Daily Market Report - 19th Nov 2020

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EURUSD

The EUR/USD pair kept trading at a dull fashion this Wednesday, trapped within familiar levels yet at the upper end of its weekly high. The pair followed equities’ limbo, as global indexes seesawed between gains and losses, unable to find directional strength. Pfizer completed phase three of its experimental coronavirus vaccine, announcing it is 95% effective in preventing contagions without serious side effects. The market, however, seems more focused on the fragile economic reality.

Soft economic data exacerbated the quietness across financial markets. The EU published the final version of October inflation data, confirming the annual CPI at 0.2%. As for the US, the country released October Housing Starts, which increased by 4.9%, and Building Permits that remained flat in the month.

This Thursday, ECB’s President Christine Lagarde is due to participate in a virtual event and could make comments on the current EU situation. The US macroeconomic calendar will include Initial Jobless Claims for the week ended November 13, foreseen at 707K.

The EUR/USD pair holds on to a positive stance, as the 4-hour chart shows that it has bounced from a bullish 20 SMA, which continues to provide dynamic support around 1.1850. The 100 and 200 SMA in the mentioned time-frame, technical indicators hold on to positive levels, although lacking directional momentum. Bulls would have better chances on a break above the 1.1920 resistance area, although a catalyst is nowhere to be found.

Support levels: 1.1845 1.1800 1.1760

Resistance levels: 1.1885 1.1920 1.1965

USDJPY

The USD/JPY pair edged lower for a fifth consecutive day this Thursday, trading near a daily low of 103.64. Coronavirus developments in the US undermined demand for the greenback, as the number of new contagions in the US increases, stressing the health system. Curfews, punctual lockdowns and mandatory use of masks in public have been announced throughout the country, but it seems to be too little too late.

Regarding macroeconomic data, Japan published at the beginning of the day the October Merchandise Trade Balance at the beginning of the day, which posted a surplus of ¥872.9 billion, much better than anticipated, as imports plunged 13.3% while exports decreased a modest 0.2%. This Thursday, the country has nothing relevant to offer.

According to technical readings, the USD/JPY pair is at risk of extending its decline after piercing the 104.00 level. The 4-hour chart shows that the 20 SMA maintains a strong bearish slope after crossing below the larger moving averages, all of them above the current level. Additionally, technical indicators head south well into negative levels, although with limited momentum. The immediate support level is 103.50, en route to the year low at 103.17. 

Support levels: 103.50 103.15 102.80

Resistance levels: 104.00 104.30 104.75  

GBPUSD

The Sterling kept advancing this Wednesday, surging against the greenback to 1.3311, despite not so encouraging Brexit-related headlines. EU Trade Commissioner Valdis Dombrovskis said they are now in the last moments to reach a trade deal with the UK. Also, UK’s Business Secretary Alok Sharma noted that “there is still some way to go” on Brexit, adding that the EU “must understand” the UK is a sovereign nation.

The British currency found additional support in local data, as October inflation in the UK came in better than anticipated. The annual CPI printed at 0.7%, while the core reading improved from 1.3% to 1.5%. The UK won’t publish macroeconomic data on Thursday.

The GBP/USD pair stabilized just below the 1.3300 level mid-US afternoon, holding ground heading into the Asian opening. The 4-hour chart shows that technical indicators have lost bullish strength but remain at daily highs near overbought readings. Also, the 20 SMA keeps heading north below the current level while above bullish 100 and 200S AM. The risk remains skewed to the upside, although the pair still needs some Brexit support alongside a clear break beyond 1.3313, this month’s high.

Support levels: 1.3260 1.3210 1.3165  

Resistance levels: 1.3320 1.3360 1.3415

AUDUSD

The Australian dollar was able to retain gains against its American rival, but AUD/USD continued trading below the monthly high at 0.7339. Investors ignored dismal Australian data as the Wage Price Index rose 0.1% in the three months to September, worse than the 0.2% expected, and the lowest quarterly increase on records. The annual growth rate came in at 1.4%, missing the expected 1.5%.

 Australia will publish October employment data this Thursday. The country is expected to have lost 30K job positions in the month, while the unemployment rate is foreseen increasing from 6.9% to 7.2%. Dismal data has already been priced in, so it would take a strong deviation from the forecast for the employment report to move the pair.

The AUD/USD pair is trading in the 0.7310 price zone, offering a neutral-to-bullish stance in the near-term. The 4-hour chart shows that it’s trading above a bullish 20 SMA, while the larger ones remain far below it. Technical indicators, however, continue to lack directional strength but remain within positive levels.

Support levels: 0.7290 0.7250 0.7210  

Resistance levels: 0.7345 0.7380 0.7420

GOLD

Gold is keeping its neutral stance in the aftermath of the vaccine developments as improved risk appetite pressured the yellow metal. On the other hand, the USD index DXY at the same time is keeping its steady decline through 92.00 levels as the markets are heading towards the first post-election FED meeting. Also, the fate of the stimulus deal is still not clear. While Democrats promised a bigger package, better than expected macro data sets might lower the expectations for a big deal. Gold is driven by the vaccine news and the direction of the pandemic at the moment more than the dynamics of the USD. Therefore, the expected rally seen in precious metals with the announcement of the stimulus package might be delayed to 2021 Q1.  

From the technical point of view, 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 kept its indecisive move on Wednesday stuck between $25.64 and $22.88 since late September. At this point, Silver is not showing signs of life for the short term. However, for the long run, it is highly expected that the USD will be under pressure with the announcement of the much-awaited stimulus deal and the physical demand for Silver might surge in the post-pandemic period. In this case, Silver prices might rally but its precious metal etiquette might limit the gains. 

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 target's 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 tried to test post $42.00 levels on Wednesday but failed to sustain the move up. The official EIA report did not see a much larger than expected build in headline crude oil stocks. Indeed, the build was more modest than expected at 0.768M barrels (consensus was for a 1.65M barrel build). Sticking with the bullish aspects of the report, Distillates also saw a much larger than expected draw of more than 5M barrels (consensus was for a 1.457M draw). On the other hand, both Cushing and Gasoline saw larger than expected builds and US weekly crude oil production jumped sharply to 10.9M barrels per day from a rate of 10.5M barrels per day last week. Apart from the mixed stock data set, it has been rumoured that the US Secretary of State Pompeo will impose fresh sanctions on Iran limiting already restricted oil imports. Possible disruption in supply also helped WTI to test $42.00 on Wednesday while the second wave of the pandemic still limits further gains due to demand worries.     

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

DOW JONES

Dow Jones continued its technical correction on Wednesday giving away some of its late gains. Vaccine driven optimism is still driving the risk appetite at the moment as elections and the stimulus deal is now overshadowed. On the other hand, the USD index DXY continued its decline through 92.00 levels. On the political side, as Trump is heading through the end of his time as president, an article on the New York Times stated that the president sought options for attacking Iran to stop its growing nuclear program. Also, Vice President Mike Pence and Secretary of State Mike Pompeo warned President Trump against a strike on Iran and described the potential risks of military escalation,'' the article reported. Housing Starts in the US rose by 4.9% on a monthly basis in October following September's increase of 6.3% (revised from 1.9%), the data published jointly by the US Census Bureau and the US Department of Housing and Urban Development showed on Wednesday. Further details of the publication revealed that Building Permits stayed unchanged in the same period after advancing by 4.7% (revised from 5.2%) in September.   

From the technical point of view, if the index stays over 29,000, 29,500 and 30,000 levels can be followed as new targets high while below the 28,400 level, 28,000 and 27,770 can be followed as supports.

Support Levels: 28,400 28,000 27,770

Resistance Levels: 29,500 30,000 30,500

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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