Daily Market Report - 23rd Oct 2020

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EURUSD

The greenback got to recover some ground this Thursday, appreciating against most of its major rivals. The EUR/USD pair fell to 1.1810 ahead of Wall Street’s opening, to spend most of the American session consolidating around 1.1820. Investors were an expectant audience ahead of definitions related to the US stimulus package and the upcoming US presidential debate, the last one, between Donald Trump and Joe Biden. The market mood improved a bit following the stimulus saga, as House Speaker Nancy Pelosi said they are closing the gap with the White House, yet also expressed doubts the Congress will pass a bill before elections.

In the data front, Germany published the GFK Consumer Confidence Survey, which came in at -3.1 in November, worsening from a previous -1.7 and missing expectations of -2.8. The US, on the other hand, released Initial Jobless Claims for the week ended October 16, which came in at 787K, beating the expected 860K. It also unveiled September Existing Home Sales, which were up 9.4% largely beating expectations. Finally, the EU published the preliminary estimate of October Consumer Confidence, which contracted to -15.5.

Friday will bring the preliminary October Markit PMIs for the EU and the US. Economic activity is expected to have shrunk in the Union and progressed in the US, although such figures can hardly lean the scale in dollar’s favor.

The EUR/USD pair is under pressure, but bears don’t hold the grip yet. The 4-hour chart shows that the price is hovering around a firmly bullish 20 SMA, unable to clear the dynamic support. Technical indicators maintain their bearish slopes but within positive levels. The chances are skewed to the downside, mainly if the pair accelerates south below the mentioned daily low, eyeing an approach to the 1.1700 threshold.

Support levels: 1.1810 1.1770 1.1725

Resistance levels: 1.1870 1.1915 1.1950

USDJPY

The USD/JPY pair got to recover some ground this Thursday, amid renewed dollar’s demand and the better performance of equities. US indexes opened the day with modest losses but turned green with comments from US House Speaker Nancy Pelosi indicating that they are “just about there” on a stimulus deal with the White House. Also, higher US Treasury yields backed the pair, surging to fresh multi-week highs on stimulus optimism. The yield on the benchmark 10-year note hit 0.85% and settled not far below this last.

The Japanese macroeconomic calendar had little to offer, as the country published minor figures related to foreign investment. This Friday, the country will publish September National inflation and the preliminary estimate of the October Jibun Bank Manufacturing PMI, foreseen at 47.3 from 47.7 previously.

The latest USD/JPY advance seems corrective, as the pair remained below the 105.00 level. The 4-hour chart shows that the pair continues developing below all of its moving averages, and with the 20 SMA still heading south below the larger ones. Technical indicators, in the meantime, have corrected oversold conditions, but pared their recoveries well into negative territory, and have already turned south. Overall, the risk is skewed to the downside, with further declines seen once below 104.65.

Support levels: 104.65 104.30 103.95

Resistance levels: 105.00 105.40 105.80

GBPUSD

The GBP/USD pair gave up some ground amid the dollar’s recovery but held at the upper half of its weekly range. EU’s chief negotiator Michel Barnier arrived in London to resume trade talks, after a one-week impasse, providing support to the pound. Barnier and his British counterpart, David Frost, are set to hold intensive talks, although both acknowledged “significant gaps” remain the most difficult areas, such as fishing rights and a level playing field, as per EU demands.

Also backing sterling, the CBI Industrial Trends Survey on Orders improved to -34% in October from -48%, also beating the -45% expected. This Friday, the kingdom will publish the October GFK Consumer Confidence and September Retail Sales, seen posting a modest 0.4% gain in the month. Markit will unveil the preliminary estimates of the October PMIs, with services output and manufacturing activity is seen contracting from their previous levels.

The GBP/USD pair trades a handful of pips below the 1.3100 level, yet it maintains its bullish bias. The 4-hour chart shows that despite the pair retreating roughly 100 pips, it is still developing above all of its moving averages and with the 20 SMA advancing above the larger ones. Technical indicators, in the meantime, have lost their bullish strength, but remain well into positive territory.

Support levels: 1.3065 1.3020 1.2970

Resistance levels: 1.3115 1.3150 1.3190  

AUDUSD

The AUD/USD pair is ending the day as it started a few pips above the 0.7100 threshold. The Aussie traded with a soft tone during Asian trading hours, although the better performance of equities in the European and American sessions helped the pair to trim intraday losses. On a down note, gold eased towards $1,895 a troy ounce, limiting the bullish potential of the pair.

Australia didn’t publish macroeconomic data on Thursday, but the country will unveil the October Commonwealth Bank Manufacturing PMI, foreseen at 55.5 from 55.4 in the previous month, and the Services PMI seen contracting to 50.3 from 50.8 in August.

The AUD/USD pair is neutral-to-bullish in the near-term. The 4-hour chart shows that the pair continues developing above a flat 20 SMA yet below an also directionless 100 SMA. Technical indicators hold within positive levels, The Momentum advancing yet the RSI is stable around 54, reflecting limited buying interest despite the weaker greenback. The pair would have better chances of extending its recovery on a break above 0.7135, the weekly high.

Support levels: 0.7110 0.7065 0.7020

Resistance levels: 0.7135 0.7170 0.7210

GOLD

Gold tested its lowest level this week on Thursday as a better than expected US data set lifted the USD. As the macro data sets in the US continues to beat expectations, the pressure on Congress to reach a deal for the stimulus package eases. In line with that scenario, a smaller package is negative for Gold as less than expected liquidity will be injected to markets. On the other hand, House Speaker Pelosi’s statement gave Gold a lifeline and lifted the yellow metal back above $1,900. House Speaker Pelosi stated that they are ‘just about there’ on a stimulus deal. Along with the move-up seen in the USD index DXY, 10-year yields in the US also tested 0.85% keeping its net move-up. At this point, the risk appetite is solely controlled by the debates on the stimulus package and the outcome of the elections in the US ignoring the record number of new Covid-19 cases, especially in Europe. On the other hand, Gold might get an indirect hit from the ECB as if the central bank decides more support due to lockdown announcements. As a result, the Euro might retreat against the USD and the move-up in the USD will most likely to pressure Gold.    

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 followed Gold on Thursday as the shift in risk appetite supported the USD and pressured precious metals. During the risk-off trading sessions, lately, Silver is outperformed by Gold and Thursday session was no exception to that. Gold to Silver ratio lifted over 77.00 levels after retracing from 81.00 levels to 76.00 during the latest bull-run this week. On the broader picture, Silver investment demand nearly tripled during the year of the pandemic due to data released by the Silver Institute. Global silver-backed Exchange-Trade Products’ holdings rose by 297 million ounces through the first three quarters of 2020, nearly tripling the growth seen during the same period last year. Also, according to the organization, Silver bullion coin demand was up 65.00% over the first three quarters. German and US markets led the way with both seeing double-digit gains over the nine-month period. Therefore, silver still gives the investors better hope to invest for the post-pandemic era.

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 move-up seen in the USD, WTI had a strong move-up on Thursday trying to erase Wednesday’s losses. Despite the lockdowns in Europe, airlines in the US stated their optimistic expectations on travel while House Speaker Pelosi signalled they are ‘just about there’ on a stimulus deal. On the other hand, Russian President Vladimir Putin also stated supportive comments about the cooperation with OPEC+ to stabilize the global oil market. Putin highlighted that Saudi/Russian unity is firmly intact and that they will continue to keep the oil prices firm. On the stock side, the EIA reported on Wednesday that an unexpected build in gasoline inventories of nearly 1.9 million barrels (vs. a forecasted 1.8 million barrels drop), which increases worries surrounding fuel demand.

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

As more positive comments about a possible deal on the stimulus package emerge, Dow Jones almost re-gained all its losses made on Wednesday. Along with the indexes, the USD index DXY also managed to erase some of its losses trying to regain 93.00 level while the US 10-year yields inched higher to 0.85%. House Speaker Nancy Pelosi said negotiations were progressing and that legislation could be hammered out "pretty soon." while a White House spokesman added a further note of optimism, saying "this is really the most optimistic we've felt about getting a deal". On the other hand, President Trump's economic adviser Larry Kudlow warned: "significant policy differences" remain in debates. Thursday’s macro-data readings were better than expected signalling the good performance of the US economy. Existing home sales surged 9.4% in September, the highest level in 14 years and just before the housing bubble popped. On the other hand, There were 787,000 initial claims for unemployment benefits in the US during the week ending October 16, the data published by the US Department of Labor (DOL) revealed this Thursday. The reading followed last week's print of 842,000 (revised from 898,000) and came in better than the market expectation of 860,000. 

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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