Thu, Jan 27, 2022 @ 15:07 GMT
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Foreign Exchange Market Commentary

EUR/USD

The EUR/USD pair closed the day marginally lower round 1.0770, not far from a daily high 1.0807 high reached ahead of London’s opening, with the dollar maintaining a weak stance and poised to decline further. Majors traded within a well-limited range during the Asian and European sessions, with the pair holding a few pips below the 1.0800 threshold, even despite the EU final Markit Manufacturing PMIs for January which confirmed that growth in the region entered 2017 with a strong footing. The German manufacturing sector growth hit a three-year high in January, despite a modest downward revision to 56.4 from the initial estimate of 56.5, while for the whole region, the final reading was revised higher, up to 55.2 from 55.1 its highest in over six years.

Solid US data pushed the USD higher early US session, as the ADP employment survey came in much better-than-expected, at 246K from previous 153K and market’s consensus of 165K, whilst manufacturing PMIs also confirmed an acceleration in growth’s pace at the beginning of the year, with official ISM manufacturing PMI up to 56.0 from December’s 54.7. As largely expected, the US Federal Reserve monetary policy meeting was a non-event, as the Central Bank left its policy unchanged, and offered no clues on what’s next. Still, chances of a March rate hike have diluted after the neutral stance, putting the greenback under pressure across the board.

Technically, the pair is poised to extend its advance, given that in the 4 hours chart, the price bounced from a bullish 20 SMA, around 1.0735, whilst technical indicators recovered their bullish slopes after a modest downward correction within positive territory. The Momentum indicator in the mentioned chart heads higher at fresh weekly highs, supporting additional gains for the upcoming sessions. Still the pair faces a tough resistance between 1.0800 and 1.0840, where it bottomed for most of 2015 and 2016, while the 50% retracement of the November/January decline stands a 1.0820. An advance beyond this region is required to confirm a new leg higher, towards the 1.0930 price zone, the 61.8% retracement of the mentioned decline.

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0740 1.0770

USD/JPY

The USD/JPY pair settled a few pips above the 113.00 level, recovering modestly, but still at risk of a bearish extension, given market’s reaction to FOMC’s latest monetary policy meeting outcome. The pair traded in the green for most of the day, supported by easing risk aversion, as stocks in Asia and Europe recovering following strong Chinese growth figures, and extended up to 113.93 following better-than-expected US employment and manufacturing data. Also, positive data coming from Japan at the beginning of the day, helped ease risk aversion among Asian investors, as the Markit/Nikkei Japan Final Manufacturing came in at 52.7, up from 52.4 in December, indicating that manufacturing activity expanded at the fastest pace in almost three years as export orders surged. But the pair retreated after the FED failed to trigger dollar’s demand, and with the pair having been rejected from the 114.00 region, the risk remains towards the downside. In the 4 hours chart, the price remains well below a bearish 100 SMA, currently around 114.00, whilst the Momentum indicator heads higher within bearish territory, but the RSI indicator hovers around 43 with no clear directional strength. The pair fell down to 112.82 as an immediate reaction to the FED, being now the level to break to confirm additional declines for this Thursday.

Support levels: 112.80 112.50 112.00

Resistance levels: 113.45 113.90 114.30

GBP/USD

The GBP/USD pair advanced up to 1.2679 this Thursday, surpassing January’s high by a few pips and ending the day a handful of pips below it. Pound strengthened at the beginning of the day following the release of Markit Manufacturing PMI for January, as the index came in at 55.9 for the month, below December’s two and-a-half years of 56.1. According to Markit, output growth was at a 32-month high, but input costs posted a record increase, due to the sharp fall of the Sterling following the Brexit referendum. From a technical point of view, the pair could advance further this Thursday, as in the 4 hours chart, the price is well above a now bullish 20 SMA, whilst technical indicators consolidate near overbought territory, in line with the low volumes at this time of the day. Seems unlikely that the pair will move much during the upcoming Asian session, as the market will probably wait for the outcome of the BOE’s monetary policy meeting, and rush to price in the Quarterly Inflation report.

Support levels: 1.2625 1.2580 1.2535

Resistance levels: 1.2680 1.2730 1.2770

GOLD

Spot gold settled at $1,209.40 a troy ounce, having trimmed most of its intraday losses after FOMC monetary policy meeting resulted a non-event, with the US Central Bank leaving its policies on hold and offering no clues on upcoming moves. The bright metal fell down to 1,198.16 early US session, as strong American data triggered some dollar demand that anyway was short lived. The absence of information on the FED statement, clearly indicates that policy makers are still uncertain about what’s next for the US economy under the new administration. From a technical point of view, the daily chart shows that the price managed to end the day above the 1,204.50 Fibonacci level, but also that it is still stuck around a bearish 100 SMA. Technical indicators in the mentioned time frame indicate lack directional strength, with the Momentum stuck around its 100 level and the RSI heading modestly lower around 59, not enough to confirm a downward extension. In the 4 hours chart, technical indicators retreated from overbought readings, but the price held above the 20 and 100 SMAs, both converging around 1,202.00, limiting chances of a downward move.

Support levels: 1,204.50 1,196.10 1,187.80

Resistance levels: 1,220.05 1,229.80 1,241.35

WTI CRUDE

Crude oil prices gained on the back of the FED, with dollar’s weakness helping the commodity to shrug off the disappointing news for oil’s market. West Texas Intermediate crude oil futures settled around $53.50 a troy ounce, recovering from a daily low of $52.23, achieved after the release of the US EIA stockpiles report, which showed a major build in inventories. US crude stockpiles for the week ended Jan. 27 rose 6.47 million barrels, nearly doubling expectations of a 3.840 million gain. West Texas Intermediate crude futures daily chart maintains a neutral technical stance, as the commodity is above a still flat 20 DMA, whilst technical indicators turned modestly higher, but hold within neutral territory. In the 4 hours chart, the upside seems a bit more constructive, given that the price is currently standing above its moving averages, all together in a 20 cents range, and that technical indicators maintain their upward slopes within bullish territory.

Support levels: 53.20 52.65 52.00

Resistance levels: 53.90 54.30 55.10

DJIA

After trading most of the day in the red, US major indexes closed in positive territory, amid strong Apple and Facebook earnings reports, this last, released right after the close. The Dow Jones Industrial Average gained 26 points and closed at 19,890.94 while the Nasdaq Composite added 0.50% to settle at 5,642.65. The S&P closed mostly flat at 2,279.55. A FED less hawkish than expected, also supported the recovery of US equities as a rate hike seems unlikely at the time being. Technically, the Dow presents a neutral stance, as in the daily chart, the price stands around a horizontal 20 DMA, whilst technical indicators head nowhere around their mid-lines. Shorter term, the 4 hours chart shows that the 20 SMA capped the upside on an early advance, now standing at 19,929, while technical indicators head higher, but still within negative territory, not enough to confirm further recoveries ahead. Once the dust settle, seems likely that investors will keep on unwinding the Trump-trade during the upcoming days, and therefore stocks will probably resume their slide.

Support levels: 19,844 19,806 19,745

Resistance levels: 19,929 19,975 20,036

FTSE 100

London equities market advanced this Wednesday, adding 8 points to settle at 7,107.65, despite a strong Pound. The Sterling managed to advance further against its American rival at the beginning of the day, but mining-related shares gained on the back of Chinese growth data. China’s official manufacturing PMI for January came in at 51.3, beating expectations of 51.4, and slightly below December reading of 51.4. Among the best performers were Anglo American, which closed up 2.89%, while Antofagasta added 2.64%. The worst performer was Mediclinic International, down 3.36%, followed by Associated British Foods which closed down 2.88%. From a technical point of view, the daily chart shows that the benchmark remains range bound below its 20 DMA, whilst technical indicators maintain their bearish slopes within negative territory, maintaining the risk towards the downside. In the 4 hours chart, selling interest kept surging on advances towards a bearish 20 SMA, while technical indicators remain within negative territory, but with no directional momentum.

Support levels: 7,104 7,057 7,011

Resistance levels: 7,154 7,183 7,241

DAX

European equities recovered ground alongside with the greenback, as local government bonds and safe-haven retreated from Wednesday’s highs on the back of solid US data. Also, backing the positive mood among local investors were news indicating that the manufacturing activity in the region reached a multi-year high at the beginning of the year. The German DAX closed the day at 11,659.50, up by 1.08% or 124 points. Financial-related equities recovered from Tuesday’s setback and within the DAX led advancers, with Deutsche Bank up 4.02% and Commerzbank adding 2.23%. The DAX’s daily chart shows that the index settled a few points above a horizontal 20 SMA, whilst technical indicators have bounced modestly from their mid-lines, overall neutral. In the 4 hours chart, the index is below a modestly bearish 20 SMA, whilst technical indicators recovered from oversold readings, but lost upward strength and turned flat within bearish territory.

Support levels: 11,609 11,550 11,000

Resistance levels: 11,711 11,770 11,804

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