Daily Commentary

Wednesday 13 September  2017

EURUSD

The EUR/USD pair fell to a fresh weekly low of 1.1925 to end the day flat in the 1.1960 region, as dollar´s demand on improved market mood receded in the US afternoon. Still, the greenback enjoyed another positive day, advancing through the first two sessions of the day following the lead of equities and yields, mostly higher for a second consecutive day. The pair saw limited action amid a scarce macroeconomic calendar, with no relevant news coming from Europe, and with the US only releasing its NFIB Business Optimism index for August, up to 105.3 from previous 105.2 and the expected 105.0. Vitor Constancio, Vice-President of the ECB, was on the wires this Tuesday, commenting on monetary policy, but adding nothing new to what the market already knows, backing the case of keeping monetary policy accommodative until the 2% inflation target is reached.

This Wednesday things will become more interesting, with the release of German inflation and US PPI among others. In the meantime, the EUR/USD pair seems to have found a temporal bottom, although it's still at risk of falling further, as in the 4 hours chart, the pair is developing below a marginally bearish 20 SMA, whilst technical indicators are recovering firmly from oversold territory, still below their mid-lines. As long as the price holds above 1.1910, the downward potential will be limited, yet below it, the pair could extend its decline down to a strong static support around 1.1870, while beyond this last, there's scope for an extension down to 1.1822, last week low. The pair would need to at least surpass Tuesday's high of 1.1977 to gain some upward traction, but bulls won't come back in force unless the pair extends beyond 1.2030.

Support levels: 1.1925 1.1870 1.1825

Resistance levels: 1.1990 1.2030 1.2070

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USD/JPY

The USD/JPY pair kept rallying this Tuesday, up to 110.19 and steady nearby by the end of the day, as the positive momentum in equities and yields weigh on the Japanese currency. With no relevant macroeconomic releases in any of both economies, the pair traded purely in sentiment, with the market ignoring late comments from President Trump, who complained about economic sanctions not being enough for North Korea. US indexes advanced for a second consecutive day, with the S&P reaching a new all-time high and the DJIA not far below its highest. As for US yields, the 10-year note interest surge to 2.18%, after trading as low as 2.02% last Friday while the yield on the 30-year Treasury bond was up at 2.78%.  Japan will release its producer price index during the upcoming Asian session, but unless a strong deviation from market's expectations, the numbers will hardly move the yen. In the meantime the 4 hours chart shows that the price remains well above its 100 and 200 SMAs, which at least have lost their bearish strength, whilst technical indicators pared gains within overbought territory, which is not enough to confirm an upcoming downward correction. The pair has anyway advanced almost straight since bottoming at 107.31 last week, which means that, despite not seen yet, a downward correction is possible, particularly if the pair is unable to advance beyond 110.25, the immediate resistance.

Support levels: 109.70 109.35 109.00

Resistance levels: 110.25 110.60 111.05

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GBP/USD

The GBP/USD trades at fresh 2017 highs by the end of the US session, not far from the early high set at 1.3297. The Pound was supported early Asia by news indicating that the EU withdrawal bill passed smoothly through the House of Commons, with discussions on possible amendments set for next October. For now, however, PM May cached a breath. The pair soared after the release of UK inflation figures for August, as the CPI rebounded to 2.9% yearly basis, from 2.6% in July. For the month, inflation increased by 0.6% from previous -0.1% whilst the core yearly inflation resulted at 2.7%. Inflation at factory gates was also higher than forecasted, up for the first time in six months, with output prices up by 3.4% in the year to August. Speculation that the BOE will have no choice but to raise rates with growing inflation and wages lagging, was behind Pound's rally.  The UK will release its latest employment figures this Wednesday, and wages will determinate whether current upward momentum would extend or not. The pair pulled back to 1.3227 early US session, but quickly regained the upside, heading into the Asian opening near the mentioned yearly high. Technically, the pair remains biased higher short term, given that in the 4 hours chart the price met buying interest around a sharply bullish 20 SMA, whilst technical indicators are currently aiming to regain the upside after correcting early overbought conditions. An extension beyond the daily high should expose the 1.3347 level, September 2016 high, while steady gains beyond this last should lead to a sustained rally up to 1.3500.

Support levels: 1.3225 1.3180 1.3140

Resistance levels: 1.3345 1.3390 1.3430

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GOLD

Gold prices trimmed intraday losses ahead of Wall Street's close, as the greenback lost momentum  mid US afternoon. Spot closed the day at $1,329.30 a troy ounce, slightly up for the day, getting a helping hand from US President Trump, who said that North Korea sanctions' resolution is just "another very small step, nothing compared to what ultimately will have to happen."  The bright metal bounced from a 2-week low of 1,322.57 achieved early London, and seems poised now to extend its recovery, as in the daily chart, technical indicators have pared their declines well above their mid-lines, coming from extreme overbought territory, now horizontal, whilst the price remains well above sharply bullish moving averages. In the shorter term and according to the 4 hours chart, further gains are still unclear, as the price remains below a bearish 20 SMA, providing a dynamic resistance at 1,338.10 while technical indicators are recovering ground, but still within negative territory.

Support levels: 1,322.60 1,315.30 1,306.60

Resistance levels: 1,337.80 1,346.30 1,355.10

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WTI CRUDE

Crude oil prices advanced for a second consecutive day, with West Texas Intermediate futures ending the day at $48.30 a barrel. An OPEC report showing that the cartel's production fell last month backed the advance. Output fell by 79,000 barrels a day in August, to 32.76 million amid a decline in Libya, Venezuela and Iraq exports. Ahead of US API and EIA reports on stockpiles, the commodity maintains the neutral stance in the daily chart, trading midway between its 100 and 200 SMAs, and with technical indicators heading nowhere around their mid-lines. In the 4 hours chart, things look a bit better with the price challenging its 200 SMA and  with technical indicators entering positive territory. Still, and in this last time frame, moving averages remain directionless, while technical indicators have barely surpassed their mid-lines, not enough to confirm further gains ahead. Anyway, stockpiles will define the upcoming movements, with disappointing figures probably not being as relevant as encouraging ones, as the market expects to be disappointed amid the latest Hurricanes that hit the US.

Support levels: 47.90 47.20 46.60

Resistance levels: 48.70 49.40 50.00

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DJIA

US indexes closed sharply higher, with the DJIA not far from its all-time high, up by 61 points to 22,118.86, but the S&P posting a fresh record close of 2,496.48 after advancing 0.34%. The Nasdaq Composite also closed in the green, up by 22 points to 6,454.28. Financial related equities led the way higher as bonds fell,  with Goldman Sachs adding 2.21% and JP Morgan adding 1.23%. Pfizer led advancers, up 3.06%. McDonald's was the worst performer, down 3.22%, followed by UnitedHealth that shed 1.06%.  The index has regained its upward momentum after a volatile summer that anyway saw it correcting, and is now poised to extend its advance, as in the daily chart, technical indicators head north at 1-month highs, whilst the index is further above all of its moving averages. In the 4 hours chart, technical readings also support an upward extension for this Wednesday, as the 20 SMA crossed above the larger ones, whilst technical indicators continue heading north, despite being in overbought territory.

Support levels: 22,086 22,041 21,992

Resistance levels: 22,137 22,179 22,220

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FTSE 100

The FTSE 100 was unable to seize the positive momentum among equities' traders, ending the day at 7,400.69, down by 12 points as Pound's rally to fresh 2017 highs dented optimism within London traders. Stronger than expected UK inflation figures raised prospects of a more hawkish BOE, backing the rally in the UK currency. Ashtead Group was the best performer, up 4.45% after the company reported strong growth in rental revenue and profits in the first quarter of its financial year. Mining and house building-related equities, on the other hand, were the worst performers, with Randgold Resources leading decliners, down 2.94%, followed by Fresnillo that shed 2.30% and Persimmon which closed 2.04% lower. The index remains directionless according to technical readings in the daily chart, still moving back and forth around its 20 and 100 DMAs, both horizontal, and with technical indicators in the mentioned chart unable to move far from their mid-lines. In the 4 hours chart, the technical picture is quite alike, with the index stuck within a congestion on moving averages, and technical indicators now flat 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

European equities maintain the positive tone seen on Monday, ending the day mostly higher as risk aversion continued to abate. The German DAX added 49 points, to end the day at 12,524.77. Financials and bank-related equities were the best performing sectors, and within the DAX, Deutsche Bank led advancers, up for the day 4.03%, followed by Commerzbank which gained 3.41%. The worst performer was RWE AG, down 2.77% at the end of the day, followed by E.ON that shed 1.47%. The daily chart shows that the index advanced further above its 100 DMA, whilst technical indicators aim have also extended their advances within positive territory, currently at over 2-month highs, favoring additional gains for the upcoming sessions. Shorter term, and according to the 4 hours chart, the risk is also towards the upside, as the index remains far above its moving averages, while technical indicators have corrected extreme overbought conditions, but remain well into positive territory, now aiming to regain the upside.

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

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

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