Thu, Jan 27, 2022 @ 14:32 GMT
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Foreign Exchange Market Commentary

EUR/USD

After being under pressure for seven consecutive weeks, the American dollar managed to change course against the common currency, and the EUR/USD pair closed the week around 1.0630, its lowest settlement in almost a month. Renewed hopes about the US government applying policies to boost growth and inflation, after President Donald Trump promised a "phenomenal" tax reform, was behind dollar’s strength. The American currency advance was uneven across the board, with the Pound and the Aussie the most reluctant to give up. The EUR on the other hand, is among the most vulnerable, given the ongoing political woes in the region, with upcoming elections in Germany and France, a possible referendum in Italy, and Greece’s bailout on "shaky ground," according to the European Commission President Jean-Claude Juncker.

The week with probably start in slow motion, with no major data scheduled in Europe and America. That said, political headlines could continue to affect currencies one way or the other. From a technical point of view, the EUR/USD pair´s daily chart shows that, after reaching the 50% retracement of the November/January decline, the pair is back below the 38.2% retracement of the same decline and poised to test the next Fibonacci support at 1.0565. Technical indicators in the mentioned time frame head sharply lower within negative territory, whilst the price is below its 20 and 100 DMAs, this last with a strong downward slope around 1.0700. In the shorter term, and according to the 4 hours chart, technical readings also favor the downside, as a bearish 20 SMA kept capping the upside, currently around 1.0660, whilst the Momentum indicator turned south after failing to overcome its mid-line, and the RSI indicator consolidates around 38.

Support levels: 1.0620 1.0590 1.0565

Resistance levels: 1.0660 1.0710 1.0750

USD/JPY

The USD/JPY pair closed the week with modest gains around 113.20, down on Friday after failing to regain the 114.00 level. Risk appetite was not enough to fuel the pair, with bulls probably disappointed by the outcome of the Abe-Trump meeting, as both leaders shook hands and praise one another, but said nothing about a possible trade deal or on how the relationship between the two countries will continue. Despite Wall Street closed at record highs for a second consecutive day on hopes for an upcoming tax cut and recovering US Treasury yields, the USD/JPY pair closed the week with a lower low and a lower high, somehow suggesting that yen’s rally is not yet over. Risk aversion may re-surge with the weekly opening, as over the weekend, North Korea fired an unidentified ballistic missile, triggering condemnatory comments from both, Abe and Trump, with the first saying that missile tests "can absolutely not be tolerated." Technically, the daily chart shows that the pair was unable to break below a bullish 100 DMA, currently at 111.85, while the 38.2% retracement of the latest bullish run stands at 111.95, providing a major support for the upcoming days. In the same chart, however, technical indicators have lost upward strength right below their mid-lines, and the RSI is slowly turning south, leaning the scale towards the downside. In the 4 hours chart, the price is struggling with a bearish 100 SMA, while the RSI indicator pulled back from overbought readings, now heading lower around 54, whilst the Momentum indicator maintains its bullish strength near overbought readings.

Support levels: 112.85 112.40 111.90

Resistance levels: 113.60 114.00 114.55

GBP/USD

The GBP/USD pair closed the week flat a few pips below the 1.2500 threshold, hit by dollar’s strength by the end of the week and in spite of strong UK data. Industrial and manufacturing production more than doubled expectations in December, with the first up 1.1% and the second 2.1% when compared to the previous month. The year-on-year figures came in at 4.3% and 4.0% respectively, while previous month’s reading were revised higher. Also, the goods trade balance for the same month showed a deficit of £-10.89B, better than the expected £-11.500B or previous £-11.55B, whilst the NIESR GDP estimate for the three months to January came in at 0.7%, beating expectations and above previous. Adding strong macroeconomic figures to the Brexit bill passing smooth through the Parliament, seems Pound’s declines are set to be limited. Technically, the daily chart shows that the pair is right below a bullish 20 DMA, whilst technical indicators head modestly lower within neutral territory. The chart also shows that the pair bounced strongly from the 38.2% retracement of its latest bullish run at 1.2430 a key support for the upcoming days. In the 4 hours chart, the price is trading below horizontal moving averages, with the 200 EMA a few pips above the mentioned Fibonacci support, while technical indicators are also standing within neutral readings, with a modest bearish potential.

Support levels: 1.2470 1.2430 1.2390

Resistance levels: 1.2535 1.2585 1.2620

GOLD

Gold prices extended their gains this past week, with spot reaching a fresh three-month high of $1,244.67 a troy ounce, to close the week at 1,234.01, down on Thursday amid re-surging risk appetite. Despite broad dollar’s strength, demand for gold remained high, amid reduced hopes of three rate hikes coming from the FED this year, with speculators foreseeing the most, two hikes one in June and one in December. Gold prices will depend much on the upcoming Federal Reserve Chair Janet Yellen semi-annual testimony before congress, with a hawkish stance probably taking gold down. From a technical point of view, the upside is still favored given that in the daily chart, the price is well above a bullish 20 DMA that crossed above a bearish 100 DMA, whilst technical indicators have advanced within positive territory, with the Momentum indicator heading north at fresh monthly highs. In the 4 hours chart, however, the price is right below a horizontal 20 SMA, the Momentum indicator retreats from its 100 level within bearish territory, whilst the RSI indicator lacks strength around 55, suggesting a break above Friday’s high of 1,237.10 is required to confirm further gains.

Support levels: 1,230.00 1,219.40 1,210.10

Resistance levels: 1,237.10 1,244.70 1,255.15

WTI CRUDE

West Texas Intermediate crude oil futures advanced for a second consecutive day, with the commodity setting a couple of cents above 53.00. WTI set a daily high of $53.20 a barrel, still underpinned by Wednesday’s news, showing an unexpected draw in US gasoline stockpiles that suggest rising demand for the commodity. Despite a large build in crude inventories, the commodity advanced for a second consecutive day, although the price continues developing within the range set mid December. Technically, the daily chart shows that the price is now around a flat 20 SMA, whilst technical indicators have turned flat around their mid-lines, indicating a limited upward scope. In the 4 hours chart, the price advanced beyond a still bearish 20 SMA, but is currently struggling with the 100 and 200 SMAs, both flat, whilst the Momentum indicator heads higher above its 100 level and the RSI remains flat around 54, in line with the longer term view.

Support levels: 52.50 51.80 51.10

Resistance levels: 53.20 53.65 54.20

DJIA

US equities extended their Thursday’s rally, with all of the three major indexes closing the day at all-time highs. On Friday, the Dow Jones Industrial Average added 96 points or 0.48% to end at 20,269.37, while the S&P gained 0.36% to 2,316.10. The Nasdaq Composite settled at 5,734.13, up by 18 points. Stocks rallied on Trump’s promises of an upcoming tax reform, and a recovery in oil prices that lifted the energy sector. Within the Dow, Caterpillar led gainers, up by 2.50%, followed by NIKE that added 1.65% and Boeing, up by 1.19%. On the losing side, Coca-Cola topped losers’ list, down 1.62%, followed by Wal-Mart Stores that shed 1.53%. From a technical point of view, the upside is favored given that in the daily chart the Dow is well above a modestly bullish 20 SMA, whilst the RSI indicator heads higher around 70, with the Momentum indicator, however, diverging, neutral around its 100 line. In the 4 hours chart, the bias is firmly bullish with the index well above a bullish 20 SMA, the Momentum indicator heading north near overbought readings and the RSI hovering around 72.

Support levels: 20,228 20,157 20,090

Resistance levels: 20,297 20,350 20,415

FTSE 100

London shares got a boost from China last Friday as a better-than-expected trade surplus in the country sent mining-related equities higher, helping the FTSE 100 to add 29 points and close at 7,258.75. A weaker Pound also lifted the mood among local traders. Rio Tinto was the best performer, up 5.63%, followed by Antofagasta that gained 4.65% and Anglo American that added 4.40%. Reckitt Benckiser was the worst performer, down 2.96%, followed by Royal Bank of Scotland that lost 1.80%. The index closed at its highest in three weeks, and technical readings in the daily chart support additional gains, given that the benchmark has extended above a still flat 20 SMA, but indicators maintain bullish slopes within positive territory. In the 4 hours chart, the 20 SMA advanced to converge with the 100 SMA at 7,208, providing a strong dynamic support, while the RSI indicator consolidates at 71 and the Momentum indicator turned higher within positive territory, in line with the longer term perspective.

Support levels: 7,208 7,163 7,128

Resistance levels: 7,275 7,326 7,354

DAX

European equities closed marginally higher on Friday, with the German DAX finishing at 11,666.97, up 24 points. Despite staring the day with a strong footing, shares failed to extend the risk-appetite rally triggered by the US president on Thursday, but remained afloat on strong earnings reports released earlier in the week, and positive trade data coming from China. In Germany, banks were among the worst performers, with Commerzbank down 2.37%, leading losers’ list, and Deutsche Bank down 1.35%. ThyssenKrupp was the best performer by adding 2.35%, followed by Heidelberg Cement that closed 1.58% higher. Technically, the pair presents a modest upward potential in the daily chart, as it´s just holding at the upper end of its latest range, and a few points above a flat 20 SMA, whilst technical indicator in the mentioned time frame barely aim higher within neutral territory. In the 4 hours chart, the index settled above all of its moving averages, but the 20 and 100 SMAs lack clear directional strength, whilst technical indicators have turned lower within positive territory, limiting chances of a steeper recovery as long as the benchmark is unable to advance beyond 11,720, Friday’s high and the immediate resistance.

Support levels: 11,605 11,545 11,498

Resistance levels: 11,720 11,794 11,845

Henyep Capital Marketshttps://www.hycm.com/en
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