Daily Market Report - 4th Dec 2020

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EURUSD

The EUR/USD pair reached 1.2174, a level that was last seen in April 2018, as the dollar’s sell-off continued after the breakout of critical levels. US data was mixed, although employment-related figures were quite encouraging, boosting Wall Street. The Initial Jobless Claims for the week ended November 27 improved to 712K, beating expectations. Challenger Job Cuts printed at 64.797K in November, better than the previous 80.666K. The ISM Services PMI, however, contracted to 55.9 in November from 56.6 in the previous month. 

The EU published October Retail Sales, which were upbeat, surging 1.5% MoM and 4.3% YoY. Markit published the final November Services PMIs, with the EU index revised to the upside and the US one confirmed at 58.4. Market players kept looking beyond data, focusing on vaccine hopes and US stimulus chatter.

Germany will release October Factory Orders this Friday, while the US will publish the November Nonfarm Payrolls. The country is expected to have added 481K new positions in the month, below the previous 638K. The unemployment rate, however, is seen improving from 6.9% to 6.8%.

The EUR/USD pair retreated from the mentioned high but remains well above the 1.2100 threshold. The pair is extremely overbought, but a corrective decline could not be taken for granted. The 4-hour chart shows that it keeps developing far above all of its moving averages, while technical indicators are barely retreating from extreme overbought levels. The pair could correct lower, but the upside will remain favored as long as it holds above 1.2000.

Support levels: 1.2110 1.2070 1.2020

Resistance levels: 1.2175 1.2230 1.2280

USDJPY

The USD/JPY pair plunged to 103.66, its lowest in almost three weeks, bouncing from such a low during US trading hours. The American currency came under selling pressure as optimism surrounding a stimulus package in the US cooled down after Senate Majority Leader Mitch McConnell rejected the bipartisan $908 billion proposal. US Treasury yields retreated from their weekly highs on such headline, closing the day in the red.

Japan reported this Thursday the November Jibun Bank Services PMI, which was revised to 47.8 from a previous estimate of 47.7. The country’s macroeconomic calendar will be empty this Friday, with the focus shifting to US employment figures.

The USD/JPY pair trades a handful of pips below the 104.00 level, bearish in the near-term. The 4-hour chart shows that the pair is developing below all of its moving averages, with the 20 and the 100 SMA gaining bearish slopes below the 200 SMA. Technical indicators have lost directional strength but stabilized near their daily lows within negative levels. A steeper decline could be expected on a break below 103.50, a strong static support level.

Support levels: 103.50 103.15 102.70

Resistance levels: 104.30 104.70 105.00  

GBPUSD

The GBP/USD pair traded as high as 1.3499, a fresh 2020 high, ignoring persistent tensions in the Brexit front. An EU diplomat reported this Thursday that issues around fisheries and a level playing field are still unsolved. UK authorities made more optimistic comments, as Ireland’s Foreign Minister, Simon Coveney, said that there was a good chance the UK and the EU would secure a trade deal in the next few days. Investors are still hopeful that the UK and the EU may finally clinch a deal. Mixed Brexit-related headlines in the US afternoon put some pressure on the pair.

News that the UK will distribute a coronavirus vaccine next week may have also added to the pound’s momentum. Data wise, the Markit Services PMI was upwardly revised to 47.6 in November from a preliminary estimate of 45.8. On Friday, Markit will publish the November Construction PMI, foreseen at 52 from 53.1 in October.

The GBP/USD pair is trading in the 1.3450 price zone as the US session comes to an end, maintaining its bullish stance. The 4-hour chart shows that technical indicators are barely retreating from near overbought levels, but the pair continues to develop above bullish moving averages. The December 2019 monthly high at 1.3513 provides a critical resistance, with further gains expected on a break above it.

Support levels: 1.3440 1.3390 1.3350

Resistance levels: 1.3515 1.3560 1.3605

AUDUSD

The AUD/USD pair reached a fresh 2020 high of 0.7449, nearing the August 2018 high at 0.7452. The pair advanced for a third consecutive day on the broad dollar’s weakness, getting some additional support this Thursday from equities, as most indexes closed in the green.

Australian data came in better than anticipated, as the Commonwealth Bank Services PMI rose to 55.4 in November from 54.9, while the Composite PMI improved to 54.9. The AIG Performance of Construction Index came in at 55.3 after printing 52.7 in October. Also, the October Trade Balance post a much larger-than-anticipated surplus of 7456M. The country will publish the final reading of October Retail Sales during the upcoming Asian session.

The AUD/USD pair is trading near its daily high, bullish despite lacking momentum. The 4-hour chart shows that moving averages are barely advancing below the current level, while technical indicators consolidate near overbought readings. The former year’s high at 0.7413 is now the immediate support, although the pair would need to break below 0.7330 to lose its bullish potential.

Support levels: 0.7415 0.7375 0.7330

Resistance levels: 0.7450 0.7490 0.7530

GOLD

Gold kept its move north on Thursday as the USD index DXY continued its decline through sub-91.00 levels. While the decline in the USD supports the bullish outlook on Gold, vaccine optimism continues to cap the gains. On the stimulus side, December 11th is the deadline to reach an agreement on any type of funding. At present, the federal government is operating under a continuing resolution (CR) that funds operations through December 11. Congress must either pass the annual appropriation bills (likely all at once in an omnibus) or once again resort to a CR to prevent a partial government shutdown after that date. While the Democrats were pushing for a deal that worths $2 trillion before the election, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said that a $908 billion bipartisan Senate plan should “be used as the basis for immediate bipartisan, bicameral negotiations.” Around the same time, Senate Republican leaders released a plan that is in the ballpark of $500 billion and similar to their proposal from mid-September. Stimulus deal hopes also supports precious metals as it will put the USD more under pressure. The long-term looks bright for precious metals as the ultimate end of the pandemic is still a long way to go. Today’s NFP data set will be a key driver in terms of the performance of the labour market in the US and the need for the stimulus package.   

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

DOW Jones

Dow Jones once again tested its all-time high around 30,080 zones on Thursday as vaccine and stimulus optimism continued to support the risk appetite. As Britain will begin inoculations next week, while the US Food and Drug Administration will hold its own advisory committee meeting next week that could determine when treatments are approved for use in the country, Reuters reported for the vaccine emergency use. On the other hand, the minutes of the November 4-5 FOMC meeting has sparked speculation that the Fed could be willing to make further use of its balance sheet should the economy necessitate this as the Congress still yet to sign a deal for the stimulus package. The past three consecutive weeks of Initial jobless claims data in tune with the November release of the ADP private payrolls data suggest that the momentum in the economy is being lost and, given the delays by Congress in agreeing on further fiscal stimulus forcing Fed to step-in at the moment. House Democrats have greenlighted a bipartisan fiscal stimulus plan coming from moderate Senators. While the package is worth only $908 billion, it may reach higher levels. Moreover, markets were positively surprised to see progress in Washington during the lame-duck session – and still await more in January, when President-elect Joe Biden takes office. Today’s NFP data set will be a big indicator for the slow-down in the economy due to the second wave in the pandemic. Therefore, a worse than expected reading might force Fed intervention on the markets.       

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

XAGGAGAGAGA

Silver surprisingly failed to benefit the continuous decline seen in the USD on Thursday. While Gold kept its strong foot over the $1,800 level, Silver failed to sustain its move over the $24.00 level. At this point, Silver trading is hurt by the second wave of the pandemic as the physical demand is subdued due to partial lockdowns that disturb the manufacturing sectors. On the other hand, Gold to silver ratio which is out of balance also signals an expected rally of Silver is still yet to come in the post-pandemic period. Apart from outperformed by gold lately, Silver at least managed to protect its trading range between $22.90 and $26.00 compared to the volatile movement of Gold. 

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 

WTI

WTI is testing its highest level since the start of March price melt-down. While vaccine hopes combined with the stimulus deal expectation supports the black gold, the delay on the OPEC+ deal is limiting gains. Saudi Arabia and Russia remain at crossheads over the decision whether to extend the record oil output cuts, which led to a no-compromise between the alliance earlier this week. The OPEC+ meets once again on Thursday to resume discussions and eventually reach a deal on the output policy. The OPEC+ is widely expected to extend oil cuts of 7.7 million barrels per day, or 8% of global supplies, at least until March 2021, per Reuters. On the other hand, stocks continue to build-up in the US. Crude oil stocks fell by 679,000 barrels in the week to Nov. 27, by less than the 2.4 million-barrel decline expected as reported by the Energy Information Administration (EIA) on Wednesday. 

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.

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