Daily Market Report - 21st Oct 2020

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EURUSD

The EUR/USD pair hit a fresh October high of 1.1840 this Tuesday, retreating just modestly from the level ahead of Wall Street’s close. There was no specific catalyst behind the dollar’s slump, as investors retained a cautiously optimistic stance ahead of a definition of the latest US stimulus talks, to take place during the upcoming Asian session. Equities recovered from Monday’s slump but closed mixed in Asia and Europe. US indexes recovered part of the ground lost at the beginning of the week.

Economic data indicated mild economic progress, as the EU published the August Current Account that posted a seasonally adjusted surplus of €19.94 B. Also, the German Producer Price Index came in better than anticipated. As for the US, the country released September Building Permits, which rose 5.2%, beating the market’s expectations and Housing Starts for the same month that missed estimates by printing a 1.9% monthly gain. This Wednesday, the only relevant event included in the calendar is a speech from ECB’s President, Christine Lagarde.

The EUR/USD pair is trading near the mentioned high as the market prepares for US stimulus news. It is technically bullish, as, in the 4-hour chart, it has advanced further above all of its moving averages, with the 20 SMA advancing, although below the larger ones. Technical indicators, in the meantime, have reached overbought levels partially losing their bullish momentum, but maintaining the risk skewed to the upside. A steeper advance is to be expected on a break above 1.1870, now the immediate resistance level.

Support levels: 1.1810 1.1770 1.1725

Resistance levels: 1.1870 1.1915 1.1960 

USDJPY

The USD/JPY pair peaked at 105.74, underpinned by the better tone of Wall Street, and rising US Treasury yields, with that of the 10-year note touched 0.80%, a two-week high, ending the day not far below the level. The pair, however, retreated from the mentioned high to settle in its comfort zone around 105.40, as speculative interest got rid of the greenback.

Japan’s macroeconomic calendar is quite scarce this week, as the country didn’t publish relevant figures this Tuesday and there’s nothing in the docket for Wednesday.

The USD/JPY pair has briefly advanced above its 100 and 200 SMA, back below them, a few pips above the current level. The 20 SMA has modestly advanced below the current level, while technical indicators turned south, now challenging their midlines.

Despite the pair has been confined to a tight range and maintains its neutral stance, chances are increasingly bearish, given the lack of dollar’s demand.

Support levels: 105.00 104.65 104.20

Resistance levels: 105.80 106.25 106.60

GBPUSD

The GBP/USD pair ended the day as it started it, trading around 1.2940, as frozen Brexit talks overshadowed the broad dollar’s weakness. Downing Street has put trade talks with the EU on pause, waiting for Brussels to make concessions. The European Commission has officially stated its willingness to intensify trade talks with the UK, but at the time being, talks are being held by phone. Meanwhile, UK PM Johnson said tougher restrictions would be imposed on the Greater Manchester region in northern England starting on Friday after the country reported 21,331 new coronavirus cases.

The United Kingdom will release this Wednesday, September inflation figures. The annual CPI is foreseen at 0.5%, up from 0.2% in the previous month, while the core reading is expected at 1.3% from 0.9% previously.

The GBP/USD pair has remained below a daily descendant trend line coming from this October high at 1.3082 and currently around 1.3020. The 4-hour chart shows that the pair is trading within all of its moving averages, as technical indicators hold around their midlines without clear directional strength. The pair will likely continue trading uneventfully ahead of Brexit-related definitions, with the bullish potential limited, despite absent demand for the greenback.

Support levels: 1.2940 1.2895 1.2850 

Resistance levels: 1.2985 1.3025 1.3060 

AUDUSD

The Australian dollar fell on the back of a dovish Reserve Bank of Australia, with AUD/USD hitting a 4-week low of 0.7020. The RBA released the Minutes of its latest meeting, which showed that boar members have continued to consider how additional monetary easing could support jobs and even discussed the possibility of reducing the targets for the cash rate and the 3-year yield towards zero. On a positive note, members noted that the global economy is gradually recovering, although it will remain linked to coronavirus developments.

The pair later recovered from the mentioned low alongside US equities during US trading hours, trimming early losses and trading in the 0.7060 price zone. During the upcoming Asian session, the country will publish the September Westpac Leading Index, previously at 0.48%. It will also publish the preliminary estimate of September Retail Sales, previously at -4%.

The AUD/USD pair is technically bearish, as the 4-hour chart shows that the pair remained below all of its moving averages, with the 20 SMA still below the larger ones. Technical indicators have recovered from their intraday lows, but turned flat within negative levels, indicating limited buying interest, despite the broad dollar’s weakness. 

Support levels: 0.7020 0.6980 0.6940

Resistance levels: 0.7100 0.7130 0.7170 

SILVER

Silver had a positive start to week trying to take over $25.00 resistance. Improved risk appetite caused by the optimism on a stimulus package deal pressured the USD index DXY through 93.00 levels and precious metals are supported by the decline in the USD. At this point, the price action for Silver is caused by monetary developments rather than the actual supply and demand. In the long run, an increase in industrial silver demand combined with the extreme liquidity will likely to outperform Gold in terms of gains. Lately, Silver outperformed Gold almost in all risk-off trading sessions. Gold to Silver ratio retraced back to 77.00 levels reflecting the better performance from the white metal.      

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 finally capitalised the decline seen in the USD index DXY on Thursday and tried to test the $42.00 level. However, the black gold failed to sustain its move up and retraced to mid-$41.00 levels. The OPEC+ reinforced its commitment to support the oil market amid dwindling demand prospects, as coronavirus cases continue to rise globally. However, the alliance failed to offer any hints on further oil output cuts. OPEC Secretary M.Barkindo recently said that the cartel will do its best to prevent another plunge in prices from happening again. On the other hand, the latest statements from Nancy Pelosi, speaker of the United States House of Representatives, considered as positive and energy prices supported by the hopes of a deal. At this point, markets tend to ignore the lockdown measures re-imposed in the EU due to the rising number of new cases as full lock-downs are not expected anymore. 

WTI tested its highest level since early September. 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

After the heavy selling seen on Monday, Dow Jones tried to erase some of its losses on Tuesday with the improved optimism surrounding the stimulus talks. As the Democrat candidate Biden is heading for a win, hopes of a bigger than expected aid package is the main driver behind the risk appetite. Pelosi hinted at a possible deal before the elections while Senate Majority Leader Mitch McConnell has told Senate Republicans on Tuesday that he has warned the White House not to make a big stimulus deal before the election. Housing data released on Tuesday in the US showed a rebound in Housing Starts and Building Permits in September as the housing sector has been an early and clear bright spot of the reopening economy usually. On the other hand, Q3 earning season continues in the US while of the 66 S&P 500 companies that have reported results, 86.4% have surpassed the expectations for earnings, according to Refinitiv IBES data.     

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

GOLD

Gold inched higher on Tuesday trading as markets decided to evaluate the current stimulus talks as progressive. As there are talks scheduled to take place between Steven Mnuchin and Nancy Pelosi, Democrat’s representative stated that they want to understand if they are in the same line with the package with the Republicans. At this point, the size of the package will most likely affect Gold directly as a possible $2.0 trillion USD aid package will push Gold to $2,000 levels. On the other hand, Covid-19 conditions seem to be the new normal as markets prefer to focus more on monetary developments instead of the re-imposed lockdown measure, especially in the EU. Due to the rising number of new cases, many European countries re-imposed some of the lockdowns measures labelled as “circuit breakers”. However, the developments on the pandemic side did not create a risk-off sentiment experienced like in the first wave.

Gold managed to surpass $1,900 level decisively on Tuesday. Below the $1,860 level, the supports can be followed at $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: $1,860 $1,763 $1,700

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

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.

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