Daily Market Report - 9th Nov 2020

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EURUSD

The EUR/USD pair extended its rally on Friday to reach 1.1890, its highest since mid-September. The greenback was pressured by the elections’ uncertainty and equities strength, which anyway closed mixed. The greenback got to recover some ground following the Nonfarm Payrolls report, which showed that in October, the country added 638K new jobs, slightly better than anticipated, while the unemployment rate contracted to 6.9% from 7.9%.

On Saturday, the media called the US presidential election for Joe Biden, but President Donald Trump rejected the outcome and won’t concede. Even further, his campaign has kick-started litigation on Thursday and will continue with it, although without substantial results so far. What may be worrisome for markets is that the Senate remains divided, and the Democrats are still far from having a leading majority. Still, speculative interest is pricing in a huge stimulus package coming, and that will likely keep high-yielding assets rallying at the weekly opening.

The macroeconomic calendar will be much lighter this week. On Monday, Germany will publish the September trade balance, while the EU will unveil November Sentix Investor Confidence. The US won’t publish relevant data.

The EUR/USD pair is holding on to gains, with the risk still skewed to the upside. The daily chart shows that the price settled above all of its moving averages, which keep lacking directional Street. The Momentum indicator consolidates within neutral levels, while the RSI aims north around 60. In the 4-hour chart, the 20 SMA has crossed above the larger ones, all of them over 100 pips below the current level, while technical indicators are correcting overbought conditions. The pair may continue correcting to the downside, yet bulls will retain control as long as the pair holds above 1.1790.

Support levels: 1.1845 1.1790 1.1750 

Resistance levels: 1.1915 1.1960 1.2000

USDJPY

The USD/JPY pair plunged to 103.17, its lowest since last March, finishing the week with losses in the 103.30 price zone. The pair fell on the back of persistent dollar’s weakness, and despite stocks rallied throughout the week. The poor performance of equities on equities added pressure on the pair on Friday. US Treasury yields, on the other hand, recovered ground at the end of the week, following an upbeat US jobs’ report.

Japanese data released at the end of the week came in better than anticipated, although still indicating economic contraction. Labor Cash Earnings were down by 0.9% YoY in September, while Overall House Spending was down 10.2%. This Monday, the country will publish the preliminary estimate of the September Leading Economic Index, foreseen at 88.6 from 88.4 in August. It will also publish the Coincident Index for the same period, expected to have decreased to 79 from 79.2.

From a technical point of view, the USD/JPY pair is poised to extend its decline. The daily chart shows that the 20 DMA has accelerated its decline, below the larger ones, and well above the current level. Technical indicators, in the meantime, remain within negative levels, consolidating weekly losses. In the 4-hour chart, the pair is well below all of its moving averages, with the 20 SMA heading firmly lower around 104.05, as technical indicators corrected oversold conditions but hold well below their midlines. The main support is March 12 low at 103.07, with further declines expected on a break below such level.

Support levels: 103.05 102.70 102.25

Resistance levels: 103.70 104.05 104.50

GBPUSD

There was no action around the GBP/USD pair, which closed the day unchanged around 1.3150. For the week, however, the pair has got to advance, although unable to surpass the October high at 1.3176. The UK currency was undermined by Brexit talks, as another week went by with significant differences remaining on key points. Deadlocked talks, with just a week remaining before the UK and EU parliaments need to begin ratification of a trade and security deal, could cause severe damage to the pound. On Monday, BOE’s Governor Andrew Bailey is scheduled to speak, although he is not expected to refer to monetary policy.

The GBP/USD pair is trading at the upper end of its latest range but lacks bullish momentum. The daily chart shows that the pair has settled above all of its moving averages, which lack directional strength, as technical indicators consolidate just above their midlines. In the shorter-term, and according to the 4-hour chart, the risk is skewed to the upside, as the 20 SMA maintains a bullish slope above the larger ones, while technical indicators hover around overbought levels. The pair needs to overcome 1.3185 to be able to extend its advance but needs a strongly positive Brexit-related catalyst to maintain a bullish stance.

Support levels: 1.3110 1.3065 1.3020

Resistance levels: 1.3185 1.3230 1.3290

AUDUSD

The AUD/USD pair consolidated gains at the end of the week, closing it around 0.7260. The Australian dollar continued following Wall Street´s lead, as US indexes closed mixed, although around their daily openings. On Friday, Australia published the AIG Performance of Services Index, which improved in October to 51.4 from 36.2. Also, the RBA published the Monetary Policy Statement, showing that policymakers are willing to expand their bond-buying program if it’s needed. Additionally, they expect economic growth to return by the end of 2021. Australia won’t publish macroeconomic data this Monday.

The daily chart for the AUD/USD pair indicates that the risk is skewed to the upside, although the positive momentum faded. The 20 and 100 DMA converge around 0.7120, providing dynamic support, while technical indicators consolidate within positive levels. In the shorter-term, and according to the 4-hour chart, the picture is quite alike, as technical indicators retreat from overbought readings, but the pair is well above a bullish 20 SMA, which maintains its bullish slope well above the larger ones.

Support levels: 0.7220 0.7170 0.7115

Resistance levels: 0.7300 0.7345 0.7390

GOLD

Post-election uncertainty on Friday resulted in a wide range of trading sessions for Gold. However, the yellow metal ended the day a tick over the positive range while the USD index DXY extended its decline. Later on the weekend, Joe Biden is announced as the 46th president of the US despite Trump’s objections while the race for the senate is in favour of Democrats with a tight margin.

Markets already priced a Biden win as the risk appetite pressured the USD index DXY and lifted the precious metals and indexes in the US. On the other hand, while markets were negatively affected by the first wave of the pandemic, the second wave seems ignored at the moment. The second wave of the pandemic hit harder but markets solely focused on the election outcome in the US as the results will have a direct impact on the stimulus deal and the liquidity will be injected into the markets.

Also, on Friday, the US economy added 638K new jobs in October as compared to 600K expected. Moreover, the previous month's reading was also revised higher to 672K as against 661K reported earlier. Further details revealed a significant drop in the unemployment rate, which fell to 6.9% from 7.9% previous. The labour market is still recovering without an absence of the stimulus deal. Therefore, despite the bigger package offered by the Democrats, better than expected data sets might trim the level of the new aid plan.

As Biden’s presidency is announced on Saturday, the market opening might be volatile despite the Democrat victory already priced. Apart from the post-election dust cloud, consumer inflation data set in China will be followed on Tuesday. On Wednesday, the Fed's Brainard speech will be followed while the consumer inflation data set will be followed in the US on Thursday. Finally, on Friday, Michigan Consumer Sentiment Index (Nov) PREL will be followed.

If Gold tests $1,950, the targets upside can be followed at $1,980, $2,000 and $2,040 levels. Below the $1,950 the supports can be followed at $1,920, $1,900 and $1,825 (2011 August close) levels.

Support Levels: $1,920 $1,900 $1,825

Resistance Levels: $1,980 $2,000 $2,040

SILVER

Silver is keeping its synchronised move with Gold driven by the risk appetite triggered by the elections. As Biden’s win was already priced in the markets dragging the USD index DXY lower, the precious metals tested their highest levels since late September. Also, Silver kept outperforming Gold as the Gold to Silver ratio tested 76.00 levels. It is highly expected that Silver will be driven by the developments in the US apart from the second wave of the pandemic. On the other hand, the demand side keeps getting stronger as Silver ETFs surge. The coming week might be positive for the precious metals after Biden’s victory. However, profit-taking might be in play as the Democrat win was already priced in.

Below the $22.90 level ($11.63-$29.86 38.20%), the supports can be followed at $20.75 ($11.63-$29.86 50.00%) and $18.42 ($11.63-$29.86 61.80%). Over the $22.90 level, the targets up can be followed at $25.21 ($11.63-$29.86 23.60%), $26.00 (August-September support), $27.00 and $28.00 levels.

Support Levels: $22.90 $20.75 $18.42

Resistance Levels: $25.21 $26.00 $27.00  

CRUDE WTI

WTI reversed the mood and extended its decline to Friday after Thursday rejection at $39.00 resistance. While all the focus was on the elections, the second wave in the pandemic and rising stockpiles pressured WTI. According to the latest data, US energy producers increased the number of active oil and gas drills for the eight-consecutive week. Oil rigs, a gauge of future supply, increased to a total count of 226 in the US on the week of October 30, which is their highest since May. On the other hand, OPEC+ is expected to extend scheduled production cuts to fight with loss of demand.

Technically speaking, $33.00 zone stands as the breakdown level to confirm a bear market has started. Below the $37.00, the supports can be followed at $33.23 ($0.00-$43.49 23.60%), $26.88 ($0.00-$43.49 38.20%) and $21.75 ($0.00-$43.49 50.00%). Over the $37.00 zone, resistance can be followed at $39.00, $40.00 and $42.00 zone (July-august consolidation range).

Support Levels: $33.23 $26.88 $21.75

Resistance Levels: $39.00 $40.00 $42.00

DOW JONES

Dow Jones faced a technical correction on Friday as Biden victory was imminent. After the election, the risk appetite was strong dragging the USD index DXY lower and lifting the precious metals and US indexes higher. Later on Saturday, finally, Biden’s win was announced and also, the popular pro-GOP station has called Nevada and Arizona to Biden, while others are waiting for more results. On the other hand, Trump immediately refused the results and it is likely that more debates will be on the way until Biden takes over the White House. At the moment, two Senate run-offs are due in January and they are critical for control of the upper chamber. With Republicans on course to have 50 seats and Democrats 48, a win for Dems in the two run-offs would cause a tie in the upper house. Vice-President-elect Kamala Harris would be able to break ties, thus flipping the Senate from Republicans to Democrats. A Democrat win for the Senate will most likely end up with a bigger than expected stimulus deal. Therefore, the risk appetite will be triggered by the extreme liquidity injected into markets.

The second wave in the pandemic is ignored at the moment despite the outcome of the wave surpassing the first wave. The positive mood can be hurt in the short term and trigger a sell-off in case if deeper counter-measures are announced.       

From the technical point of view, over the physiological 28,000 level, 28,400 with 29,000 and 29,500 can be followed as next resistance while below 27,770 level the supports can be seen at 27,400, with 27,000 and 26,757 (24,680-27,400 23.60%) levels. The US economy added 638K new jobs in October compared to 600K expected. Also, the previous month's reading was revised higher to 672K as against 661K reported earlier. Further details revealed a significant drop in the unemployment rate, which fell to 6.9% from 7.9% previous.

The week ahead will be light in terms of the economic calendar as on Wednesday, the Fed's Brainard speech will be followed while the consumer inflation data set will be followed in the US on Thursday. Finally, on Friday, Michigan Consumer Sentiment Index (Nov) PREL will be followed. 

Support Levels: 27,700 27,400 27,000

Resistance Levels: 28,400 29,000 29,500

MACROECONOMIC EVENTS

* All the Moving Average support and resistance levels are dynamic by nature. Means when the price approaches the Moving averages, slight variation occurs in the forecasted Moving Average support and resistance levels. Previous few days’ intraday levels are also signicant while trading the current day as the price tend to hover around these levels for some time. Levels in red indicate strong, critical or vital.

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