Mon, Aug 02, 2021 @ 05:45 GMT
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Foreign Exchange Market Commentary


The EUR/USD pair traded around the 1.0630 for most of the last 24 hours, as investors were waiting for the US Central Bank monetary policy decision. Mrs. Yellen and Co. delivered the 25bps raise as expected, moving its benchmark interest rate to 0.75%-1.0%. There was only one dissenter, Minneapolis Fed President Neel Kashkari. The dollar was sold-off as an immediate reaction to the announcement, with the EUR/USD pair advancing up to 1.0710 with the news, settling a few pips below it ahead of Yellen’s speech. She offered a positive outlook to the economy, as she said that the "economy continues to expand at a moderate pace." Weighing on the greenback were comments suggesting that the funds rate doesn’t need to rise "all that much" to get to where the Fed considers neutral. Despite the dot plot still favors three rate hikes this year, the market is convinced the Central Bank will deliver just two this year. Overall, a dovish stance.

Data coming from the US earlier in the day was mixed as February inflation showed the biggest annual increase in almost 5 years. The consumer price index advanced by 0.1% when compared to January, and up 2.7% from a year before. Retail Sales, however, were slightly disappointing, as purchases rose by just 0.1% as expected, the lowest gain in six months.

The pair rallied further after the release of the Dutch elections’ result, showing that the ruling party is taking over 30 seats, while Geert Wilders’ party won "just" 19, bringing relief to those concerned over populism in Europe, according to exit polls.

As for the technical point of view, the EUR/USD pair is trading at the higher in over a month, breaking through the 1.0700/20 region, and sharply bullish after the news. From a technical point of view, the risk is clearly towards the upside, given that in the 4 hours chart, the price has recovered above all of its moving averages, whilst technical indicators head sharply lower after surpassing their mid-lines, maintaining strong upward slopes and with the RSI indicator approaching overbought territory. If the price manages to hold above 1.0720, there’s room for an extension up to 1.0820, the 50% retracement of the post-US election slide.

Support levels: 1.0720 1.0660 1.0635

Resistance levels: 1.0755 1.0790 1.0820


The USD/JPY pair held above the 114.50 threshold until the US Federal Reserve unveiled its monetary policy decision, which resulted in a dollar’s sell-off and sent the pair as low as 113.31, a fresh 2-week low. Yellen’s soft wording towards the future, with the dot plot showing no relevant changes in the amount of upcoming rate hikes, neither in inflation or growth, disappointed those waiting for a more hawkish stance. US yields plunged with the news, with the 10-year benchmark down to 2.51% from previous 2.59%. During the upcoming Asian session, the Bank of Japan will have its monetary policy meeting, although no big changes are expected. The Central Bank is expected to maintain the status quo, focusing on the yield-curve control, whilst Governor Kuroda is expected to maintain its optimist outlook, despite inflation is nowhere near the Central Bank’s target. The pair is set to fall further as it broke below a bullish 100 DMA, currently around 114.30, while a major Fibonacci resistance stands at 114.50, making of the region now a selling point. In the 4 hours chart, technical indicators have turned sharply lower after failing to overcome their mid-lines and now entering oversold territory, whilst the price is now around a horizontal 200 SMA after surpassing the 100 SMA, all of which supports additional declines during the upcoming hours.

Support levels: 113.30 112.90 112.50

Resistance levels: 114.00 114.50 114.95


It was a wild ride the one the GBP/USD pair had today, recovering from a daily low of 1.2178, and challenging 1.2300 at the end of the day following the Fed’s announcement. The UK released mixed employment figures this Wednesday, as the unemployment rate fell to 4.7% in the three months to January, level last seen in 2005. Additionally, there were 31.85 million people in work, 92,000 more than for August to October 2016 and 315,000 more than for a year earlier. Still, wages were a big miss, as Average Earnings, including bonus, slowed to 2.2% from previous 2.6% leaving real pay growth, adjusted for inflation, was just 0.7%. The Bank of England is having its monetary policy meeting this Thursday, largely expected to remain on hold, albeit weaker wages together with rising inflation, are a worrisome mixture that policymakers can’t ignore for long. From a technical point of view, the 4 hours chart shows that the price bounced multiple times intraday from a bullish 20 SMA, whilst technical indicators regained the upside after testing their mid-lines, heading now north at fresh 1-week highs. The pair has a critical resistance at 1.2345, the 50% retracement of January’s rally and February’s low. If the price manages to break above it, the rally can extend up to 1.2425, the next Fibonacci resistance. Still, Brexit jitters weigh, and may trigger a sudden reversal on an approach to any of the mentioned resistances.

Support levels: 1.2260 1.2230 1.2190

Resistance levels: 1.2345 1.2385 1.2425


Gold prices jumped to their highest since March 7th on dollar’s broad weakness, ending the day near $1,220.00 a troy ounce. Investors were disappointed by the dot plot that offered no fastest pace in the rate rise path. Projections continue to indicate two rate hikes more for this year, while inflation and growth forecast were barely revised from December’s ones. The daily chart shows that the commodity has recovered well above a major Fibonacci level around 1,210.00, the 38.2% retracement of the latest bullish run. The chart also shows that the price held above its 100 DMA, but also that the 20 SMA continues heading south above the current level, whilst technical indicators have bounced modestly, but remain well below their mid-lines, indicating a limited upward scope in the longer term. In the 4 hours chart, the sharp movement higher has helped the pair recover above a still flat 20 SMA, while pushed technical indicators higher, now heading north almost vertically. The commodity needs now to advance beyond 1,222.80 to be able to extend its rally up to 1,230.30, the 23.6% retracement of the mentioned rally.

Support levels: 1,197.10 1,188.20 1,180.50

Resistance levels: 1,210.00 1,218.50 1,226.70


Oil prices found modest support in the EIA weekly report, showing a surprise drawdown in oil stockpiles. According to the US Energy Information Administration, inventories fell by 237,000 barrels in the week through March 10, following nine weeks of steady advances. The report also showed that total stockpiles stood at 528.2 million as US crude imports fell by 565,000 barrels and refinery activity declined. Crude stocks at the Cushing, Oklahoma delivery hub rose by 2.13 million barrels. Gasoline and distillate stockpiles also fell by more than expected, dropping 3.1 million barrels the first and 4.2 million barrels the second. West Texas Intermediate crude oil futures settled at $48.50 a barrel, a fresh weekly high, but the upward still seems limited, given that the recovery was quite shallow, despite dollar’s weakness. Daily basis, the price was unable to surpass its 200 DMA, whilst technical indicators remain within oversold territory, with limited directional strength, maintaining the risk towards the downside. In the 4 hours chart, the price has settled a few points above a still bearish 20 SMA, whilst technical indicators are posting modest advances within neutral territory, hardly enough to anticipate further gains.

Support levels: 48.00 47.30 46.65

Resistance levels: 49.10 49.75 50.50


Wall Street got a nice boost from the Fed, with all three major indexes closing in the green. The Dow Jones Industrial Average is back on its way to surpass 21,000, as the benchmark closed the day at 20,950.10, up 112 points or 0.54%. The Nasdaq Composite added 43 points, and settled at 5,900.05, an all-time high, while the S&P added 19 points or 0.84% to end at 2,385.26. The rally came after the FED failed to surprise the market, maintaining its stance of a gradual pace in rate hikes. Within the Dow, only six components closed lower, with Caterpillar leading the advance by adding 1.69%. UnitedHealth Group gained 1.66%, while Verizon advanced 1.62%. The daily chart for the Dow shows that the benchmark recovered modestly from around its 20 DMA, whilst technical indicators have pared losses and turned higher, with the Momentum barely bouncing from its 100 level, but the RSI indicator near overbought readings. In the 4 hours chart, the index has bounced from its 20 and 100 SMAs that stand together around 20,880, while technical indicators have lost upward strength after entering positive territory, rather reflecting the low volumes after the close than suggesting an upcoming downward move.

Support levels: 20,880 20,852 20,817

Resistance levels: 20,978 21,015 21,064

FTSE 100

The FTSE 100 posted some modest gains, adding 10 points and ending the day at 7,368.64. Hikma Pharmaceuticals was the best performer, advancing 8.04% following the release of its earnings report, as the profit drop was smaller than expected. The company reported an operating profit of £247.6M, hiking dividends. The second best performer was miner Glencore that added 2.86% after Goldman Sachs upgraded the share to ‘buy’ from ‘neutral.’ Rising iron-ore and copper, boosted the mining the sector, albeit Randgold Resources was among the worst performers, ending down 1.07% as gold underperformed. The Footsie extended its advance in after-hours trading, flirting with 7,400 ahead of the Asian opening, tracking Wall Street’s advance. The daily chart maintains the positive tone seen on previous updates, with the index advancing further above a bullish 20 DMA and technical indicators extending their tepid advances within positive territory. In the 4 hours chart, the 20 SMA regained its upward strength well below the current level, whilst technical indicators hold within positive territory, but with limited upward momentum.

Support levels: 7,322 7,306 7,262

Resistance levels: 7,397 7,420 7,450


European equities closed marginally higher, with the German DAX adding 21 points, and settling at 12,009.87, as investors were cautious ahead of the US Federal Reserve monetary policy decision. There were little news to drive the German index, exacerbating the range bound trading. Commerzbank led the advance, adding 2.57%, followed by Deutsche Lufthansa that added 2.32%. Among the worst performers were E.ON, down 3.17% and Volkswagen that shed 0.96%. The daily chart suggests that the index may advance further this Thursday, as it already advanced in electronic trading, now at 12,059, holding above a bullish 20 SMA and with technical indicators regaining their bullish potential, but with the Momentum still within neutral territory. In the 4 hours chart, the technical picture also points for an upward extension, as the index moved further above a still flat 20 SMA, whilst technical indicators advanced within positive territory, and particularly the RSI indicator that stands at 63. March high stands at 12,067, the immediate resistance and the level to surpass to see the index retesting the multi-year high set last February at 12,099.

Support levels: 12,003 11,961 11,909

Resistance levels: 12,067 12,099 12,140

Henyep Capital Markets
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