Thu, Jan 27, 2022 @ 14:57 GMT
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Foreign Exchange Market Commentary

EUR/USD

The American dollar closed the day firmer against most of its major rivals after a tepid start to the week, with the EUR/USD pair settling around 1.0735 after falling to a daily low of 1.0705. Such low came after the release of a poll carried by INSA for Germany’s Bild newspaper showing that Ms. Merkel’s Christian democrats have fallen into second place behind Germany’s centre-left opposition for the first time in a decade. Additionally, ECB’s head Draghi has said before the Committee on Economic and Monetary Affairs of the European Parliament that the Bank is prepared to increase both the size and duration of its bond-buying program if the inflation outlook remains low.

In general, data released in Europe continued to signal a faster pace of growth in the region in the Q4 or 2016 and early 2017, as the EU Sentix Investor Confidence Index for February, came in at 17.4, matching market’s expectations, but below previous 18.2. In Germany, Factory Orders rose by 5.2% in December, from a previously revised -3.6%, while the year-on-year reading resulted at 8.1% from previous 2.0%. In the US the Labor Market Conditions Index increased by 1.3% in January, indicating that the jobs’ market remains healthy in the US.

The EUR/USD pair bounced was mostly technical, given that the pair has the 38.2% retracement of the November/January slide around it, while in the daily chart a bullish 20 DMA converges with a bearish 100 DMA around the level. The tepid posterior recovery, however, maintains the risk towards the downside for the upcoming sessions. In the 4 hours chart, the 100 SMA stands a few pips above the mentioned critical support, whilst the 20 SMA has turned flat around 1.0770. Indicators in this last time frame have lost their bearish strength, but remain within negative territory, supporting a downward extension on a breakout of the 1.0700/10 support area. A recovery beyond 1.0770 on the other hand, will favor another attempt of breaking beyond the 1.0800/40 price zone.

Support levels: 1.0710 1.0660 1.0620

Resistance levels: 1.0770 1.0800 1.0840

USD/JPY

The USD/JPY pair broke below the 112.00 level late in the US session, with the Japanese currency benefiting from market’s turmoil. Uncertainty surrounding the US future, alongside with increasing political woes across Europe, has sent investors into safe haven assets, with the JPY and gold benefiting by the most daily basis. Adding to the bearish case of the pair were US Treasury yields that edged sharply lower at the beginning of the week, with the 10-year benchmark down to 2.42% from 2.49% last Friday, and the 30-year yield falling from 3.11% to 3.06%. Japan will release December preliminary coincident and economic indexes during the upcoming Asian session, expected to have improved from November’s readings. Trading below the key 112.00 level, the 38.2% retracement of the latest bullish run, the 4 hours chart shows that the 100 SMA has accelerated its slide above the current level, whilst the Momentum indicator has been rejected from its mid-line on multiple attempts to regain the level, as the RSI extends its slide around 36, supporting further slides ahead, moreover on a break below 111.60, the 100 DMA.

Support levels: 111.60 111.25 110.80

Resistance levels: 112.00 112.45 112.80

GBP/USD

The GBP/USD pair fell for a third consecutive day, settling around 1.2460 after posting a daily low of 1.2427 at the beginning of the European session. There were no macroeconomic releases in the UK this Monday, with attention centered in the ongoing Parliament discussion over the Brexit bill. Policymakers are willing to make amendments to May’s proposal, but the government said that they won’t allow any Brexit legislation that attempts to keep Britain inside the EU. The House will vote next Wednesday, and in the meantime, tensions surrounding the matter will likely keep the Pound subdued. Short term technical readings are biased towards the downside, supporting additional declines ahead, particularly on a break below the mentioned low, as the level stands for the 38.2% retracement of this year’s bullish run. In the 4 hours chart, the 20 SMA has turned south above the current level, now converging with the 23.6% retracement of the same rally at 1.2530, while the Momentum indicator has bounced from oversold readings, heading north below its 100 level, and the RSI indicator consolidates around 37.

Support levels: 1.2425 1.2390 1.2350

Resistance levels: 1.2495 1.2540 1.2585

GOLD

Spot gold rose to its highest since mid November, ending the day a few cents below a daily high of $,1232.95 a troy ounce. The commodity has benefited from an easing dollar ever since the year started, now accelerating its advance after the latest FOMC meeting’s minutes suggest that a rate hike in the US won’t come anytime soon. Weaker-than-expected wage growth in the US according to the NFP report released on Friday, support the safe-haven metal, further underpinned by increasing risk aversion. The metal has now trimmed half of its post-US elections losses, as the price stands around the 50% retracement of the November/December decline. In the daily chart, the 20 DMA accelerated higher and is currently aiming to cross above the 100 DMA, whilst technical indicators head north within positive territory, supporting some further gains for this Tuesday. In the 4 hours chart, technical indicators also present a strong upward momentum, with the RSI entering overbought territory, and the price well above bullish moving averages, in line with the longer term view.

Support levels: 1,230.00 1,221.65 1,215.00

Resistance levels: 1,237.30 1,245.20 1,255.05

WTI CRUDE

West Texas Intermediate crude oil futures fell sharply this Monday, down to 52.90 to settle at $53.06 a barrel by the end of the US session. Speculation about an increase in US oil output continues to curb optimism over OPEC output cut, after last week´s Baker Hughes and EIA reports, showing a large increase in stockpiles and in the number of oil drilling rigs. Technically, WTI remains in a consolidative phase, having retreated from the upper end of its range tested late last week. In the daily chart, technical readings maintain a neutral stance, as the price is currently struggling with a horizontal 20 SMA, whist technical indicators have turned lower around their mid-lines, with limited bearish strength. In the shorter term, and according to the 4 hours chart, the price is currently pressuring its 100 and 200 SMAs, both around 53.10, without confirming a break lower, whilst the RSI indicator maintains its bearish slope around 40, supporting additional declines towards the 52.00 region.

Support levels: 52.65 52.00 51.60

Resistance levels: 53.55 54.30 55.10

DJIA

US indexes closed with modest losses this Monday, with the Dow Jones Industrial Average down by 19 points or 0.09%, to settle at 20,052.42. The Nasdaq Composite closed the day at 5,663.55, down by 3 points, while the S&P lost 0.21%, to 2,292.56. Energy-related equities dragged Wall Street’s lower, although strong earnings reports limited declines. Hasbro Inc. shares rose to their highest on record, after reporting an 11% increase in revenues during the last quarter of 2016. Within the Dow, Boeing was the best performer, up by 1.00%, whist Verizon Communications topped losers’ list, down by 1.21%. The daily chart shows that the index remains well above a flat 20 SMA, whilst technical indicators have lost upward momentum and turned modestly lower within positive territory, not enough to confirm further slides. In the 4 hours chart, the index maintains a positive technical stance, given that technical indicators have resumed their advances after a modest downward correction from near overbought readings, whilst it remains well above a bullish 20 SMA.

Support levels: 20,010 19,945 19,896

Resistance levels: 20,090 20,141 20,200

FTSE 100

The FTSE 100 closed the day at 7,172.15, down 16 points or 0.22%, weighed by the negative mood among local traders, although a sharp advance in Randgold Resources, after the company reported a 76% advance in its Q4 net profit, kept losses subdued. The company was the best performer, closing the day 4.15% higher, followed by Mediclinic International, up by 1.97%. The worst performer was Tesco, down 2.15%. The daily chart shows that an early advance was contained by the 20 DMA, while technical indicators diverge from each other within neutral territory, lacking clear directional clues. In the 4 hours chart, the index remains between its 20 and 100 SMAs, with the largest acting as immediate resistance at 7,205. In this last time frame, technical indicators have bounced from near their mid-lines and maintain upward slopes, indicating a limited bearish potential in the short term, and favoring a modest recovery, to be confirmed with a break above the mentioned resistance.

Support levels: 7,163 7,128 7,091

Resistance levels: 7,205 7,258 7,312

DAX

The German DAX fell to its lowest since mid January, down 1.22% or 139 points to settle at 11,509.84, as the positive sentiment seen during the Asian session reverted, resulting in a strong slide in banking-related equities. Automakers also fell sharply, amid a decline in oil prices. Within the DAX, all components closed in the red, with Commerzbank being the worst performer, down 2.61%, followed by Adidas that closed 2.39% lower and Volkswagen that shed 2.38%. Ahead of the Asian opening the index stands around the mentioned close, having finally extended below a horizontal 20 SMA, whilst the Momentum indicator maintains a neutral stance, hovering around the 100 level, and the RSI indicator accelerates its decline, now heading south around 45, this last favoring a steeper decline, particularly on a break below 11,425, January 17th low. In the 4 hours chart, the upside was contained by a bearish 20 SMA that now converges with the 100 SMA at 11,628, whilst technical indicators maintain strong bearish slopes within negative territory, also indicating further slides ahead.

Support levels: 11,479 11,425 11,366

Resistance levels: 11,570 11,628 11,680

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