Daily Market Report - 1st Sep 2020

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EURUSD

The American dollar remained on the backfoot this Monday, edging lower against most major rivals after a failed attempt to recover some ground. The EUR/USD pair surged to test its year high at 1.1965, to settle a handful of pips below the level. The market’s mood was mixed, as market players started the day with a positive sentiment, backed by upbeat Chinese data. Still, equities traded mixed throughout the sessions.

In the data front, Germany published August inflation data, which was worse than anticipated. The annual reading came in at -0.1%, while the monthly CPI printed at -0.2%. The US, on the other hand, released the Dallas Fed Manufacturing Business Index for August, which bounced from -3 in July to 8. Also, Fed’s Vice Chair Richard Clarida offered a speech, reiterating that negative interest rates are not in the table and that the central bank will not raise interest rates just because the unemployment rate is falling.

This Tuesday, Markit will publish the final versions of August Manufacturing PMIs for all major economies, while the EU will unveil its preliminary estimate of August inflation. The US will unveil the official ISM Manufacturing PMI, foreseen at 54.5 from 54.2 in the previous month.

The EUR/USD pair is trading firmly above the 1.1900 level as the US session comes to an end, poised to extend its advance amid the persistent dollar’s weakness. The 4-hour chart shows that the pair has continued to advance beyond its moving averages, with the 20 SMA accelerating north above the 100 SMA, reflecting the strong buying interest. Technical indicators, in the meantime, have partially lost their bullish strength near overbought readings, but are far from indicating exhaustion.

Support levels: 1.1905 1.1870 1.1825 

Resistance levels: 1.1965 1.2010 1.2050

USDJPY

The American dollar was able to advance only against its Japanese rival, with the USD/JPY pair peaking for the day at 106.09, to later stabilize in the 105.80 price zone. The pair found support at the beginning of the day on better-than-anticipated Chinese data, which boosted sentiment in detriment of the Japanese currency. Also, Japan macroeconomic data came in worse than anticipated, weighing on the local currency. According to the official releases, Retail Trade contracted 2.8% YoY in July, while Industrial Production in the same month, was down by 16.1% YoY. Consumer Confidence in the country printed at 29.3 in August, down from 29.5 in the previous month.

The intraday spike could be attributed to US Treasury yields, which were up ahead of Wall Street’s close, but retreated ahead of the close. The yield on the benchmark 10-year Treasury note hit a daily high of 0.75% to finally settle at 0.69%. Japan will publish this Tuesday the July Unemployment rate, foreseen at 3% from 2.8% in the previous month, and the final August Jibun Bank Manufacturing PMI seen unchanged from the preliminary estimate at 46.6.

The USD/JPY pair maintains its bearish tone despite its latest bounce, incapable of retaining gains beyond the 106.00 level. The 4-hour chart shows that the pair retreated from around its moving averages, with the 20 SMA still heading south below the larger ones. Technical indicators, in the meantime, stalled around their midlines, now stable just below them. Bears will likely return on a break below 105.50, the immediate support.

 Support levels: 105.50 105.10 104.80

Resistance levels: 106.00 106.35 106.70  

GBPUSD

The GBP/USD pair peaked at 1.3395, a fresh high for this 2020, ending the day in the 1.3370 price zone. The greenback was sold off ahead of London’s fix, with the dollar index at its lowest in two years, pushing GBP/USD up. The UK didn’t publish relevant data, while there were no fresh Brexit-related headlines. Investors continued to ignore the latest news on the matter, showing that UK’s Brexit negotiator David Frost has menaced to walk away from trade talks if Brussels does not drop its demand to align with EU state aid rules.

This Tuesday, Markit will publish the final version of the August UK Manufacturing PMI, foreseen unchanged at 55.3. The kingdom will publish July Consumer Credit, and Mortgage Approvals for the same month.

The GBP/USD pair is consolidating its daily gains and seems ready to continue advancing. In the 4-hour chart, technical indicators have stabilized within overbought readings, as the pair develops above all of its moving averages. The 20 SMA heads firmly higher in the 1.3260 area, providing dynamic support and accelerating above the larger ones. Further gains are to be expected on a break above the 1.3400 figure, the immediate resistance.

Support levels: 1.3330 1.3295 1.3260

Resistance levels: 1.3400 1.3445 1.3490

AUDUSD

The AUD/USD pair reached 0.7402, a level that was last seen in August 2018, adding some pips to its latest advance on the back of the dollar’s persistent weakness. Australia published at the beginning of the day August TD Securities inflation, which was up 1.3% YoY in line with July’s reading. The country also published Q2 Company Gross Operating Profits, which increased 15% much better than the 1.2% expected.

Australia is having a busy calendar this Tuesday, as it will publish the official AIG Performance of Manufacturing Index for August, previously at 53.5, and July Building Permits. The Commonwealth Bank Manufacturing PMI will also be out, foreseen unchanged at 53.9. Finally, the RBA is having a monetary policy meeting. The central bank is expected to leave the monetary policy unchanged, keeping the cash rate at a record low of 0.25%, while policymakers are expected to keep conducting market operations to provide liquidity to the banking system.

The AUD/USD pair hovers near its daily high ahead of the Asian opening, overbought yet still bullish. The 4-hour chart shows that technical indicators partially lost their upward strength but remain within extreme levels. The 20 SMA, in the meantime, heads north almost vertically, below the current level and above the larger ones, which also present bullish slopes. The RBA is a risk factor, but if it triggers a bearish movement, the most likely scenario will be buyers reappearing at lower levels.

Support levels: 0.7325 0.7290 0.7245

Resistance levels: 0.7400 0.7440 0.7475

GOLD

Gold tried to extend its move up on Monday but failed to pass Friday’s top at 1.976$. The USD index DXY kept its way down testing the 92.00 level. Earlier in the day, both Non-Manufacturing PMI(Aug) and NBS Manufacturing PMI(Aug) data sets in China beat expectations and stayed over the 50.00 level signalling the normalisation in the economic activity is intact. On the other hand, due to the bank holiday in the UK, trading volume was limited in the EU session. Also, month-end trading action saw some profit-taking while Gold will print its first monthly loss in 6 months. As the Fed clearly stated that they will keep the monetary policy the same until the “average” inflation will be considered to increase the rates, the weakness in the USD will keep on supporting the yellow metal. Also, heightened coronavirus vaccine hopes seem to be providing a boost to market sentiment. Stephen Hahn, head of the US Food and Drug Administration, said over the weekend that the US is willing to fast-track vaccine approval if benefits outweigh the risks.         

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 outperformed Gold on Monday lifting itself over 28.00$. As a result of the better performance from Silver, the Gold to Silver ratio slid below 70.00 level while the long-term average stands at 65.00 level. The decline continues in the USD index DXY supporting precious metals. Also, better than expected Chinese PMI data set early on Monday gave Silver an extra boost due to its industrial usage.   

If Silver manages to stay over 27.00$, next targets upside might be followed at 29.28$ (March 2013 resistance), 30.00$ and 32.00$ levels. Below the 27.00$ level, the supports might be followed at 25.00$ and 24.00$ levels.

Support Levels: 27.00$ 25.00$ 24.00$

Resistance Levels: 29.28$ 30.00$ 32.00$

DOW JONES

Dow Jones experienced a month-end profit-taking action on Monday combined with the decline in energy shares while S&P printed marginal gains on a daily basis, also, printing its best August since 1984. On the other hand, Nasdaq is keeping printing a new all-time high daily supported by the share split for Tesla and Apple today. Also, Salesforce, Amgen, and Honeywell International officially entered the Dow Jones listings on Monday, replacing ExxonMobil, Pfizer, and Raytheon Technologies. Fed’s dovish stance and shift in the inflation target strategy combined with the positive expectations regarding the Covid-19 vaccine is fueling the risk sentiment at the moment.      

From the technical point of view, over the physiological 28.000 level, 28.400 can be followed as next resistance while below 27.770 level the supports can be seen at 27.400, 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

WITITITII

WTI failed to sustain its move-up over the 43.00$ level on Monday despite the better than expected Chinese PMI data set. Despite the bullish PMI set, China’s crude imports in September are set to fall for the first time in five months as record volumes of crude are stored in and outside of the world’s largest importer. On the other hand, due to a recently-published report, Goldman Sachs analysts noted that they are expecting energy prices to rally in 2021, as reported by Reuters. "There is a growing likelihood that vaccines will become widely available starting next spring, helping support global growth and oil demand, especially jet," analysts said. WTI is set to print for the fourth consecutive month with gains supported by the weakening USD and positive news regarding the Covid-19 pandemic. 

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$

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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