Wed, Apr 14, 2021 @ 08:34 GMT
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Foreign Exchange Market Commentary

EUR/USD

The EUR/USD pair closed the day marginally higher, a couple of pips below the 1.0800 threshold, but managed to extend its gains up to a fresh 2017 high of 1.0828 intraday. The American dollar traded softly against all of its major rivals, undermined by FOMC’s monetary policy statement that failed to provide any signal on upcoming rate hikes, but European currencies were unable to take as much advantage as commodity-related ones. The common currency found support in local data, as in the EU, producer price inflation surged in December by 0.7% when compared to November, and up to 1.6% YoY from previous 0.1%, the fastest pace in nearly four years, driven by soaring energy costs, according to Eurostat.

In the US, weekly unemployment claims fell down to 246K for the week ending January 27, whilst Nonfarm Productivity rose in the last quarter of 2016 to 1.3%, above market’s forecast but below a previous upwardly revised 3.5%. Finally, the US unit labor cost, also for the last quarter of 2016, rose by less than expected, up to 1.7% from a previously revised 0.2%. If it weren’t because of Trump-related uncertainty, such data, ahead of the NFP release, would have been enough to support the case of a faster rate hike pace coming from the FED, and therefore a stronger greenback. The Nonfarm Payroll report, to be released this Friday, will probably have a similar effect over the greenback, with any positive figure overshadowed by uncertainty about Trump’s policies.

Technically, the EUR/USD pulled back from a major resistance area, as the 1.0800/40 region has probed strong back in 2015 and 2016, when it acted as a major static support. The area is a tough bone to break, but once cleared, the pair may extend its rally up to the 1.1000 region. Technically, the 4 hours chart shows that the price remains above a bullish 20 SMA, now providing support around 1.0770, whilst technical indicators retreat within positive territory alongside with price, not enough to support further slides ahead. Much of the upcoming direction will depend on the result of the NFP report, with a positive figure probably helping the pair to correct down to 1.0710.

Support levels: 1.0770 1.0710 1.0650

Resistance levels: 1.0840 1.0885 1.0930

USD/JPY

The Japanese Yen advanced against its American counterpart this Thursday, helped by the weak tone of worldwide equities and falling US Treasury yields. The 10-year benchmark stands at 2.46%, pulling back from pre-FOMC highs of 2.51%. There were no relevant releases coming from Japan, and for this Friday, the country will release the Minutes of the BOJ latest meeting, hardly a market mover. Attention then, will likely turn towards the US Nonfarm Payroll report to be released ahead of Wall Street’s opening. The US economy is expected to have added 175K new jobs during December, while the unemployment rate is expected to have remained unchanged at 4.7%. Wages are seen rising at a softer pace than during November, when they jumped well beyond 2016 average. The Japanese yen is quite sensitive to dollar’s news, and as larger the deviation between expectations and the outcome, the larger the pair’s move in either direction. The technical stance for the USD/JPY pair is bearish given that it settled below the 113.00 level, and in the 4 hours chart, the price remains well below a bearish 100 SMA. Technical indicators in the mentioned chart are recovering within bearish territory, but below previous highs, indicating that it’s still at risk of breaking lower. The pair has bounced twice already from the 112.00 region, but renewed selling interest around the level will likely result in a bearish breakout, with scope then to test the 111.20 region, where the pair has its 100 SMA.

Support levels: 112.00 111.60 111.20

Resistance levels: 113.00 113.45 113.90

GBP/USD

BOE’s Super Thursday was a major disappointment for Pound’s bulls, as the Central Bank seemed little concerned about rising inflation, attributing it to external factors and a weaker GBP. As widely expected, the Bank of England left rates and the APP unchanged by an unanimous decision, whilst Governor Carney reiterated that “monetary policy can respond, in either direction, to changes to the economic outlook as they unfold”. The Central Bank reviewed its growth forecast from 1.4% to 2% for this 2017, but maintained its inflation perspectives unchanged. Carney also repeated that “there are limits to the extent that above target inflation can be tolerated,” but policy makers are in no rush to raise rates to deal with higher inflation. The GBP/USD pair plunged to 1.2525 in the US afternoon, from where the pair bounced modestly after shedding roughly 200 pips from its daily high. From a technical point of view, however, the decline seems corrective, and further slides unlikely, given that the pair bounced from the 23.6% retracement of the 1.1986/1.2705 rally at 1.2530. In the 4 hours chart, the pair is standing a few pips below a directionless 20 SMA,  whilst the Momentum indicator bounced from near its mid-line,  and the RSI pared losses and turned higher, now around 46. A recovery above 1.2600 is now required to confirm additional gains for this Friday.

Support levels:  1.2520 1.2470 1.2430

Resistance levels: 1.2600 1.2645 1.2690

GOLD

Gold rallied on the back of persistent dollar’s weakness, but trimmed half of its daily gains ahead of the close, with spot settling around $1,215.85 a troy ounce. The commodity traded as high as 1225.23 this Thursday, underpinned by the negative tone of worldwide stocks, following a clueless FOMC meeting. Adding to the safe-haven upward momentum these days, are US President Trump contentious´ relationships with countries such as Mexico, Japan and now, Australia. From a technical point of view, spot has advanced above its 100 DMA for the first time since past September, while the 20 DMA is nearing the 100 DMA with a sharp bullish slope, supporting some further gains ahead. In the same chart, the RSI indicator resumed its advance, now around 62, a fresh weekly high. In the 4 hours chart, technical indicators have retreated from overbought readings, maintaining bearish slopes, but within positive territory, whilst the price is above a bullish 20 SMA, indicating that the commodity may correct lower before resuming its advance.

Support levels: 1,211.56 1,204.50 1,196.10

Resistance levels: 1,225.23 1,231.10 1,241.35

WTI CRUDE

West Texas Intermediate crude oil prices surged to a daily high of $54.32 a barrel, but trimmed all of its daily gains ahead of the close and settled at 53.47. The early advance was triggered by mounting tensions between the US and Iran, as the White House put Iran "on notice" after the country conducted a ballistic missile-test launch, but at the end of the day, US rising production weighed more on traders’ sentiment. From a technical point of view, US oil maintains the neutral stance seen on previous updates according to the daily chart, as technical indicators remain flat around their mid-lines, while the price is a few cents above an also directionless 20 SMA. In the shorter term, and according to the 4 hours chart, the price is standing above its moving averages that anyway remain all together in a tight range, and with no certain directional strength, whist technical indicators have pulled back from oversold territory, and are currently standing within neutral territory.

Support levels: 53.20 52.65 52.00

Resistance levels: 53.90 54.30 55.10

DJIA

US major indexes closed pretty much flat, with the DJIA down 6 points at 19,884.91, and the S&P also down by 6 points at 5,636.20. The S&P gained 1 point or 0.06% to settle at 2,280.85. Earnings reports released right after the close were disappointing, with GoPro missing on sales, down 11% after hours, and Amazon plunging also due to missing sales and despite Q4 earnings per share beat estimates. Ongoing uncertainty and upcoming US Nonfarm Payroll report kept investors side-lined this Thursday, ahead of clearer clues about the US economic future. The DJIA daily chart shows that the index is  in a consolidative phase, despite off its record highs around 20,150, still hovering around a horizontal 20 DMA, but far above a bullish 100 SMA, and with technical indicators within neutral territory. In the 4 hours chart, the index is a few points above a bearish 20 SMA but hovering around flat 100 and 200 SMAs, both together around 19,890, while the Momentum indicator heads north within positive territory and the RSI hovers around 48, this last limiting changes of a steeper recovery.

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

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

FTSE 100

The FTSE 100 gained 33 points to close the day at 7,140.75, underpinned by an advance in the mining sector and a weaker Pound, which plummeted after the BOE disappointed speculative interest waiting for an upcoming rate hike on soaring inflation. Hikma Pharmaceuticals top gainer’s list, up by 3.82, followed by consumer health and hygiene products firm Reckitt Benckiser Group which added 4.48%, benefiting from a cheaper Sterling. Capita on the other hand was the worst performer, down by 2.72%. The daily chart for the index shows that it holds below the 20 DMA, whilst technical indicators have lost their bearish strength, but remain within negative territory, indicating that the daily recovery is not enough to revert the soft tone seen since early January. In the 4 hours chart, a modestly bullish tone surged ahead of the close, as the benchmark is above a horizontal 20 SMA, whilst technical indicators head higher within positive territory.

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

Resistance levels: 7,183 7,241 7,297

DAX

The German DAX lost 31 points and closed the day at 11,627.95, with European indexes closing mixed but not far from their daily openings. In the region, financial firms and automakers led the way lower, as investors continued unwinding the so-called "Trump trade." In Germany, Deutsche bank was the worst performer, down by 3.87%, followed by Daimler that shed 294% and Volkswagen which closed 1.29% lower. Infineon Technologies on the other hand was the best performer, up 2.13%. Daily basis, the technical picture remains neutral, with indicators unable to find direction, still stuck around their mid-lines, and the benchmark stuck around a horizontal 20 SMA. Shorter term and according to the 4 hours chart, the index remains below a bearish 20 SMA, whilst technical indicators have turned flat right below their mid-lines, indicating that the risk is towards the downside for the upcoming session.

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

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

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