Daily Commentary

Friday 20 January 2017

EUR/USD

The EUR/USD pair closed the day marginally lower in the 1.0620 region,  weighed mostly by the ECB´s latest monetary policy announcement. Mario Draghi offered a quite dovish statement, unimpressed by the up-tick in inflation from last December, acknowledging that it was mainly driven by rising energy prices. After keeping the ongoing policy unchanged, the statement accompanying the decision showed that policy makers believe that risk remains towards the downside, and that QE could be extended "if the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation." The ECB's stance contrast with FED's hawkish stance, reinforced by comments coming from Janet Yellen late Wednesday and US data released this Thursday.

According to official releases, US weekly jobless claim fell to their lowest since November 1973, down to 234K in the week ending January 13. The Philadelphia Manufacturing Index came in at 23.6 for January from previous 21.5, while Housing Starts advanced in December to 1.226M alongside with Building Permits, although these lasts, rose by 1.210M, less-than-expected.

The EUR/USD pair fell down to 1.0588 as an immediate reaction, but  managed to bounce back afterwards, unable however to regain the 1.0650 level. Despite ongoing dollar's weakness amid political uncertainty linked to upcoming Trump´s policy, the case for a bullish EUR has suffered a major setback this Thursday, as Central Bank imbalances have become more evident. Still, and from a technical point of view, the pair needs at least to break below 1.0565, the 23.6% retracement of the November/January decline to get closed to resume its slide. In the 4 hours chart, the price has broken below a bullish 20 SMA, the Momentum indicator heads south within negative territory, whilst the RSI indicator consolidates around 46, increasing chances of a downward continuation for this Friday.

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0750 1.0800

20170120EURUSDH4.png

USD/JPY

The USD/JPY pair jumped to 115.61, entering positive territory for the first time this week, as the greenback edged higher at the beginning of the day, helped by FED's Yellen, who offered some unexpected hawkish comments at a speech in San Francisco. Mrs. Yellen warned about the risk of waiting too long before rising rates again on accelerating inflation, while expressed the willingness to raise rates "a few times a year" until reaching what the Central Bank considers a long-run neutral rate of 3%, by 2019. Further supporting the rally in the pair was a recovery in US yields, as the 10-year note benchmark advanced 10 basis points to 2.49% after strong US data supported Yellen's wording. The sudden turned around in the pair has put it back into bullish territory, moreover as the price is back below the 23.6% retracement of its latest bullish run, after nearing the 38.2% retracement of the same rally earlier this week. In the short term, the upward potential is now being limited by a bearish 100 SMA in the 4 hours chart at 115.80, the level to surpass to confirm additional gains this Friday. Technical indicators in the mentioned chart accompany the bullish perspective, barely losing upward strength near overbought readings.

Support levels: 115.10 114.70 114.30

Resistance levels: 115.50 115.90 116.35

20170120USDJPYH4.png

GBP/USD                                         

The GBP/USD pair closed the day little changed around 1.2300, mostly indifferent to developments outside the UK. Pound traders are still trying to asset the implications of latest PM May speech, in which she confirmed the government's choice of a "hard-Brexit," but with the most conciliatory tone ever.  The absence of macroeconomic releases helped keep the pair subdued intraday, with market's attention now focusing in the UK December Retail Sales, to be released this Friday. Retail Sales are expected to show some tepid growth during the month, although latest data coming from earnings reports from retailers, anticipate an upward surprise, which could boost the Sterling, at least in the short term. The pair is currently in a short term consolidative phase according to the 4 hours chart, with the upside limited by the 200 EMA around 1.2330, and the RSI indicator flat around 56, but the 20 SMA maintaining its upward slope below the current level, limiting chances of a strong downward move. In the same chart the Momentum indicator has retreated sharply within positive territory, rather reflecting the lack of direction than suggesting an upcoming bearish move.

Support levels:  1.2260 1.2225 1.2190

Resistance levels: 1.2330 1.2375 1.2415

20170120GBPUSDH4.png

GOLD

Gold prices eased this Thursday, with spot settling at $1,202.50 a troy ounce, as a stronger dollar added to mute physical demand in Asia. FED's Yellen comments, reaffirming the Central Bank willingness to raise rates over the upcoming years, sent the bright metal down to a daily low of 1195.81, although the negative tone of Wall Street helped it bounce back above the 1,200 mark. The lower high and lower low daily basis suggests that the latest bullish run has come to an end, although the price remains  too to the 38.2% retracement  of its latest bearish move at 1,204.50, to confirm so. In the daily chart, the price retreated further after failing to surpass a sharply bearish 100 DMA, today at 1,220.90, while technical indicators retreated from overbought readings, but are far from confirming a downward move. In the 4 hours chart, however, the bearish potential has increased moderately, as the price develops below its 20 SMA, whilst technical indicators stand within bearish territory, although with limited bearish strength at the time being, given the late intraday bounce.

Support levels: 1,195.80 1,182.90 1,173.80                                                                               

Resistance levels:  1207.00 1,215.60 1,223.60

20170120XAUUSDH4.png

WTI CRUDE

West Texas intermediate crude oil futures closed the day little changed at $52.15 a barrel, hit early US session by the EIA report, which showed a large build in US inventories. According to the release, US commercial crude inventories rose by 2.3 million barrels in the week through Jan. 13 to 485.5 million barrels, well above the expectations of a 342,000-barrel decline. Gasoline stocks also were larger-than-expected, whilst distillates inventories fell. The following recovery came after the  International Energy Agency said oil markets had been tightening, even before the OPEC output cut deal came into effect. Given that the commodity ended the day pretty much flat, technical indicators in the daily chart have lost their bearish strength, but remain within negative territory. The 100 DMA in the same chart keeps heading higher around 49.70, a possible bearish target for the upcoming days. Shorter term, the 4 hours chart shows that spikes towards the 200 SMA were quickly reversed, maintaining the risk towards the downside, whilst technical indicators have turned flat within negative territory, lacking clear directional strength.

Support levels: 51.40 50.70 50.00                                                                                                 

Resistance levels: 52.60 53.10 53.80

20170120CRUDE_H17H4.png

DJIA

Wall Street edged lower this Thursday, as a decline in overseas counterparts added to the prevailing cautious mood ahead of Trump's inauguration as US president this Friday. The Dow Jones Industrial Average lost 72 points or 0.37% and closed the day at 19,732.40, while the Nasdaq Composite shed 15 points, to 5,540.08. The S&P lost 8 points, and ended at 2,263.69. The DJIA fell to its lowest since December 9th, and despite the late bounce the index is at risk of further slides, given that in the daily chart, it extended further below is 20 DMA, whilst technical indicator turned lower, the Momentum around its 100 level, but the RSI now at 44, anticipating some further declines. In the 4 hours chart, the index is now below all of its moving averages, with the 20 SMA having accelerated below the 100 SMA and about to cross the 200 SMA, increasing chances of a  steeper decline. In the same chart, the RSI indicator is bouncing modestly from oversold readings, whilst the Momentum indicator heads modestly lower within negative territory, supporting a bearish extension for this Friday.  A slide below 19,676, the intraday low, will put further away hopes for a test of the 20,000 level, fueling therefore the negative momentum of the benchmark.

Support levels: 19,704 19,676 19,615                                                                                          

Resistance levels: 19,782 19,846 19,895

20170120DOW30H4.png

FTSE 100

The FTSE 100 closed the day at 7,208.44, down by 39 points or 0.54% weighed by a steady Pound and a decline in the housing sector all through the region. Within the Footsie, the worst performer was Royal Mail, down 5.48% after reporting that sales within the UK declined by 2% in the nine months to December, followed by British Land, down 3.64%. Mining-related shares closed mostly in the red as a stronger dollar dragged commodities' prices lower. The FTSE 100 daily chart shows that the index is currently a few points above its 20 DMA, the immediate support at 7,190, whilst technical indicators keep heading lower within positive territory, indicating some further declines are likely on a downward acceleration below the mentioned low. In the 4 hours chart, the index extended its decline below a bearish 20 SMA, whilst technical indicators have bounced modestly after reaching oversold territory, maintaining the risk towards the downside.

Support levels: 7,190 7,146 7,085

Resistance levels: 7,244 7,288 7,354

20170120FT100H4.png

DAX

European index closed lower following ECB's decision to leave rates on hold, but adding a dovish statement that sees risks for inflation and growth still towards the downside. The German DAX  lost just 2 points and settled at 11,596.89. Banks and automakers bounced back, with Commerzbank leading gainers' list, up by 3.99%, followed by Volkswagen that added0.54% and Deutsche Bank that closed 0.44% higher. Real estate investment companies dragged European markets lower, and within the DAX, the worst performer was Vonovia, down by 1.66%. The daily chart for the DAX shows that the index held above a horizontal 20 DMA, while the Momentum indicator maintains a neutral stance, stuck around the 100 level and the RSI retreats within positive territory, now around 60, hardly supporting a bearish breakout. In the 4 hours chart, the technical picture is also neutral, with indicators hovering around their mid-lines and the benchmark stuck around a horizontal 20 SMA.

Support levels: 11,554 11,490 11,440

Resistance levels: 11,657 11,694 11,750

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