Daily Market Report - 9th Sep 2020

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EURUSD

The EUR/USD pair fell to 1.1765, its lowest in over a week, ending the day in the red below 1.1800. The dollar strengthened throughout the first half of a day, underpinned by increased tensions between the EU and the UK weighing on high-yielding assets. The greenback eased during US trading hours following comments from House Speaker, Pelosi and Senate Majority Leader Mitch McConnell, regarding an aid package. Republicans will put in the table a $300B bill, which is far less than what Democrats are seeking. Pelosi said that such a small package is an insult to American people.

The EU published its Q2 Gross Domestic Product, which was revised to -11.8% in Q2, better than the previous estimate of -12.1%, but still showing record contraction. Also, and in the three months to June, the Employment Change came in at -2.9%, worse than the previous -2.8%. The US, on the other hand, published minor figures, the NFIB Business Optimism Index for August, which improved to 100.2 from 98.8, beating expectations.and the IBD/TIPP Economic Optimism for September, which printed at 45 from 46 previously. The macroeconomic calendar will not offer relevant data for these two economies on Wednesday.

The EUR/USD pair retains its bearish stance and is at risk of falling further, although would need to break below 1.1760. The 4-hour chart shows that it has extended its decline below all of its moving averages, while a bearish 20 SMA kept providing intraday resistance. Technical indicators have lost their bearish strength, but remain within negative levels, indicating absent buying interest.

Support levels: 1.1760 1.1710 1.1680

Resistance levels: 1.1840 1.1880 1.1925  

USDJPY

The USD/JPY pair topped at 106.37 on the back of dollar’s demand, but fell to 105.85 with the US opening, weighed by another rough day in Wall Street. US indexes were sharply down in the first trading day of the week as the rout in tech shares continued. The Nasdaq Composite lost over 400 points and was the worst performer. The poor performance of US equities weighed on Treasury yields, which also edged lower.

In the data front, Japan published its final version of Q2 GDP, which was downwardly revised to -7.9% better than the -8.1% expected. The country’s Trade Balance resulted in ¥137.3B, much better than the ¥-181.3B anticipated by analysts. Even further, the August Econ Watchers Survey on the current situation improved from 41.1 from 43.9. This Wednesday, the country will publish July Machinery Orders, seen up 1.9% MoM.

The USD/JPY pair turned short-term bearish after giving up, now trading around the 106.00 level. The 4-hour chart shows that the price is stuck around converging 100 and 200 SMA, while the 20 SMA gains strength downward above the larger ones. The Momentum indicator heads firmly lower within negative levels, while the RSI hovers around 43. Still, the pair continues to trade within familiar levels. A relevant support level comes at 105.50, with bears having more chances on a break below it.

Support levels: 105.90 105.50 105.10

Resistance levels: 106.35 106.70 107.10

GBPUSD

The GBP/USD pair traded as low as 1.2985 this Tuesday settling at the end of the American session a few pips above this last. The pound remained in sell-off mode on the back of Brexit jitters, as chances of a no-trade deal increased sharply in the last couple of days, and neither the UK nor the EU seem willing to give up on their demands. UK PM Johnson’s spokesman said this Tuesday that, while the government still thinks a deal is possible, the EU needs to be more realistic.

Concerns were exacerbated by news that the head of the UK’s legal department, Jonathan Jones, quit after PM Johnson proposed to row back on parts of the Withdrawal Agreement relating to Northern Ireland. The UK didn’t publish macroeconomic data, and the calendar will remain empty on Wednesday.

The GBP/USD pair is extremely oversold yet still bearish. A clear break below the 1.2980, August monthly low, will likely exacerbate the ongoing slump. The 4-hour chart shows that the pair has broken below all of its moving averages, with the 20 SMA heading south below the 100 SMA. The Momentum indicator has bounced modestly from daily lows, but the RSI indicator keeps heading south, despite being at 23.

Support levels: 1.2980 1.2930 1.2890

Resistance levels: 1.3055 1.3095 1.3140

AUDUSD

The AUD/USD pair ended the day in the red in the 0.7210 price zone, weighed at the end of the day by persistent dollar’s demand alongside the poor performance of European and American equities. Australia published at the beginning of the day NAB’s Business Confidence, which improved in August to -8 from -14, although the NAB’s Business Conditions deteriorated to -6 from 0.

During the upcoming Asian session, the country will publish September Westpac Consumer Confidence, previously at -9.5%, and July Home Loans, seen up 3.1% after advancing 7.1% in the previous month.

The AUD/USD pair has met sellers on an early spike to 0.7280, quickly retreating from the level, a sign that bulls are giving up. The 4.hour chart anticipates further declines ahead as it shows that the pair is below its 20 and 100 SMA with the shortest heading firmly lower. Technical indicators, in the meantime, remain near daily lows, with the Momentum losing directional strength, but the RSI sill heading lower currently at around 25.

Support levels: 0.7210 0.7170 0.7130

Resistance levels: 0.7240 0.7280 0.7320

GOLD

Gold had another indecisive and volatile trading session on Tuesday as traders came back to work after the Labor Holiday in the US. Risk-off trading dominated the markets as Wall Street faced sharp sell-off action. On the other hand, the USD index DXY extended its move-up through mid 93.00 level. Also, China, the second-largest holder of the U.S. Treasuries, worth over $1 trillion, is now gradually selling them. The 10-year yield stands at %0.68 after testing %0.72 last week. After the record-breaking move that carried Gold to 2.075$, the yellow metal entered into a consolidation phase while 1.900$ holding tight with the barrier around 1.960$ on top.   

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$

SILVER

Silver is outperformed by Gold on Tuesday as the Gold to Silver ratio again tested mid 72.00 levels. On the other hand, Silver is in a consolidation mode like Gold after the impressive rally that took the white metal through 29.86$ which was seen last time in March 2013. In general, market uncertainty and the central bank’s liquidity moves supported precious metals in the light of the Covid-19 pandemic. The interest for physical Silver increased in 2020 and also ETF-exchange traded funds also supported the rally seen in Silver. Unlike Gold, Silver is highly affected by the industrial activity as it has wide usage in solar panels and now in 5G technology. Therefore, along with the central bank’s policies, Silver will most likely be supported by the industrial demand in the long run.   

If Silver manages to stay over 27.00$, next targets upside might be followed at 29.28$ (March 2013 resistance) and 30.00$ levels. Below the 27.00$ level, the supports might be followed at 25.00$, 24.00$ and 23.38$ levels.

Support Levels: 25.00$ 24.00$ 23.38$

Resistance Levels: 27.00$ 29.28$ 30.00$

CRUDE WTI

WTI extended its sharp retreat to its fifth consecutive day as demand worries started to weigh on the black gold. As the number of new cases continues to increase globally, possible countermeasures against the pandemic will definitely lower the demand for oil. Also, the current move-up seen in the USD index DXY is pressuring WTI combined with the escalating tensions between the US and China. Earlier on Tuesday, the NY Times reported that the US is considering a ban on some of the cotton products from China’s Xinjiang province. Meanwhile, President Donald Trump said he plans to end America’s reliance on the country.  

Technically speaking, 33.00$ zone stands as the breakdown level to confirm a bear market has started. Below the 37.00$, the supports can be followed at 33.23$ (0.00$-43.49$ %23.60), 26.88$ (0.00$-43.49$ %38.20) and 21.75$ (0.00$-43.49$ %50.00). Over the 37.00$ zone, resistance can be followed at 39.00$, 40.00$ and 42.00$ zone (July-august consolidation range).

Support Levels: 33.23$ 26.88$ 21.75$

Resistance Levels: 39.00$ 40.00$ 42.00$ 

DOW JONES

Dow Jones extended its decline in its third consecutive day to a critical level of 27.500. Along with Dow Jones, Nasdaq printed %4.0 decline reaching a total of %10 loss in three days. Last Friday, Jerome Powell stated that the August NFP data set was a good one. However, the chairman added that the gains will likely decline in the coming term. Also, Trump stated that if re-elected, he would seek to decouple the country from China. This means that he will seek to end a significant amount of business between the two countries. That statement came on the same day that data from China showed it had a trade surplus of more than $58 billion. That was in contrast with the US trade deficit of more than $63 billion. The USD gained traction on Tuesday testing mid-93.00 levels while Gold had an indecisive and volatile session barely ending the day on positive territory.

If Dow Jones keeps its stance over 27.000 level decisively, 27.583 (June 2020 high), 28.000 and 28.402 levels can be followed as resistances. Below the 27.000 level, the supports can be followed at 26.000, 25.210 (29.568-18.158 %61.80) and 24.690 (2020 April-May resistance) levels.     

Support Levels: 26.000 25.210 24.690

Resistance Levels: 27.583 28.000 28.402

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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