Daily Market Report - 26th Oct 2020

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EURUSD

The EUR/USD pair closed the week with gains at 1.1860, advancing on Friday as speculative interest continued to sell the dollar amid caution ahead of the US presidential election. The shared currency found support in mixed growth figures, as Markit published the preliminary estimates of its October PMIs. Services output fell into contraction levels in the Union, with the German Services PMI came in at 48.9 while the EU index plunged to 46.2. Manufacturing activity, however, surprised to the upside, expanding to 58 in Germany from 56.4, and to 54.4 from 53.7 in the EU. US Markit indexes were generally upbeat, as the Manufacturing PMI improved to 53.3 from 53.2, while the services PMI beat expectations by jumping to 56 from 54.6.

Market players ignored record coronavirus contagions in several European countries and governments pledges of further restrictions. Record cases in France, Italy and Spain, among other countries, have resulted in curfews and focused lockdowns. More restrictions will likely be announced in the upcoming days and may finally take their toll on the common currency. Things in the US are no better, as the country reported a record high of 82,668 cases on Saturday.

This Monday the calendar will include the German IFO Survey for October, with the Business Climate seen contracting to 92.7 from 93.4. The US will publish the September Chicago Fed National Activity Index, New Home Sales for the same month and the October Dallas Fed Manufacturing Business Index.

The EUR/USD pair is neutral-to-bullish according to the daily chart, as it got to close near a five-week high. In the mentioned time-frame, the pair is developing above all of its moving averages, with the 20 SMA gaining bullish strength, currently around 1.1760. Technical indicators hold within positive levels but lack directional momentum. In the shorter-term, and according to the 4-hour chart, the picture is quite alike, with the price holding above a bullish 20 SMA, but technical indicators heading nowhere around their midlines. A strong static resistance level comes at 1.1915, with bulls likely adding longs once beyond it.

Support levels: 1.1810 1.1760 1.1710

Resistance levels: 1.1870 1.1915 1.1950

USDJPY

The USD/JPY pair broke lower last week, ending it around 104.70, near a 4-week low of 104.33. The American currency fell, amid mounting tensions ahead of elections and despite “progress” in a US stimulus aid package. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi had been engaged in daily talks ever since the week started, reporting advances but warning that chances of a bill being approved before the presidential election are quite slim. Economic growth, in the meantime, is being put at doubt amid new coronavirus outbreaks worldwide. Concerns overshadowed higher government bond yields, usually a bullish factor for USD/JPY.

Japanese data published on Friday was generally encouraging, as the National CPI ex-Fresh Food declined by 0.3% YoY, better than the expected -0.4%. Also, the preliminary estimate of the Jibun Bank Manufacturing PMI for October came in at 48, improving from 47.7. The country will publish the August Leading Economic Index this Monday, and the Coincident Index for the same month.

The USD/JPY is technically bearish according to the daily chart, as the pair has fallen below all of its moving averages, spending the last couple of days consolidating losses. Technical indicators in the mentioned time frame have turned south within negative levels, although their bearish strength is limited. The 4-hour chart shows that a bearish 20 SMA rejected an intraday advance, while the Momentum heads higher in neutral readings. The RSI, however, consolidates near oversold levels, skewing the risk to the downside.

Support levels: 104.30 103.95 103.50

Resistance levels: 105.00 105.40 105.80

GBPUSD

The GBP/USD pair fell for a second consecutive day but managed to close the week with gains around 1.3040. UK macroeconomic figures released on Friday were generally encouraging, as the country reported September Retail Sales which came in at 1.5% MoM and 4.7% YoY, beating expectations. Also, the preliminary estimate of October Manufacturing PMI resulted at 53.3, better than expected, while the Services PMI missed expectations but remained within expansion levels, resulting in 52.3.

In the Brexit front, cautious optimism prevails, as the EU and the UK resumed trade talks. News indicating that French President Emmanuel Macron has said to the local fishing industry to brace for impact, somehow indicated that a deal is closer. However, investors are still cautious about the matter. Meanwhile, the resurgent number of coronavirus contagions in the UK pressures authorities, who refuse to impose a new full lockdown. The kingdom won’t publish relevant macroeconomic figures this Monday.

From a technical point of view, the GBP/USD pair has limited bullish potential. The daily chart shows that it is developing above all of its moving averages, which are anyway confined to a tight range with modest bullish slopes. Technical indicators eased within positive levels, and hold around their midlines. The 4-hour chart shows that the pair settled below a bullish 20 SMA and that the Momentum indicator heads firmly lower within negative levels. The RSI indicator is flat within neutral levels, leaving the risk skewed to the downside.

Support levels: 1.3020 1.2970 1.2915

Resistance levels: 1.3060 1.3115 1.3150  

AUDUSD

The AUD/USD pair posted a modest recovery last week, ending it in the 0.7130 price zone. The advance could be attributed to the broad US dollar’s weakness, as investors have little reasons to buy the Australian currency after the RBA Meeting’s Minutes showed that policymakers are preparing to cut rates to fresh record lows. Softer gold prices also limited the upside for Aussie.

On Friday, investors knew that the Australian preliminary October Commonwealth Bank Manufacturing PMI came in at 54.2 from 55.4 in the previous month, while the Services PMI improved to 53.8 from 50.8 in August. The country will publish the preliminary September Trade Balance, with the surplus previously at 2643 M.

The daily chart shows that the AUD/USD pair has remained below its 20 DMA, which lacks directional strength, while it hovers around the 100 DMA. Both moving averages are confined to a tight range, indicating no directional convictions. Technical indicators develop below their midlines, without directional momentum. In the shorter-term, and according to the 4-hour chart, the pair is neutral-to-bullish trading above a bullish 20 SMA but below a flat 100 SMA. Technical indicators hold on to positive ground, but with uneven strength, failing to provide directional clues.

Support levels: 0.7110 0.7065 0.7020

Resistance levels: 0.7170 0.7210 0.7260

GOLD

Gold ended the week barely on break even point after an indecisive trading session on Friday staying a tick over $1,900. Surprisingly, the USD index DXY also stayed in the negative zone failing to pass 93.0 level. On the other hand, the US 10-year yield retraced from its high at 0.86 to 0.84. Washington’s comments about putting pen on paper did not help the risk sentiment and also Gold failed to capitalise the supportive developments. While the last Trump-Biden debate did not create a surprise, as the elections came closer, Biden’s net lead started to shrink. At this point, it is widely expected that the markets will be extra cautious against the outcome of the elections as the results might take longer to finalize due to postal votes. Also, the size of the stimulus package will play a certain role in the risk appetite and for the precious metals.

On Monday, the US New Home Sales Change (MoM) (Sep) will be followed as it might be used to determine the size of the needed stimulus package. On Tuesday, the Durable Goods Order data set will be tracked in the US followed by the Gross Domestic Product Annualized (Q3) PREL, Core Personal Consumption Expenditures (QoQ)(Q3) PREL and weekly job data set in the US on Thursday. Also, ECB’s interest rate decision on Thursday might affect the USD and precious metals with an indirect matter. On Friday, inflation data in the EU zone and Personal Spending data set will be followed as a risk driver.   

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 also followed the indecisive trading environment with Gold failing to find a net direction. Silver still can’t get rid of the usual monetary risk drivers and focus on its industrial demand. A clear Democrat victory in the US will most likely pour more cash into the markets and therefore, the USD will retrace further supporting the precious metals. Also, as the Democrats are clearly in favour of the clean energy resources, the solar panel indıstriy might boom and Silver, at least for now, is an important component of the solar panels. Therefore, all signs are in favour of Silver for the long run to invest at the moment.

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 hit its weekly lowest day sliding below $40.00 level on Friday following the Baker Hughes’ report. US oil drillers added six new rigs last week, to a total count of 211, in their sixth consecutive increment since having bottomed in mid-August. With crude prices steady around $40 during the last two months, oil producers seem to be restoring their production which was closed down during the first wave of the pandemic. With the increase in the number of oil rigs, stock fears began to build-up while the rising number of cases fueling fears of a decline in the demand. On the other hand, the current decline seen in the US oil stocks did not help the black gold to improve its sentiment. The US crude stocks fell by 1 million barrels for the week ended Oct. 16 after a 3.8 million-barrel decline seen a week ago. 

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 managed to get away from its daily lows on Friday ending the week slightly positive despite the daily negative close. It is all about the stimulus talks and the upcoming elections in the US at the moment. Even the record-breaking number of new cases especially in Europe and re-imposed lockdown measures are not playing a big role in the risk sentiment. Lately, House Speaker Pelosi said they are ‘just about there’ with the stimulus deal. Pelosi’s comment indicates more progress has been made, but what is also needed is Senate Majority Leader McConnell’s blessing. On the other hand, White House economic adviser Larry Kudlow warned that there were "significant policy differences" that were hardly resolvable before the election. The market did not show a significant reaction to the second Trump-Biden debate. Biden still has the lead due to latest polls but Trump started to pick up the pace in a small margin.   

The data schedule will be busy this week in the US with the release of New Home Sales Change (MoM) (Sep) on Monday while on Tuesday the Durable Goods Order data will be followed. Gross Domestic Product Annualized (Q3) PREL, Core Personal Consumption Expenditures (QoQ)(Q3) PREL and weekly job data set in the US will be followed on Thursday with the Personal Spending data set in the US on Friday.   

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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