Daily Market Report - 7th Dec 2020

NCM Investment - The Festival of GOLD

OPEN ACCOUNT AND GET A CHANCE TO WIN GOLD

For more details: https://www.nooralmal.com/gold...

Official Website: https://www.nooralmal.com/

EURUSD

The EUR/USD pair eased on Friday to close the week with solid gains in the 1.2120 price zone. The dollar’s sell-off helped the pair to reach 1.2177, its highest since April 2018, correcting later on profit-taking ahead of the weekend. Generally speaking, markets remained optimistic, mostly based on coronavirus vaccination plans. Russia has started immunization, and the UK will start this week, while several other countries have announced intentions to begin this month.

Data wise, the focus was on November employment figures, which were mixed. The Nonfarm Payrolls report showed that the country added just 245K new jobs in November, far below the expected 469K. The unemployment rate contracted to 6.7%, better than anticipated, while wages up by 0.3% in the month and 4.4% when compared to a year earlier. This Monday, the macroeconomic calendar will start at a soft pace as Germany will publish October Industrial Production, while the EU will release the December Sentix Investor Confidence. The US has nothing relevant to offer.

The EUR/USD pair retains its bullish tone, although overbought conditions in the daily chart suggest that the pair may continue correcting lower. In the mentioned time-frame, the pair keeps developing above bullish moving averages, while technical indicators are barely retreating from extreme readings. In the 4-hour chart, a bullish 20 SMA provided support around the former year’s high at 1.2110. Technical indicators head firmly lower but remain within positive levels, supporting additional intraday slides. The longer-term bullish potential will remain intact as long as the pair holds above the 1.2000 threshold.

Support levels: 1.2110 1.2070 1.2020

Resistance levels: 1.2175 1.2230 1.2280

USDJPY

The USD/JPY pair made little progress these past days, holding within familiar levels for a fifth consecutive week. The pair settled at 104.18, recovering on Friday after bottoming at 103.66 on Thursday. US Treasury yields rose to fresh three-week highs after a dismal Nonfarm Payroll report lifted hopes for fiscal stimulus, providing support to USD/JPY. The yield on the benchmark 10-year Treasury note rose to 0.97%, where it closed the week.

At the beginning of the week, Japan will publish the October Leading Economic Index’s preliminary estimate, previously at 92.5, and the same month’s Coincident Index.

The risk is skewed to the downside, according to the daily chart, as the USD/JPY pair is trading below all of its moving averages. The 20 DMA is flat a handful of pips above the current level, while the longer ones have accelerated their declines above it. Technical indicators lack directional strength, holding within negative levels. In the 4-hour chart, the pair is also below its moving averages, with the 20 SMA and the 100 SMA converging around 104.30. The RSI indicator is in recovery mode and about to cross its midline into positive territory, but the Momentum indicator remains directionless within negative levels.

Support levels: 103.95 103.50 103.15 

Resistance levels: 104.30 104.70 105.00  

GBPUSD

The GBP/USD pair hit 1.3539 on Friday, its highest level since May 2018, on the back of hopes for an “imminent” trade deal between the EU and the UK, according to comments from an unnamed EU official. However, intensive Brexit trade talks have bare no fruit. EU´s Brexit Negotiator Michel Barnier tweeted that, after a week of negotiations in London, both sides were unable to reach an agreement, with persistent, significant differences on the issues of a level playing field, governance and fisheries.

On Saturday, EU’s Commission leader Ursula von der Leyen said, “I had a phone call with Boris Johnson on the EU-UK negotiations. Differences remain. No agreement feasible if these are not resolved. Chief negotiators will reconvene tomorrow. We will speak again on Monday.” GBP/USD could gap lower at the weekly opening.

On the data front, Markit published the November UK Construction PMI, which improved from 53.1 in the previous month to 54.7. This Monday, the kingdom will publish November Halifax House Prices.

The GBP/USD pair closed the day pretty much unchanged in the 1.3430 price zone, offering a neutral-to-bullish stance in its daily chart. The 20 DMA provides a dynamic support level around 1.3300 while advancing below the larger ones. Technical indicators lack directional strength but hold above their midlines. In the shorter-term, and according to the 4-hour chart, the bearish potential is also limited, as the pair found support in a bullish 20 SMA, while the Momentum indicator consolidates at weekly highs. The RSI turned lower, putting in some bearish pressure.

Support levels: 1.3395 1.3350 1.3305

Resistance levels: 1.3485 1.3540 1.3590

AUDUSD

The AUD/USD pair topped 0.7449 on Thursday, closing the week a handful of pips below this last. The pair remained mute on Friday, confined to a tight 30 pips’ range. A broadly weak greenback and the positive tone of equities provided support but fell short of boosting the pair. Australian data, on the other hand, limited the advance as October Retail Sales resulted in 1.4%, below the preliminary estimate of 1.6%.

Australia will start the week publishing the November AIG Performance of Services Index, previously at 51.4. RBA’s Governor Philip Lowe is due to deliver a speech, although not directly linked with monetary policy.

The AUD/USD pair lacks momentum, but given that it trades near this year’s high, the risk remains skewed to the downside. In the daily chart, the pair continues developing above bullish moving averages, indicating no imminent risk of a bearish movement. The Momentum indicator has retreated towards its midline while the RSI consolidates near overbought levels. In the nearer-term and according to the 4-hour chart, the pair is bullish, with the 20 SMA picking up momentum below the current level and above the longer moving averages. Technical indicators diverge on direction but remain well above their midlines.

Support levels: 0.7415 0.7375 0.7330

Resistance levels: 0.7450 0.7490 0.7530

DOW JONES

Dow Jones had a net bullish trading session on Friday carrying the index to its new all-time highs despite the NFP data readings failed expectations. The data published by the US Bureau of Labor Statistics showed that Nonfarm Payrolls (NFP) in the US rose by 245,000 in November. This reading missed the market expectation of 469,000 by a wide margin. Furthermore, the Unemployment Rate declined to 6.7% from 6.9% but this was likely caused by a 0.2 percentage point decline seen in the Labor Force Participation Rate. The weak reading might push Congress further for the stimulus deal to protect the economy against further decline. Apart from the NFP readings, US equity markets are driven by the stimulus hopes. The US President-elect Joe Biden reiterated calls for more coronavirus aid and said that any stimulus bill passed this year would be just the start. House Speaker Pelosi and US Senator Chuck Schumer of New York Schumer have backed bipartisan plans as a base for stimulus talks which markets are cheering. On the vaccine side, The US Food and Drug Administration (FDA) and EU’s European Medicines Agency (EMA) decisions on the coronavirus vaccines authorization expected this month as well, Pfizer Inc said in a briefing on Wednesday. Also, as an extra contribution, the standard year-end rally is also supporting the prices.     

The week ahead will be quiet in terms of US macro data readings. On Thursday, weekly labour data from the US and CPI data set will be followed by the investors while on Friday, Michigan Consumer Sentiment Index (Dec) PREL data will be followed.  

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

XAGAGGAGAGA

This time Silver outperformed Gold on Friday while the yellow metal fluctuated after the outcome of the NFP reading. Gold to Silver ratio balanced itself around 76.00 level as Silver managed to hold onto the positive zone. At this point, weaker USD leads to riskier asset-buying instead of supporting the precious metals due to the risk appetite mostly supported by the vaccine news. The extreme amount of liquidation might create inflation in the coming term. Therefore, as the precious metals are usually used as inflation-hedge, both Gold and Silver might find extra demand apart from the usual monetary drivers. On the other hand, Silver is more stable compared to Gold managing to protect its trading range.     

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 

GOLD

Gold had a volatile trading session on Friday following its three-day winning streak. The weak USD schema continues as the USD index DXY slid below 91.00 levels as the NFP data reading stayed well below the expectations. Soft readings in the labour data will probably push Congress to pass the much-awaited stimulus deal. However, this expectation is still not priced by Gold as the vaccine developments limit the gains for Gold and fuels the risk appetite. Also, mixed reports from both White House Economic Adviser Kudlow and House Majority Leader Hoyer about the deal limited the gains. Kudlow did not provide any optimism that McConnell is willing to budge on state and local aid, while Hoyer noted that the $908 billion bipartisan proposals are the floor for stimulus negotiations. A deal before the holiday with lower than expected level might support Gold but the expected gold rally is far from reach at this point.

Markets will try to digest the NFP data set in the coming week. On Monday, the Trade Balance report from China will be looked upon for fresh catalysts as a better than expected reading will fuel the risk appetite pushing the USD even lower. On Tuesday, the Eurostat will release the third-quarter Gross Domestic Product (GDP) growth data, which is expected to print +12.6% on a yearly basis before the ECB monetary policy on Thursday. Also on Thursday, weekly labour data from the US and CPI data set will be followed by the investors. Finally on Friday, Michigan Consumer Sentiment Index (Dec) PREL data will be followed in the US. Apart from the economic data readings, the US Food and Drug Administration (FDA) is expected to announce toward the end of the week whether it grants authorization to the emergency use of Pfizer’s and Moderna’s coronavirus vaccines. In the case of authorization, Gold might face extra selling pressure.     

From the technical point of view, below the $1,860 level, the supports can be followed at $1,800, $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: $1,800 $1,763 $1,700

Resistance Levels: $1,900 $1,956 $2,000

WTI

WTI hit fresh 9-month highs before retracing back as OPEC+ fall short of expectations. OPEC+ announced on Thursday it will gradually increase its oil output by 500K BDP starting in January vs. the 2 MBDP originally planned. The cartel now intends to reach the 2 MBDP by April. While the OPEC+ deal pressured WTI, vaccine developments continue to support risk appetite with hopes of an increase in demand. At this point, WTI is driven more with the vaccine optimism like the equity markets rather than the OPEC+ moves. On Friday, the US Food and Drug Administration (FDA) is expected to grant authorization to Pfizer’s and Moderna’s coronavirus vaccines which might support WTI further.       

Next supports can be seen at 45.00$, 43.88$ and 43.00$ respectively while the resistances can be followed at 47.00$ and 48.50$.

Support Levels: 45.00$ 43.88$ 43.00$

Resistance Levels: 46.00$ 47.00$ 48.50$  

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.