Daily Commentary

Thursday 14 September  2017

EURUSD

After hesitating during the first half of the day, the greenback came back with a vengeance alongside Wall Street's opening, on mounting rumors the US government is stepping on the gas over the long awaited tax reform. There was no official announcement on the matter, with all coming from President Trump twitter, in where he urged the Congress to act quickly on his tax reform plan. The EUR/USD pair that traded as high as 1.1994, ended up breaking below the 1.1900 figure, to settled not far above a daily low of 1.1879. The only piece of relevant data released this Wednesday was the US producer price index, which came in below market's expectations. Despite rebounding in August, the index for final demand advanced just by 0.2% monthly basis, and by 2.4% when compared to a year earlier. Market's attention is anyway on upcoming final August CPI readings, to be released this Thursday.

Failure to regain 1.2000 is certainly discouraging for bulls, and the pair could clearly fall further, although long term the decline continues to look corrective, specially as there's no real background for a dollar rally. A long term ascendant trend line coming from the 1.0600 region, comes today around 1.1795, becoming a critical support, as a break below it will indicate that a steeper correction is under way. In the meantime, and for the short term, the pair is biased lower as in the 4 hours chart, and after failing to surpass its 20 SMA, the pair broke below the 100 SMA, whilst technical indicators maintain their strong downward slopes within negative territory. Last week low at 1.1822 is now the immediate support, en route to the mentioned trend line around 1.1795.

Support levels: 1.1870 1.1825 1.1795

Resistance levels: 1.1930 1.1965 1.2000

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USD/JPY

The USD/JPY pair continued advancing, reaching its highest since mid August during the US afternoon, backed by further gains in US Treasury yields. Holding within a narrow day ever since the day started,  yields gained ground following market talks over  the upcoming US tax reform. News made the rounds on Republicans to outline tax plans by the end of this month, to be later sent for approval into the Congress. By the end of the US afternoon, the 10-year note yield was around 2.19%, up from 2.17% Tuesday and 2.06% on Friday. The pair struggled after an early top at 110.28, retreating from the level to find strong buying interest around the 110.00 threshold, forcing bears to pull back, resulting later in a bullish breakout that sent the pair up to 110.68. The pair filled the gap left in the past week, but now has this week's one at 107.62 yet to be filled, something quite unlikely for the short term with the pair advancing beyond 110.00. The Japanese macroeconomic calendar has little to offer today, but July industrial production figures, with investors clearly focusing on US inflation. Technically, the pair retains its bullish stance, despite overbought as in the 4 hours chart, the price has continued advancing above its 100 and 200 SMAs, now directionless, whilst technical indicators have stabilized within overbought territory.

Support levels: 110.25 109.70 109.35

Resistance levels: 111.05 111.50 111.90

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GBP/USD

Pound's momentum sent the GBP/USD pair up to 1.3328, its highest since September last year early London, but gains were short-lived, as mixed UK employment data failed to keep market's mood high. Indeed, headline readings surprised to the upside, as the UK reported that the number of people in work for the three months to July reached 32.13 million, whilst the unemployment rate fell to 4.3%, its lowest in 42 years. However, average hourly remained unchanged at 2.1%, both including and excluding bonuses during  the same period. When compared to increasing inflationary pressures in the UK, real earnings are down on the year, which means that the likelihood of a BOE's rate hike decreased substantially in less than 24 hours. The Central Bank, is having its monetary policy meeting this Thursday. The pair seems now poised to extend its decline, as in the 4 hours chart, the price broke below the 1.3225 price zone, where it has its 20 SMA and the 23.6% retracement of its latest bullish run between 1.2908 and the afore mentioned high of 1.3328, heading now towards the 1.3160 region, where the pair bottomed earlier this week, and also has the 38.2% retracement of the mentioned rally. A recovery beyond 1.3225 should take off the pair some of the current bearish pressure, although a clearer picture will come after Carney & Co. announcement.

Support levels: 1.3165 1.3130 1.3095

Resistance levels: 1.3225 1.3260 1.3300

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GOLD

Spot gold fell to its lowest since September 1st, bottoming at $1,320.98 a troy ounce to settle around 1,324.00, as the dollar got a boost from US President Trump, who urged the Congress to discuss the tax reform, putting the focus back on the growth agenda. Ever since reaching its highest in a year last Friday at 1,357.49, gold has been on retreat mode, firstly on easing geopolitical tensions between the US and North Korea, and now on hopes the greenback may step back to the front. The commodity is at a brink of breaking lower according to the daily chart, as the price settled barely above a bullish 20 DMA, whilst technical indicators keep easing within positive territory, now dangerously close to their mid-lines. Shorter term, and according to the 4 hours chart, the price was rejected by a bearish 20 SMA on an attempt to regain the upside, now providing a dynamic resistance at 1,331.95, whilst technical indicators have settled within bearish territory, after failing to surpass their mid-lines. The 100 SMA in this last time frame offers an immediate support at 1,319.00, the level to break to confirm additional slides for this Thursday.

Support levels: 1,319.00 1,308.10 1,297.90

Resistance levels: 1,329.30 1,337.80 1,346.30

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WTI CRUDE 

West Texas Intermediate crude futures ended the day at $49.25 a barrel, up for fourth consecutive day and nearing last week high of 49.40, the immediate resistance. Oil prices surged despite the EIA reported that crude oil stockpiles rose for a second consecutive week in the US, up by 5.88 million barrels, against market's expectations of a 3.23 million build. Speculative interest was already prepared for the negative news amid the latest hurricanes that hit the US. The boost came from a positive surprise from a large decline in gasoline inventories, down last week by 8.4 million barrels one of the largest draw on record. WTI daily chart shows that the commodity is surpassing its 200 DMA by a few cents, whilst technical indicators head sharply higher above their mid-lines, supporting some additional gains ahead, particularly on a break above the mentioned resistance. Shorter term, technical readings in the 4 hours chart also lean the scale towards the upside, as the price extended further above anyway horizontal moving averages, whilst technical indicators maintain their strong upward momentum entering overbought territory.

Support levels: 48.80 80.25 47.70

Resistance levels: 49.40 50.10 50.65

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DJIA

Wall Street managed to close with gains after  soft start to the day, extending its latest rally to record highs. The three major indexes closed in the green, with the DJIA adding 39 points, to end the day at 22,158.18, while the Nasdaq Composite gained 6 points, to settle at 6,460.19, and the S&P ended at 2,498.37, up 0.08% and a new record close. Hopes that the US tax reform will be discussed in a couple of weeks boosted local equities, which recovered from early losses triggered by disappointing PPI figures. Within the Dow, most members were up, with Chevron leading gainers, up 1.59%, followed by DowDuPont which added 1.34%. Caterpillar was the worst performer, down 1.17%, whilst Apple lost 0.90% after launching its latest iPhone, but delaying the shipment date. The DOW closed at a record high and retains its bullish bias according to the daily chart, with the Momentum indicator extending its advance within bullish territory, and the RSI hovering around 65. In the shorter term, technical readings in the 4 hours chart indicate that bulls retain the lead, but also that a downward corrective movement can't be dismissed, as the Momentum indicator diverges south falling within positive territory, against a rising RSI which heads north around 78.

Support levels: 22,119 22,086 22,041                                                       

Resistance levels: 22,157 22,190 22,240

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FTSE 100

The FTSE 100 edged once again lower, ending the day at 7,379.70 after losing 21 points, or 0.28%. Pound's early advance was offset by plummeting metals, which ultimately resulted in the index closing in the red, as dollar's strength put the Pound under pressure by the end of the session. Mining-related equities led decliners, with Antofagasta, Fresnillo and Anglo American all losing over 3% each. Provident Financial on the other hand, led advancers adding 1.68%, followed by Micro Focus which added 1.25%. The Footsie holds below 7,400 ahead of the Asian session, still lacking clear directional strength, as in the daily chart, it continues moving back and forth around horizontal and converging 20 and 100 SMAs, whilst technical indicators are back around their mid-lines after failing to regain the upside earlier on the day. Shorter term, and according to the 4 hours chart, the index is also neutral, still stuck within converging moving averages, and with technical indicators heading nowhere around their mid-lines.

Support levels: 7,376 7,333 7,289

Resistance levels: 7,444 7,482 7,515

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DAX

The German DAX closed the day at 12,553.57 up 28 points, with European indexes closing the day mixed, but little changed for the day. Weighing on equities were latest Apple news, which after presenting its new iPhone, delayed the shipping date affecting the company suppliers. A softening  EUR at the end of the session, helped shares to remain afloat. Within the DAX, Merck was the best performer, up 1.86%, followed by Deutsche Post, which gained 0.93%. Financials underperformed, with Muenchener leading decliners, down 4.15%, followed by E.ON that shed 1.76%. The index's daily chart shows that it held above its 100 DMA, overall positive, as technical indicators in the mentioned chart keep heading marginally higher within positive territory. Shorter term, and according to the 4 hours chart, the index entered a consolidative phase, retaining anyway its positive stance, as it settled well above a bullish 20 SMA, whilst technical indicators hold directionless within overbought territory.

Support levels: 12,489 12,443 12,401

Resistance levels: 12,559 12,603 12,646 

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