Daily Market Report - 6th Oct 2020

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EURUSD

The EUR/USD pair surged to a weekly high of 1.1797 during US trading hours, as the greenback stood under selling pressure throughout the day. Upbeat US data coupled with positive reports about President Trump’s health boosted the market’s mood, which in turn, weighed on the American currency. The US September ISM Services PMI surged to 57.8, beating the 56.2 expected, while the Markit Services PMI for the same month was confirmed at 54.6. The Composite Index, however, was downwardly revised from 54.4 to 54.3.

Meanwhile, reports said that US President Trump is set to return to the White House, as doctors are optimistic about his condition. Stocks surged with the news, leading to dollar’s losses against most major rivals. European data was also encouraging, as Retail Sales in the Union were up 4.4% MoM in August, much better than anticipated, while the EU Markit Services PMI came in at 48 in September, better than the previous estimate of 47.6, although still signaling economic contraction. This Tuesday, Germany will publish August Factory Orders, seen advancing a modest 2.6% MoM. Also, ECB’s Lagarde and Fed’s Powell are due to offer speeches in separate events.

The EUR/USD pair is trading a handful of pips below the mentioned daily high as the US session comes to an end, holding on to a bullish short-term stance. The 4-hour chart shows that the intraday advance stalled around a mildly bearish 200 SMA, although the pair is holding above the 20 and 100 SMAs. Technical indicators, in the meantime, have lost directional strength, but hold within positive levels, maintaining the risk skewed to the upside.

Support levels: 1.1770 1.1725 1.1690

Resistance levels: 1.1810 1.1850 1.1890

USDJPY

The USD/JPY pair surged to 105.79, holding on to gains by the end of the American session. The safe-haven yen was pressured by the market’s optimism, although given that the greenback was also out of the market’s radar, the advance was limited. The main support for the pair were US Treasury yields, which edged firmly higher, amid hopes that the US Congress will agree on a stimulus package and news that President Trump is doing better after announcing he contracted coronavirus last Friday. The yield on the benchmark 10-year note surged to a multi-month high of 0.76%, which somehow anticipates another leg higher in USD/JPY.

In the data front, Japan published the September Jibun Bank Services PMI which beat expectations but held within contraction levels, printing at 46.9 from 45 previously. This Tuesday, the Japanese macroeconomic calendar will remain empty.

The USD/JPY pair has been unable to advance beyond last week’s high at 105.80, but holds nearby, which increases the risk of a bullish breakout. The 4-hour chart shows that the pair is now above its moving averages, which anyway remain directionless and inside a limited range. Technical indicators, in the meantime, stand flat within neutral levels, indicating limited buying interest at the time being.

Support levels: 105.40 105.00 104.60

Resistance levels: 105.80 106.25 106.60

GBPUSD

The GBP/USD pair traded as high as 1.2991, underpinned by the ruling upbeat mood. The pair not only found support in rallying equities but also in mounting hopes for a breakthrough in Brexit talks. Despite the EU and the UK remaining far apart in some critical issues, UK PM Johnson and EU Commission leader, Ursula von der Leyen had agreed to extend negotiations until October 31, a sign that none of them favors a no-deal exit. Two weeks of intense talks began this Monday.

Earlier in the day, Markit published the final version of the UK Markit Services PMI, which resulted in September at 56.1, better than the previous 55. On Tuesday, Markit will publish the UK September Construction PMI foreseen at 54.1 from 54.6 previously.

The GBP/USD pair holds on to daily gains ahead of the Asian opening trading in the 1.2970 price zone. The 4-hour chart shows that the Momentum indicator eased, but that the RSI indicator holds steady around 61, reflecting the latest range rather than suggesting an upcoming decline. In the mentioned chart, a bullish 20 SMA provided intraday support, currently in the 1.2920 price zone.

Support levels: 1.2925 1.2870 1.2815

Resistance levels: 1.3010 1.3050 1.3085

AUDUSD

The AUD/USD pair has traded uneventfully for a third consecutive day, set to finish the day little changed in the 0.7170 price zone. China and Australia celebrated holidays at the beginning of the week, although Australia released some macroeconomic figures. The Commonwealth Bank Services PMI for September improved to 50.8, beating the 50 expected. The TD Securities Inflation was up 0.15 MoM in September and surged 1.3% YoY, matching August readings. Also, the NAB’s Business Confidence index improved from -8 to -4.

The focus now shifts to the Reserve Bank of Australia, as the central bank will announce its latest decision of monetary policy. Policymakers are expected to remain on hold, but there’s mounting speculation that they will pave the wave for additional stimulus measures in the near term. Deputy Governor Guy Debelle said that “the outlook for inflation and employment is not consistent with the Bank’s objectives over the period ahead,” adding that the recovery “has not been a rapid bounce but more of a slow grind,” already hinting the RBA is preparing to act.

The AUD/USD pair holds on to gains but losses bullish potential according to intraday technical readings. The 4-hour chart shows that the pair has spent the day trading above a bullish 20 SMA yet below a mildly bearish 100 SMA. Technical indicators have turned lower, the Momentum entering negative territory but the RSI holding around 57. The upcoming direction will likely depend on how the market reacts to the RBA’s announcement, with bulls having better chances on a break above 0.7210, the immediate resistance.

Support levels: 0.7140 0.7100 0.7060 

Resistance levels: 0.7210 0.7250 0.7290

GOLD

Gold hit its highest level in the last two weeks as the retracement in the USD index DXY extended its losses. Trump left the Walter Reed Medical Center on Monday despite there is still no clear declaration about his health status. Increased risk appetite also supported by the new hopes on the new fiscal stimulus package. Gold exchanged its safe-haven role with the USD recently as positive news continues to weigh on the USD. In the long run, extreme liquidity and a possible easing in the pandemic situation with the releases of vaccines will most likely support precious metal.     

Gold managed to get away from the critical support zone at $1,860. Below this 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 benefited the decline seen in the USD and as a routine template seen lately, the white metal outperformed Gold in USD negative trading day. Gold to Silver ratio retraced back below 80.00 level to 78.40 levels indicating the better performance from Silver hitting its highest level in two weeks. Optimism on the global growth and industrial production is also supporting Silver due to its usage in key industries.  

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 risk appetite gained strength on Monday and as the decline seen in the USD index DXY intensified. WTI found extra support from the greenback. On the other hand, some OPEC officials stated that $40.00 level can be an acceptable comfort zone for WTI. Also, the Norwegian energy giant, Equinor, announced a shutdown of its four major oil and gas fields due to an extension of the labor strike which will limit the production. As stated by the company, the escalation could cut Norway’s petroleum production capacity by as much as 330,000 barrels of oil equivalent per day (boepd) or 8% of total output.     

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 

DOWWOWO

Dow Jones started the day with a bullish gap due to increased risk appetite. President Trump left the hospital to continue his treatment at White House. Shares of Regeneron Pharmaceuticals jumped after Trump’s physician said that he has been treated with the company's dual antibody treatment. Also, renewed hopes for the stimulus package lifted the mood in the markets. White House Chief of Staff Mark Meadows stated on Monday that there is still a chance to reach an agreement as the president is committed to reach a deal. Surprisingly, right before the elections, Republicans are in favour of a smaller package despite they are the ruling party while Democrats are supporting a bigger package. Despite the latest retracement, reflecting the rally seen in the US indexes, S&P 500 posted 25 new 52-weeks highs and no new lows while Nasdaq recorded 104 new highs against 11 new lows.

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.

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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