Mon, May 16, 2022 @ 19:35 GMT
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Foreign Exchange Market Commentary

EUR/USD

It was another quiet day across the FX board, with the Pound being the exception, as the Sterling plummeted against all of its major rivals. There were some minor macroeconomic releases that weren’t enough to affect currencies. The EUR/USD pair ended the day pretty much flat in the 1.0580 region, having however, extended its weekly decline to 1.0557. During the European morning, news confirmed EU´s growth at 0.4% for the last quarter of 2016, while German data disappointed, as new orders in manufacturing fell by 7.4% in January, against a December advance of 5.2%. The annual reading resulted at -0.8%, from a previously revised 8.0%. In the US the trade deficit widened to $48.5B in January, as expected. Finally, the US IBD/TIPP Economic Optimism Index declined 1.1 points, or 2.0%, in March, posting a reading of 55.3 vs. 56.4 in February 2017.

The EUR/USD pair technical picture shows that Friday’s upward potential kept fading, as the pair has moved further below its 100 DMA and closed the day below its 20 DMA for a second consecutive day, although barely. In the 4 hours chart, the price is barely holding above a bullish 20 SMA, and a few pips below a bearish 100 SMA, while the Momentum indicator head lower, still above its 100 level, and the RSI also turned south, but remains around 50. Market seems ready to resume dollar’s buying, but will likely wait from macroeconomic confirmations, in the form of the ECB monetary policy announcement and the US Nonfarm Payroll report, to be unveiled later this week.

Support levels: 1.0565 1.0520 1.0470

Resistance levels: 1.0635 1.0660 1.0710

USD/JPY

The USD/JPY pair closed the day flat around 114.00, amid the absence of directional clues. Equities closed mixed around the globe, but not far from their opening levels, while US Treasury yields remained unchanged around Monday’s levels. Japan will release the final version of its Q4 GDP during the upcoming Asian session, expected to be revised up to 0.4% from previous estimate of 0.2%, alongside with January trade figures, but seems unlikely the data could trigger some interesting moves. China will also release its trade figures for February, and will likely have a deeper effect over currencies than Japanese ones. From a technical point of view, the 4 hours chart shows that the price has held above its 100 and 200 SMAs that anyway remain flat, converging in the 113.30 region, while technical indicators lack directional strength, flat within neutral territory, reflecting the quietness around the pair.

Support levels: 113.50 113.25 112.90

Resistance levels: 114.55 114.95 115.30

GBP/USD

The GBP/USD pair extended its decline to a fresh 7-week low of 1.2169, to close the day around the 1.2200 figure. Early London, the Halifax house price index showed that house prices posted the slowest rate of growth in over three years in the three months to February, up 5.1% than in the same period a year ago, but down from a 5.7% gain in the three months to January. The lender, also said that it expects prices growth to keep easing due to lower consumer spending power. The House of Lords kept discussing the Brexit bill, and peers voted against the possibility of a second referendum, and agreed on a veto to the final Brexit deal, weighing further on Pound, as it´s another setback for PM May. From a technical point of view, the pair is at risk of falling further, as it extended its slide well below the 61.8% retracement of January’s rally at 1.2260, and the 4 hours chart shows that the 20 SMA maintains its bearish slope, now below the mentioned Fibonacci level, while the Momentum indicator retreated from its mid-line, and the RSI indicator holds flat around 31, all of which supports some additional slides on a break below the mentioned daily low.

Support levels: 1.2170 1.2130 1.2085

Resistance levels: 1.2220 1.2260 1.2300

GOLD

Despite the limited action seen across the FX board, the greenback was firmer against other assets, with gold underperforming, plunging to $1,214.09 a troy ounce and finishing the day a few cents above it. Spot fell to a fresh 1-month low on hopes the US Federal Reserve will pull the trigger on rates as soon as next week. The daily chart shows that the price pulled further away from its 200 DMA, which now converges with the 61.8% retracement of post-US slide, also extending its slide below the 20 DMA, whilst technical indicators maintain sharp bearish slopes within negative territory, supporting additional declines with the market now targeting 1,204.50, the 38.2% retracement of the same rally. In the 4 hours chart, the bearish momentum is even stronger, as the RSI maintains its downward strength around 23, while the Momentum indicator retraced sharply after failing to overcome their mid-lines. In the same chart, the 20 SMA maintains a strong bearish slope, having already crossed below the 100 SMA, and poised now to break below the 200 SMA.

Support levels: 1,204.50 1,198.15 1,188.20

Resistance levels: 1,221.70 1,230.00 1,239.25

WTI CRUDE

US sweet, light crude continued to trade flat as WTI futures ended the day a few cents above $53.00 a barrel, retracing an early spike up to 53.78. Saudi Arabia’s oil minister gave mixed messages on future OPEC production cuts, saying that the deal sealed last November has improved the oil market, but only because Saudi Arabia cut beyond its pledge. Ahead of US inventory data, the daily chart shows that the index is posting a second consecutive doji, with the early advance contained by selling interest around a horizontal 20 DMA, still around 53.70. In the same chart, the Momentum indicator continues to be flat around its 100 level, but the RSI indicator heads modestly lower around 45, leaning the scale towards the downside. In the 4 hours chart, the price remains trapped within horizontal moving averages, whilst technical indicators turned south, and are currently entering negative territory, in line with the longer term view.

Support levels: 52.50 51.90 51.40

Resistance levels: 53.70 54.20 54.80

DJIA

US indexes closed the day marginally lower, down for a second consecutive day. The Dow Jones Industrial Average settled at 20,924.76 down by 29 points, while the S&P lost 0.29%, to 2,368.39. The Nasdaq Composite closed at 5,833.93, down by 15 points. Energy and pharmaceutical equities were among the worst performers, with Verizon Communications leading Dow’s decline, down by 1.32%, followed by Chevron that shed 1.23%. Boeing was the best performer after adding 0.55%. Technically, the daily chart for the Dow shows that the benchmark barely surpassed its Monday’s low, and held within a well-limited range, as caution prevailed, with the Momentum indicator still holding horizontal above its 100 level, and the RSI indicator also heading nowhere around 70. In the shorter term, the 4 hours chart the benchmark is increasingly bearish, as attempts to advance were contained by a now bearish 20 SMA, at 20,957, whilst technical indicators head south within bearish territory, after being unable to re-enter positive territory.

Support levels: 20,892 20,849 20,800

Resistance levels: 20,957 21,017 21,064

FTSE 100

The Footsie closed at 7,338.99 down 11 points or 0.15%, despite continued Pound weakness. The decline was led by bookmaker Paddy Power Betfair that shed 5.86% as despite reporting an 18% raise in revenues, the company also informed that after last year’s merge, losses accounted £5.7 million. Financial and mining-related equities were also under pressure, with Standard Life down 3.78% and Antofagasta shedding 2.6%. Intertek Group, on the other hand, was the best performer, advancing 4.76%. The daily chart for the index shows that it stands near the mentioned close, holding above bullish moving averages, but with technical indicators still retreating within positive territory, suggesting the index could fall further, particularly on a break below 7,299, the 20 DMA and the immediate support. In the 4 hours chart, the index extended below a bullish 20 SMA, whilst technical indicators present tepid downward strength within bearish territory, in line with the longer term perspective.

Support levels: 7,299 7,265 7,238

Resistance levels: 7,345 7,397 7,420

DAX

The German DAX advanced 7 points this Tuesday to settle at 11,966.14, with most major European indexes closing flat, as macroeconomic data came in line with expectations, failing to motivate investors ahead of the ECB and the US NFP. Among the German benchmark, automakers and pharmaceuticals led the advance, with Daimler leading advancers, up 0.91%, followed by Continental that added 0.43%. Financials remained under pressure, with Deutsche Bank adding 1.18% to its recent losses. Daily basis, the index remained within Monday’s range, still developing above bullish moving averages, which indicate that the downward potential remains limited, whilst the Momentum indicator holds flat within neutral territory and the RSI indicator retreats from overbought readings. In the 4 hours chart, the index consolidated below a still bullish 20 SMA, whilst technical indicators have lost directional strength right below their mid-lines.

Support levels: 11,920 11,867 11,816

Resistance levels: 12,001 12,053 12,100

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