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Daily Market Report
31 Jul 2020

EURUSD

Despite some temporary weakness that saw EUR/USD falling to an intraday low of 1.1730, the pair resumed the upward move and surpassed the post-Fed high of 1.1806 to hit its strongest level in over two years at 1.1844 during the American afternoon. The pair even rose through a long-term descending trend-line resistance coming from July 15, 2008 high of 1.6038.

The greenback continued to weaken on Thursday after the Federal Reserve reiterated its pessimistic view on the economy and following catastrophic GDP numbers for the US. Preliminary estimates showed the US economy contracted at an annualized rate of 32.9% in the second quarter, which is the worst US GDP reading on record. The consensus was around a 34.1% contraction.  In quarterly terms, the world's largest economy shrank by 9.5%, a slightly smaller contraction than the 10.1% reported by Germany earlier on the day. However, it seems that no matter what the Fed or the data points to, the sentiment continues to be against the US dollar.

The data docket for Friday includes German retail sales for June, European Union Q2 CPI and US Personal spending data for June.

Technically speaking, the EUR/USD pair holds a strong bullish tone in 4-hour charts, although the RSI is entering into overbought territory. A daily close above the mentioned trend-line, currently around 1.1800, could support further gains, with next resistance at 1.1851, which is June 2018 monthly high. Above, another long-term resistance is seen at the 100-month SMA at the 1.1880 region. On the flip side, corrections should find immediate support at 1.1755, 20-period SMA in 4-hour chart, and then daily lows at the 1.1730 zone. 

Support levels: 1.1755 1.1730 1.1690 

Resistance levels: 1.1850 1.1880 1.1900 


EURUSD

USDJPY

The USD/JPY pair gained traction during the Asian session on Thursday and advanced to 105.30, but pared its daily gains to settle below 105.00. The renewed selling pressure surrounding the greenback and the risk-off market environment in the second half of the day forced the pair to turn south.

Earlier in the day, the data from Japan showed that Retail Trade surged by 13.1% on a monthly basis in June and surpassed the market expectation for an increase of 7.1% by a wide margin. Nevertheless, market participants largely ignored this data.

In the early American session, the US Bureau of Economic Analysis' first estimate revealed that the real Gross Domestic Product (GDP) in the US shrunk by 32.9% on a yearly basis in the second quarter. Although this reading came in slightly better than analysts' estimate for a contraction of 34.1%, it ramped up the demand for safe-haven US Treasury bonds and caused their yields to fall sharply. With the 10-year US T-bond yield losing nearly 6% and falling to its lowest level since late April at  0.54%, the USD weakened against its peers.

The USD/JPY pair extended its losing streak into the sixth straight day on Thursday. On the daily chart, the RSI stays in the oversold area below 30 for the fourth straight day. However, the RSI on the 4-hour chart is staying near 35, suggesting that the pair could continue to push lower before staging a technical correction. On the same chart, the 20 SMA aligns as a dynamic resistance at 105.15.

Support levels: 104.75 104.40 104.00

Resistance levels: 105.15 105.80 106.10

usdjpy

GBPUSD

In the absence of macroeconomic data releases from the UK and Brexit headlines, the USD's market valuation drove the GBP/USD pair's action on Thursday. After dropping below 1.2950 during the early trading hours of the European session, the pair staged a sharp U-turn in the American session and climbed to its highest level since early March near 1.3100. 

In its highly-anticipated report, the US Bureau of Economic Analysis (BEA) announced that the real Gross Domestic Product (GDP) in the second quarter contracted by 32.9% on a yearly basis. The BEA noted that the decline in the activity reflected the impact of the "stay-at-home" orders issued in March and April as a response to the coronavirus outbreak. US Treasury bond yields fell sharply with the initial reaction to this data and forced the USD to weaken against its rivals. There won't be any data featured in the UK economic docket on Friday and investors will be paying close attention to Personal Spending and Personal Income data from the US. 

Earlier in the day, British Health Secretary Matt Hancock said that they were worried about the second wave of COVID-19 but these comments weighed more heavily on the UK's FTSE 100 Index rather than the GBP.

The RSI indicator on the daily and the 4-hour charts both remain in the overbought territory above 70, suggesting that GBP/USD is poised for a technical correction before the next leg up. In the meantime, the 20-day SMA is closing on the 200-day SMA and could bring in more buyers if it completes a bullish cross in the near-term.

Support levels: 1.3000 1.2940 1.2885

Resistance levels: 1.3100 1.3150 1.3200


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AUDUSD

The Australian dollar pulled away from a 15-month peak right below the 0.7200 level and posted mild losses against the greenback on Thursday as Fed dovish tone and devastating US GDP figures triggered risk aversion and pushed the AUD/USD to lows at the 0.7120 area. However, a recovery in Wall Street indexes helped the Aussie to recover some of the lost ground during the American afternoon. Technical factors also contributed to the pair’s pullback. The AUD/USD failed to break decisively above the 0.7200 psychological level and turned lower instead.

Data from Australia showed that the ANZ's Business Confidence and the Activity Outlook indexes continued to worsen in July. Additionally, Building Permits declined by 4.9% on a monthly basis in June. During the upcoming Asian session, private sector credit for June and Q2 PPI figures will be released.  

Technical indicators in the 4-hour chart maintain a slightly bullish tone, while the price has managed to recover above the 20-period SMA. In the daily chart, the positive stance is somewhat stronger, although the RSI remains in overbought territory suggesting some consolidation ahead. A clear break above 0.7200 is needed to pave the upward way.

Support levels: 0.7120 0.7070 0.7040

Resistance levels: 0.7200 0.7240 0.7280


AUDUSD

GOLD

After hitting a new all-time high this week and testing 1.980$ zone twice, Gold retreated on Thursday in the wake of US GDP figures. Annualized US GDP falls 32.9% in the second quarter as the coronavirus cripples the economy. The decline was the most in a century of records but less than the -34.1% forecast. On the other hand, the USD index DXY continues its decline testing 93.00 flat levels did not help Gold this time. Apart from the much-expected decline in the Q2 economic activity, President Donald Trump tweeted that perhaps the elections should be postponed given the virus. While his comments seemed to divert attention from the economic figures, it triggers new worries as an additional risk event apart from the rising tensions between the US and China. 

After the impressive rally seen in Gold, the yellow metal had a technical correction. As the 2.000$ level is on sight now, as long as Gold stays over 1.950$, the targets upside can be followed at 1.980$ (new all-time high), 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$

Gold

 

SILVER

Silver has extended its decline as the white metal has been outperformed by Gold this week in general. Silver retraced almost %4 on a daily basis on Thursday despite the USD index also tested 93.00 level. On the other hand, Gold and Wall Street also retraced back as a part of typical profit-taking at the end of the month. Gold/Silver ratio continued its rebound and is trying to settle above the 84.00 level as this is an important resistance level for the ratio. 

Over the 24.00$ level, Silver can target 25.11$ (August 2013 high), 26.23$ (2011-2012 multi-year support) and 28.00$ levels. Below the 22.19$ (2014 high) level, the supports can be followed at 21.50$ and 21.00$ levels.

Support Levels: 22.19$ 21.50$ 21.00$

Resistance Levels: 25.11$ 26.23$ 28.00$

XAGUSD

 

CRUDE WTI

WTI had a sell-off on Thursday testing this month’s lows at 38.00$ zone. Crude oil inventories fell by 6.829 million barrels in the week ended July 24, the American Petroleum Institute (API) released on Tuesday showed. Analysts had forecasted a moderate inventory build-up of 357,000 barrels following the preceding week's unexpected rise of 7.544 million barrels. As a result of the new restrictions to fight with the incline seen in new coronavirus cases in the US is suppressing oil prices as the demand declines.   

WTI found a balance between 40.00$ and 41.00$ almost in the whole of July. However, as the black gold failed to extend its incline, the prices retraced with a lack of an extra catalyst. If WTI manages to hold over 40.56$ (65.62$-0.00$ %61.80) level, the targets upside can be followed at 41.00$, 46.57$ (March decline start) and 50.00$ levels. Below the 40.00$, the supports can be followed at 39.00$ and 32.81$ (65.62$-0.00$ %50) levels.

Support Levels: 40.00$ 39.00$ 32.81$ 

Resistance Levels: 41.00$ 46.57$ 50.00$


oil

DOW JONES

Dow Jones tested sub-26.000 level on Thursday with the outcome of q2 GDP in the US. Annualized US GDP falls 32.9% in the second quarter as the coronavirus hit the economy. The decline was the most in a century of records but less than the -34.1% forecast at least. At this point, the rally seen in Wall Street up to now is fueled by the extreme amount of liquidity provided to markets by the Fed. As Powell once more stated that Fed has more room to support the markets, extra cash injection might end up in equity markets again lifting the indexes.  

Technically speaking, over the 26.000 level, the resistance can be followed at 27.000, 27.583 (June 2020 high) and 28.000 levels. On the other hand, below the 26.000 level, targets downside can be followed at 25.210 (29.568-18.158 %61.80), 24.690 (2020 April-May resistance) and 23.863 (29.568-18.158 %50.00).

Support Levels: 26.000 25.210 24.690

Resistance Levels: 27.000 27.583 28.000


dowjones

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* 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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Please remember that trading financial markets carry a high degree of risk to your capital. It is possible to lose more than your initial stake. Leveraged products may not be suitable for all investors, therefore please ensure you fully understand the risks involved and seek independent advice if necessary.

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