Daily Market Report - 28th Aug 2020

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EURUSD

The EUR/USD pair traded as high as 1.1901 and as low as 1.1761 but is ending the day in its around 1.1820. The sharp moves were triggered by US Federal Reserve chief Powell’s worlds, as he presented a new framework for monetary policy in his opening remarks in the Jackson Hole Symposium. As expected, Powell introduced a shift towards average target inflation, which means that policymakers could let inflation run beyond the usual 2%. Also, Powell focused on the employment situation. He highlighted a “broad-based and inclusive goal” of maximum employment. By the end of his statement, Powell noted that it would take a couple of years for the employment sector to recover, which alongside the new view on inflation, pretty much signifies lower rates for longer.

Stocks soared but trimmed part of their gains ahead of the close, while Treasury yields reached fresh weekly highs with the events, although currency majors saw little changes after the dust settled. The US also reported the second estimate of its Q2 GDP revised to -31.7%, and Initial Jobless Claims for the week ended August 21, which resulted at 1.006 million, slightly worse than expected.

In terms of data, Friday will be quite a busy day, as Germany will publish the September GFK Consumer Confidence Survey, while the EU will release August Consumer Confidence and the Economic Sentiment Indicator. As for the US, the country will unveil spending and income data for July and the final reading of the August Michigan Consumer Sentiment Index.

The EUR/USD pair has held inside last Friday’s range for a fourth consecutive day, finishing it little changed on the downside. The short-term picture is neutral, as the pair has spent most of the day hovering around converging 20 and 100 SMA, both directionless, now trading a few pips below them. Technical indicators, in the meantime, fell below their midlines before turning flat, losing their directional strength. The short-term picture is neutral, although, in the longer run, the risk keeps skewing towards the downside.

Support levels: 1.1750 1.1710 1.1665

Resistance levels: 1.1840 1.1885 1.1920

USDJPY

The greenback stands victorious against the Japanese yen, as the pair surged to 106.69, a fresh weekly high, holding nearby at the end of the American session. The pair recovered from a daily low of 105.59, retaining gains on the back of soaring Treasury yields. US Government bonds came under pressure after the US Federal Reserve announced a monetary policy shift that will now average inflation, compensating above 2% inflation with periods of lower price pressure. The yield on the benchmark 10-year Treasury note surged to an over one-week high of 0.75%, finishing the day at 0.73%.

Japan published at the beginning of the day the All Industry Activity Index, which improved to 6.1% in June from -4.1% in the previous month. Early Friday, the country will publish August Tokyo inflation data. The annual CPI is expected at 0.8% YoY while the core reading is foreseen at 0.3%.

The USD/JPY pair holds on to most of its daily gains, but stalled at a strong resistance level, and lacks momentum in the short-term, somehow limiting the chances of a new leg north. The 4-hour chart shows that the pair has settled above all of its moving averages, with the 20 SMA advancing between the larger ones, all of them confined to a tight range. Technical indicators, in the meantime, turned lower, but remain within positive levels.

Support levels: 106.35 105.90 105.50

Resistance levels: 106.70 107.05 107.40

GBPUSD

The GBP/USD pair has reached a fresh 2020 high of 1.3284 retreating afterwards to settle around the 1.3200 level, pretty much unchanged daily basis. Beyond the broad volatility witnessed around the time of Fed Powell’s remarks, the pair has remained confined to quite a tight range. The absence of relevant UK data released this week and mounting concerns about the UK’s future trade relationship with the EU limited the pound’s bullish chances. The kingdom’s calendar will remain empty on Friday, but BOE’s Governor Bailey is set to speak this Friday at the Jackson Hole Symposium. Meanwhile, Brexit-related uncertainty would likely continue to cap pound’s advances.

The GBP/USD pair is at the lower end of its daily range ahead of the Asian opening, with the bearish potential limited according to intraday technical readings. In the 4-hour chart, the pair settled above its 20 and 100 SMA, with the shortest advancing modestly above the larger one. Technical indicators in the mentioned time-frame eased from daily highs but remain above their midlines, with the RSI now stable around 56. The pair has an immediate support level at 1.3160, the daily low, with scope to pierce the 1.31 figure on Friday once below it.

Support levels: 1.3160 1.3120 1.3085

Resistance levels: 1.3215 1.3255 1.3290

AUDUSD

The AUD/USD pair reached a fresh 2020 high of 0.7290, retreating afterwards yet ending the day with gains in the 0.7260 price zone. The rally was backed by Wall Street’s rally and persistent dollar’s weakness. Australia published only minor macroeconomic data this week, which had no effect on the local currency. Still, this Thursday the country released Q2 Private Capital Expenditure, which came in at -5.9% worse than the previous -4.1% but better than the -8.4% expected. The country won’t release macro figures this Friday.

From a technical point of view, the AUD/USD pair seems poised to extend its advance, as the 4-hour chart shows that it keeps moving above its moving averages, with the 20 SMA gaining upward traction above the larger ones. Technical indicators, in the meantime, hold near their daily highs, the Momentum flat, yet the RSI is still advancing currently at around 65. Beyond the mentioned daily high, the pair has room to extend its advance 0.7373 the high set in December 2018. 

Support levels: 0.7195 0.7160 0.7120

Resistance levels: 0.7290 0.7330 0.7360 

SILVER

Silver also had a volatile session on Thursday as FED changed its inflation policy to “average inflation” of %2. Apart from Gold’s extreme moves, Silver trading can be considered as more stable with a bullish look holding well over 26.00$ zone. On the other hand, lack of catalyst from the industrial demand side is still limiting the advance for Silver. In the long run, precious metals are expected to be supported by FED’s policy at least until 2022 as the interest rates will remain low to zero. As the industrial demand normalises for Silver, the white metal can find an extra boost to outrun Gold.   

If Silver manages to stay over 27.00$, next targets upside might be followed at 29.28$ (March 2013 resistance), 30.00$ and 32.00$ levels. Below the 27.00$ level, the supports might be followed at 25.00$ and 24.00$ levels.

Support Levels: 27.00$ 25.00$ 24.00$

Resistance Levels: 29.28$ 30.00$ 32.00$

DOW JONES

Wall Street had another record-breaking trading day on Thursday as both S&P and Nasdaq kept on printing new all-time highs. On the other hand, Dow Jones surpassed a critical resistance level of 28.400 on its way to close the bearish gap made on February 24th. Jerome Powell took the stage on Thursday in the Jackson Hole symposium. The chairman announced changes to the central bank’s policy framework in a speech at the Jackson Hole economic symposium that was perceived as offering a more accommodative monetary policy. FED changed its fixed inflation target of %2 to an “average target” of %2.0, allowing the central bank to keep the monetary policy unchanged even the inflation target is met. On the data side, the United States' Real Gross Domestic Product (GDP) contracted at an annual rate of 31.7% in the second quarter, which is the biggest decline after the great depression, the US Bureau of Economic Analysis' second estimate showed on Thursday. This reading came in better than the advance estimate of 32.9% and the market expectation of 32.5%. As a critical event for Dow Jones next week, a 4-for-1 Apple stock split is expected to shift the exposure of the index.         

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

GOLDXA

Gold had a volatile session on Thursday assisted by Powell’s speech. During his speech, the USD index fell to its weekly lows at 92.44 pushing Gold to its daily high of 1.976$. However, close to the market close in the US, the USD index managed to erase its losses trying to re-gain 93.00. The Fed announced a shift in its approach to monetary policy. The central bank adopted an “average inflation” target of 2%, allowing inflation to run “moderately” higher for some time. It also mentioned if it will focus on shortfalls of maximum employment instead of “deviations''. The message from the Fed is that it will let inflation run higher (moderate) in times of economic prosperity and keep the rates low for a longer period even if the inflation target is reached. On the other hand, 10-year yields in the US hit %0.74, highest since mid-June.

Profit-taking action before the speech pushed Gold to lower while FED’s policy, in the long run, is yellow metal positive. 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$

WTIOIL

WTI gave away its daily gains at the end of the session as the National Hurricane Center (NHC) stated that hurricane Laura has weakened to Category 3. However, as a precaution, oil producers in the region already declared that they halted the production earlier this week. On the other hand, Crude Oil Stocks Change in the US was -4.7 million barrels in the week ending August 21st, the weekly report published by the US Energy Information Administration (EIA) revealed on Wednesday, compared to analysts' estimate of -3.7 million barrels. US crude oil refinery inputs averaged 14.7 million barrels per day during the week ending August 21, 2020, which was 225,000 barrels per day more than the previous week’s average. Despite the pullback, WTI managed to stay over 43.00 level gaining traction in a slow but steady pace also supported by the weakness seen in the USD.      

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$

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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