Daily Market Report - 7th Oct 2020

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EURUSD

The EUR/USD pair managed to extend its weekly advance to a fresh high of 1.1807, although it was unable to hold on to gains, ending the day little changed around 1.1770. The market’s attention shifted to a US stimulus package this Tuesday, amid continued talks between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. According to the first, progress has been “slow,” although negotiations continue. Ahead of Wall Street’s close, US President Trump tweeted that Democrats are not negotiating in good faith and called off stimulus-related negotiations until after the election, triggering a sell-off in Wall Street and pushing the greenback higher.

The macroeconomic calendar was quite scarce, as Germany published August Factory Orders, which came in better-than-expected, up 4.5% in the MoM and down 2.2% when compared to a year earlier. As for the US, the country published the August Trade Balance, which posted a deficit of $67.1B, worse than the expected $-66.1B. Also, ECB’s President Christine Lagarde expressed concerns about the economic recovery, saying that she fears that instead of a V-shaped recovery, the rebound would be shaky. This Wednesday, Germany will publish August Industrial Production figures, while in the US, the FOMC will release the Minutes of its latest meeting.

The EUR/USD pair fell to daily lows in the 1.1730 area as the-sentiment turned sour, set to close the day in the red. The 4-hour chart shows that the intraday rally stalled around a mildly bearish 200 SMA, while the pair struggles to hold above its 20 and 100 SMA. Technical indicators in the mentioned time frame, have turned lower within positive levels, falling short of signaling additional slides ahead. The pair would need to run past 1.1810, the immediate resistance level, to become more attractive for bulls.

Support levels: 1.1725 1.1690 1.1650

Resistance levels: 1.1770 1.1810 1.1850  

USDJPY

The USD/JPY pair is ending Tuesday pretty much unchanged in the 105.60 price zone, after spending the day consolidating within a tight range. The market’s optimism faded after US President Trump returned to the White House late on Monday, stating that he was “feeling good.” The focus then shifted to a US coronavirus aid package and Brexit talks, with no progress reported in any of both fronts. Equities came under strong selling pressure, although US Treasury yields, maintained their strength, with the yield on the benchmark 10-year note hitting 0.79%, a fresh multi-week high, and ending the day around 0.74%.

Japan didn’t publish relevant data this Tuesday but will release the preliminary estimate of the Leading Economic Index, foreseen in August at 89.4 from 86.9 in July. The Coincident Index for the same period is foreseen at 76.4 from 76.2 in the previous month.

The USD/JPY pair was unable to extend gains beyond the 105.80 resistance level, but spent the day nearby, maintaining its positive tone. The 4-hour chart shows that the pair is still trading between directionless moving averages, while technical indicators lack directional strength, but hold within positive levels. Once beyond the mentioned resistance, the pair has room to extend its advance towards 106.25, although bulls will likely remain cautious amid the broad dollar’s weakness.

Support levels: 105.40 105.00 104.60

Resistance levels: 105.80 106.25 106.60

GBPUSD

The GBP/USD pair seesawed this Tuesday, alongside hopes for a Brexit deal. The pair ended the day in the red near its daily low of 1.2891, amid reports that the EU has no plans to offer concessions to the UK ahead of Boris Johnson’s deadline on October 15. Instead, the Union is ready to extend talks into mid-November and risk a no-deal rather than give up on its demands about a level playing field and fisheries rights. Macroeconomic data coming from the UK has been encouraging as the Markit Construction PMI improved to 56.8 in September from 54.6 in the previous month.

Meanwhile, the UK has reported 14,542 new coronavirus cases this Tuesday, with the government considering circuit-breaker measures, although also trying to avoid a full lock-down, which seems quite contradictory. The UK calendar will include minor figures this Wednesday, including Halifax House Prices and the DCLG House Price Index.

The GBP/USD pair trades around the 1.2900 level heading into the Asian session, and at risk of extending its decline. The 4-hour chart shows that the pair retreated after flirting with a bearish 200 SMA, now also below the 20 SMA, as the dollar picks up. Technical indicators, in the meantime, have retreated towards their midlines, where they have now stabilized. The bearish potential will likely increase on a break below the mentioned daily low, exposing the 1.2810 price zone.

Support levels: 1.2890 1.2850 1.2810

Resistance levels: 1.2935 1.2980 1.3020

AUDUSD

The AUD/USD pair peaked at 0.7208 at the beginning of the day, helped by an on-hold Reserve Bank of Australia. As widely anticipated, the central bank decided to leave its official cash rate unchanged at a record low of 0.25%. Among other things, policymakers reiterated that the cash rate would remain low until progress is made towards full employment and inflation reaches the bank’s target within 2–3% band. 

They also noted that wage and inflation pressures remain very subdued and that the economic recovery is likely to be both uneven and bumpy. Finally, the board continues to consider how additional monetary easing could support jobs as the economy opens up further, somehow anticipating further easing ahead. During the upcoming Asian session, Australia will publish the September AIG Performance of Services Index, previously at 42.5.

The AUD/USD pair was unable to hold on to early gains, ending the day in the red, near the 0.700 level, undermined by falling gold prices and equities. The 4-hour chart shows that the pair is bearish, as it’s currently trading below all of its moving averages, with the shorter ones gaining bearish strength. Technical indicators eased from their daily highs accelerating south well into negative territory. The decline is expected to accelerate on a break below the 0.7100 figure, now the immediate support.

Support levels: 0.7100 0.7060 0.7025

Resistance levels: 0.7140 0.7175 0.7210  

GOLD

Trump’s tweets changed the direction of the market on Tuesday as the president rejected Pelosi’s $2.4 stimulus package. He said in a tweet that he ordered his representatives to stop negotiating until the elections. With the immediate effect, risk-off kicked in and the US indexes with Gold retraced heavily. Gold extended its decline from $1.921 to sub-$1.900 while the USD index DXY tried to come closer to 94.00 levels. Despite the stimulus talks now in a dead-lock, Powell called out Congress again to deliver the waited package. On the other hand, most of the $22.6 billion year-to-date increase in the United States trade deficit is due to a spike in gold imports, US Trade Representative (USTR) Robert Lighthizer said on Tuesday.

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

As the risk-off kicked in with Trump’s tweets about the stimulus package, Silver also faced heavy selling pressure alongside Gold. Silver erased almost 4.00% on a daily basis and underperformed compared to Gold. Gold to Silver ratio again rose over 870.00 levels while the USD index DXY tried to catch 94.00 levels. On the other hand, due to last week’s COT- Commitment of Traders report released by the Commodity Futures Trading Commission (CFTC) on Friday, large precious metals speculators added to their bullish net positions in the Silver futures markets. The non-commercial futures contracts of Silver futures, traded by large speculators and hedge funds, totalled a net position of 40730 net contracts in the data reported through September 28th 2020. This was a weekly gain of 1783 net contracts from the previous week. Net longs are now at two and a half months high.

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

WTI had a counter-reaction on Tuesday as Trump’s tweets about cancelling the stimulus package negotiations triggered risk-off trading. Despite the incline seen in the USD index DXY, WTI also rallied and lifted itself over $40.00. However, the move-up was limited with the probability that OPEC could start tapering production cuts starting as soon as in January 2021. On the other hand, Hurricane Delta has forced some off-shore platforms in the Gulf of Mexico. 

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

Dow Jones had a sharp reversal on Tuesday as President Trump stated in a tweet flood that he ordered his representatives to stop stimulus package negotiations until the elections. Trump said that Nancy Pelosi is asking for $2.4 Trillion Dollars to bail out poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business. As an immediate reaction, the US indexes fell-back heavily along with Gold while the USD index DXY gained traction. As President Trump stole the stage on Tuesday, Powell was also on the wires.

Powell highlighted the need for aggressive fiscal and monetary stimulus to save the economy. He also added that no progress made in job creation, goods consumption and business formation, among other areas and now would be the wrong time for policymakers to take their foot off the gas. Today the FOMC minutes will be in the centre of economic agenda in the US. As only three weeks left for the US elections, markets are preparing themselves for a possible Biden win as the Democrat nominee is leading the polls.    

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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