Daily Market Report - 20th Oct 2020

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EURUSD

The EUR/USD pair traded as high as 1.1793 this Monday, with the positive risk sentiment getting a boost from Chinese data indicating economic growth, and speculation about a US fiscal stimulus package. About this last, however, there are no news indicating progress, but House Speaker Nancy Pelosi announced Democrats had set a 48-hour deadline to clinch a deal. The greenback maintained its sour tone across the FX board despite Wall Street being unable to hold on to early gains and turned red mid-US afternoon.

The macroeconomic calendar had little to offer. ECB’s President Christine Lagarde and Fed’s Chair Jerome Powell participated in different virtual events but made no relevant comments related to the current monetary policy. This Tuesday, Germany will publish the September Producer Price Index, while the US will release September Building Permits and Housing Starts for the same month. In general, the calendar will be light this week, which means the focus will remain on stimulus and other pandemic-related issues, and Brexit.

The EUR/USD pair is holding on to most intraday gains and trading in the 1.1770 price zone after Democrats indicated that trade negotiations are still far apart in “values.” The risk is skewed to the upside in the short-term, as, in the 4-hour chart, it is developing above all of its moving averages, which anyway lack clear directional strength. Technical indicators have partially lost their bullish momentum, but remain well above their midlines. The pair needs to take the 1.1810 resistance to be able to extend its advance during the upcoming sessions.

Support levels: 1.1725 1.1680 1.1640

Resistance levels: 1.1810 1.1850 1.1890

USDJPY

The USD/JPY has continued to hover around the 105.40 price zone, unable to attract investors. The pair was indifferent to the broad dollar’s weakness and stocks’ behavior, instead stuck alongside government bond yields. The markets were cautious over US stimulus talks, also concerned about a continued increase in coronavirus cases worldwide, which led to new restrictive measures as the cold season reaches the North Hemisphere.

Japan published during Asian trading hours the September Merchandise Trade Balance Total, which posted a surplus ¥675 B, below the expected ¥989.8 B but above the previous ¥248.6 B. Imports decreased by 17.2%, while exports were down by 4.9%. The country won’t publish relevant data this Tuesday.

The USD/JPY pair is technically neutral, as it has been hovering around the current level for over two weeks. In the 4-hour chart, it’s above the 20 SMA but below the larger ones, which converge around 105.55. Technical indicators have posted modest advances within positive levels, but are still close to their midlines. The range is defined by 105.00 to the downside and 105.80 to the upside. The pair needs to clear one of those two levels to find some directional strength.

Support levels: 105.00 104.65 104.20

Resistance levels: 105.80 106.25 106.60

GBPUSD

The GBP/USD pair jumped traded as high as 1.3024 on the back of the broad dollar’s weakness but retreated from the level amid mounting speculation the UK will leave the European Union without a trade deal. According to the latest on the issue, the UK said that there’s still no basis for trade talks to resume, as the EU has not changed its approach. UK PM Johnson’s spokesman said that the latest talks were “constructive,” and that the negotiation teams will remain in close touch. The pair eased to the 1.2940 price zone with the headlines. The UK won’t release relevant macroeconomic data on Tuesday.

The GBP/USD pair met sellers around a descending trend line coming from this month’s high at 1.3082, currently providing resistance in the 1.3020 area. The 4-hour chart shows that the pair settled above all of its moving averages, which are directionless and confined to a tight 30 pips’ range, indicating the absence of a clear trend. Technical indicators in the mentioned time-frame hold on to the positive ground, but the RSI has already turned south, skewing the risk to the downside without confirming it.

Support levels: 1.2940 1.2895 1.2850 

Resistance levels: 1.2985 1.3025 1.3060 

AUDUSD

The AUD/USD pair hit a daily high of 0.7100 but trimmed intraday gains and trades around 0.7060 ahead of the Asian opening. The Australian currency found support at the beginning of the day on Chinese data, as the country’s Q3 GDP came in at 4.9%, below the 5.2% expected but better than the previous 3.2% Industrial Production and Retail Sales in the country improved by more than anticipated in September, indicating steady growth in the country. The pair fell during US trading hours, following Wall Street’s lead, as US major indexes plunged on headlines indicating that no progress has been made in the US on a coronavirus aid package.

 This Tuesday, the focus is on the Reserve Bank of Australia, as the central bank will publish the minutes of its latest meeting. The People Bank of China will also set rates this Tuesday.

The AUD/USD pair plunged to daily lows around 0.7060, where it trades at the time being. The 4-hour chart shows that the bearish case is still strong, as sellers rejected the early advance around a firmly bearish 20 SMA. This last keeps falling below the larger ones. Technical indicators in the mentioned time-frame turned lower, the Momentum around its midline, and the RSI at around 35, supporting another leg south in the near-term.

Support levels: 0.7050 0.7020 0.6980

Resistance levels: 0.7100 0.7130 0.7170 

GOLD

Gold kept its sideways-positive trade on Monday while the uncertainty surrounding the stimulus agreement is shaping the markets at the moment. On the other hand, lower than expected Chinese Q3 GDP figures also depressed the markets despite the annual GDP figure will most likely be positive. However, despite the weak data readings, the USD index DXY retraced to sub-93.50 levels contrary to risk aversion. At the moment, risk perspective is shifted from the Covid-19 pandemic to stimulus talks and the US election results despite the rising number of cases, especially in the EU.     

Gold managed to re-gain its physiological level of $1.900 on Monday. 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  

SILVER

Silver also followed the same routine with Gold on Monday. The white metal failed to test $25.00 levels but despite the intraday pullback, managed to stay on the positive zone. As the markets are heading into the elections in the US, the common scenario is weaker USD during and after the elections in November. On the other hand, while the USD is treated as a risk-off asset lately, uncertainty caused by the elections will most likely favour precious metals.  

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

Despite the decline seen in the USD index DXY, WTI also retraced back on Monday while the trading volume was relatively low. During a video conference, ministers of the OPEC+ monitoring committee discussed the progress in implementation of the oil production limiting deal on Monday. At the meeting, the group agreed to extend the compensation period for overproduction until the end of December which means the output cuts will remain in place till December. On the other hand, below than expected Chinese Q3 GDP data also weighed on WTI as China is the world’s second-largest oil consumer.       

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

The US indexes faced heavy sell-off on Monday as the risk aversion dominated the markets. Chinese economy printed a 4.9% growth on a yearly base below the expectations. Slower than expected growth triggered the risk-off trading while there is still no progress made on the stimulus agreement. While the elections in the US are around the corner, the US House Speaker Nancy Pelosi has given the White House a deadline of Tuesday to reach an agreement on a stimulus package. It is unlikely that an agreement will be reached until the deadline. Due to the reports, Trump is ready to agree on $1.9 trillion while the Democrats are pushing for $2.2 trillion still. The USD index DXY also lost its ground and retraced back while precious metals managed to hold in the positive zone contrary to the latest risk-off trading schema.      

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

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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