 22.19$ (2014 high) and 23.00$ levels. Below the 21.00$ level, the targets downside can be followed at 19.64$ (2019 high) and 18.38$ (14.29$-19.64$ %23.60) levels.

Support Levels: 21.00$ 19.64$ 18.38$

Resistance Levels: 21.50$ 22.19$ 23.00$

CRUDE WTI

As the risk sentiment is still positive on the markets, WTI finally managed to get away from its 40.00$ resistance. The EU agreed on a stimulus deal while the second stimulus package is in progress in the US. On the other hand, despite the surge seen in coronavirus cases, macro data readings continue to signal a V-shaped recovery which will increase the demand for oil in the close future. On the trader side, net longs in crude oil climbed to 2-week highs during the week ended on July 14th, according to the latest CFTC positioning report.   

As long as WTI holds over 41.00$ level, the resistance levels can be followed at 42.00$, 46.57$ (March decline start) and 50.00$ levels. Below the 41.00$ level, the supports can be followed at 40.56$ (65.62$-0.00$ %61.80) and 39.00$ levels.

Support Levels: 41.00$ 40.56$ 39.00$

Resistance Levels: 42.00$ 46.57$ 50.00$

DOW JONES

Wall Street had another positive day on Tuesday while Nasdaq had a technical correction, S&P 500 and Dow Jones ended the day with gains. While the number of cases continues to surge in the US, the US Congress is working on the second stimulus program to support the economy. The house wants a bill that will include another $600 added to unemployment insurance that will last until 2021. The Senate wants a bill that will include protection for businesses that will mitigate any exposure to suits for reopening a business if someone gets COVID at your establishment while The White House wants to limit the amount of money that is used for testing COVID and wants to purely focus on reopening the economy. The deal is expected to be sealed by the end of this month. The risk appetite is strong at the moment while Gold also keeping its bullish move as a cautionary measure. Also, the decline in the USD index is still active as the index is testing 95.00 level.  

Technically speaking, over the 26.000 level, the resistance can be followed at 26.875 (29.568-18.158 %76.40), 27.583 (June 2020 high) and 28.000 levels. On the other hand, below the 26.000 level, targets downside can be followed at 25.210 (29.568-18.158 %61.80), 24.690 (2020 April-May resistance) and 23.863 (29.568-18.158 %50.00).

Support Levels: 26.000 25.210 24.690

Resistance Levels: 26.875 27.583 28.000

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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