Daily Market Report - 29th Oct 2020

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EURUSD

The EUR/USD pair fell to 1.1717 this Wednesday, a fresh weekly low, as panic took over the financial boards. A steep increase in coronavirus cases throughout Europe and higher chances of total lockdowns have put equities in sell-off mode, in benefit of the American currency. Among other countries, Germany is set to close parts of its economy in November, in an attempt to curve contagions. The dollar gave up part of its intraday gains during US trading hours due to overbought conditions but ended the day up against most of its major rivals. Wall Street plunged, with the three major indexes down to fresh October lows.

The macroeconomic calendar has included the German September Import Price Index, which beat expectations, although it remained negative yearly basis. The US MBA Mortgage Applications for the week ended October 23 came in at 1.7%, improving from -0.6%. The September Trade Balance posted a deficit of $79.37B, better than the previous $-83.11B.

This Thursday, the focus will be on the ECB, as the central bank will have a monetary policy meeting. Policymakers are expected to maintain the current stimulus unchanged, but there are good chances that Lagarde & Co. will pave the way for more easing in December. The US will publish the first estimate of Q3 GDP, with the economy expected to have bounced after a record slump in Q2.

From a technical point of view, the EUR/USD pair is poised to extend its decline. The latest intraday bounce seems corrective, and bulls have no chances unless the pair regains the 1.1800 threshold. In the 4-hour chart, the pair has broken below all of its moving averages, with the 20 SMA gaining bearish strength above the larger ones. Technical indicators have corrected oversold readings but turned flat within negative levels. Renewed selling pressure below 1.1720 will likely result in a steeper decline towards the 1.1640 price zone.

Support levels: 1.1720 1.1680 1.1640

Resistance levels: 1.1770 1.1820 1.1870  

USDJPY

The Japanese yen strengthened against its American rival in a risk-averse environment, with USD/JPY falling to 104.10, a level that was last seen in September. The pair got to bounce from such low but to stabilize around 104.30, pressured by Wall Street’s slump. US Treasury yields, in the meantime, edged lower for a fourth consecutive day.

So far Japan has had a light macroeconomic calendar, but it’s having a busy day this Thursday. It will start releasing Retail Trade figures, seen contracting 7.7% in September, after falling 19% in the previous month. Later into the session, the Bank of Japan is having a Monetary Policy Meeting, widely expected to leave the policy on hold but also review its economic forecasts. The country will also release the October Consumer Confidence Index, foreseen at 31.6 from 32.7 in the previous month.

The USD/JPY pair is bearish in the near-term, and according to the 4-hour chart. Technical indicators in the mentioned time-frame head lower near oversold readings, with the Momentum indicator maintaining its downward strength. Moving averages head firmly lower above the current level, with the 20 SMA currently at around 104.65. A steeper decline could be expected on a clear break below 103.99, the September monthly low.

Support levels: 103.95 103.50 103.10

Resistance levels: 104.70 105.05 105.40  

GBPUSD

As fears spurred demand for the greenback, the GBP/USD pair fell to a fresh weekly low of 1.2916, later recovering to the current 1.2990 price zone. Broad dollar’s strength led the way this Wednesday, as a second wave of coronavirus is hitting Europe hard, the United Kingdom included. The kingdom reported 24,701 new cases and 310 deaths in the last 24 hours, with new restrictions imminent. In the Brexit front, the impasse continues. Talks are underway, although there are no reports on progress.

Data wise, the UK published the BRC Shop Price Index, which declined 1.2% YoY in September, after falling 1.6% in the previous month. This Thursday, the country will publish September money figures and Mortgage Approvals for the same month.

The 4-hour chart for the GBP/USD pair shows that buyers defended the downside around the 200 SMA, but currently remains below a flat 100 SMA and a bearish 20 SMA. Technical indicators in the mentioned time-frame have recovered from intraday lows but then turned flat within negative levels, leaving the risk skewed to the downside.

Support levels: 1.2920 1.2870 1.2830

Resistance levels: 1.3010 1.3060 1.3100

AUDUSD

The AUD/USD pair surged at the beginning of the day, reaching 0.7156 following the release of Australian Q3 inflation figures. The RBA Trimmed Mean CPI surged 0.4% in Q3 and increase D1.2% when compared to a year earlier, beating the market’s expectations. Aussie’s momentum, however, was short-lived, overshadowed by risk-aversion. Even further, the commodity-linked currency got hit by headlines suggesting the RBA is likely to expand government bond purchases by about AUD100 billion when it meets next week. This Thursday, Australia will publish the Q3 NAB’s Business Confidence, previously at -15.

The AUD/USD pair gave up on resurgent demand for the American currency, falling to 0.7037 and finishing the day a handful of pips above this last. The 4-hour chart indicates that the slide may continue, as the pair plunged after breaking below all of its moving averages. Technical indicators have partially lost their bearish momentum but hold near oversold readings. The immediate support level is 0.7030, with a break below it favoring an extension sub-0.7000.

Support levels: 0.7030 0.6990 0.6950

Resistance levels: 0.7070 0.7110 0.7160

GOLD

Gold retraced to its monthly lows pressured by the move-up seen in the USD. The second wave hit Europe countries started taking new lockdown measures to fight with the spread of the virus with an immediate effect. On Wednesday, The German government and states have agreed to a partial lockdown in the country with bars and restaurants closing from November 2nd as the partial lockdown will allow shops to remain open under the condition of one person per 10 square meters to respect social distancing. Also, France announced that they will imply quarantine measures until the first of December. Additionally, the partial lockdown of bars and restaurants will reportedly remain in place until the end of November. Along with the developments, USD gained traction against the Euro and also the precious metals put under pressure. Also, the risk aversion pressured the indexes causing strong sell-offs. Apart from the developments regarding the pandemic, the US elections and the stimulus package deal will give the direction to the markets with their direct impact on the USD. A clean Democrat win will most likely generate a big stimulus package which will pressure the USD as extreme amounts of liquidity will be injected into the markets.  

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 retraced heavily on Wednesday as the risk aversion pushed the USD higher pressuring the precious metals. The white metal tested an important support zone of $23.00 and managed to hold itself over it for now testing its monthly low levels. On the other hand, Gold to Silver ratio once again lifted over 80.00 levels as Silver is usually outperformed by Gold in decline periods. While Silver might be a good buy for the long-term due to its industrial usage, at this point it is solely driven by the USD dynamics. Therefore, the election results and a possible deal on the stimulus package will determine the mid-term direction for 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

The positive mood seen on Tuesday did not live long and WTI tested its monthly lows with a massive sell-off amid coronavirus fears. As the European countries started to announce the lockdown measures, demand worries pressured energy prices. The second wave in Europe is more intense than the first wave at the moment forcing governments to partially shut-down their economies. On the other hand, stocks data in the US created extra pressure on WTI on Wednesday. The US weekly crude stockpiles data, published by the American Petroleum Institute (API), showed a bigger-than-expected rise in the crude stocks last week. This data is combined with the rebound seen in the Libyan oil production also sparked fears of over-supply conditions seen on last April. 

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 started the day with a big bearish gap as the second wave of the pandemic triggered risk aversion around the globe. While the number of new cases in the US continues to grow higher, the centre of the second wave became Europe forcing governments to re-impose lockdown measures. On Wednesday, Germany announced a series of measures to implement a partial lockdown while France announced a full quarantine until the first of December. The fear wave struck the markets and pushed indexes all around the world into deep negative zones. On the other hand, the stimulus deal gridlock also continues to pressure the markets along with the elections next week. As Biden still leads the polls, a split between Trump win and a Democrat Senate can create an extreme amount of uncertainty. Therefore, the market volatility will be extremely high next week until the election results are cleared.    

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 with 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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