Daily Market Report - 22th Dec 2020

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EURUSD

The week started in risk-off mode amid concerns about a new coronavirus strain that surged in the UK, which led to an emergency meeting of EU’s authorities. The greenback rallied throughout the first half of the day, with the negative risk-related sentiment cooling down around Wall Street’s opening. The new covid strain seems to be much more contagious, although reports so far indicate that it’s no more deadly. Even further, the European Medicines Agency said that there’s no evidence that the just developed vaccines won’t work with the new variant.

Meanwhile, US Senators agreed on a historic $900 billion coronavirus relief package and will vote on a proposed bill this Monday, alongside government funding for a whole year. The news was overshadowed by panic. Data wise, the US has published the November Chicago Fed National Activity Index, which came in at 0.27 from 1.01 in the previous month. The EU released the preliminary estimate of December Consumer Confidence, which improved to -13.0 from -17.6 in the previous month.

This Tuesday, Germany will present the January GFK Consumer Confidence survey, foreseen at -9.5. The US will publish the final reading of Q3 GDP, November Existing Home Sales, and the December Richmond Fed Manufacturing Index.

The EUR/USD pair plunged to 1.2129 but later recovered to the current 1.2250 price zone. The near-term picture indicates that selling interest is not yet strong enough to turn the bullish tide. In the 4-hour chart, the pair has got to recover above a bullish 20 SMA after bouncing from an also bullish 100 SMA earlier in the day. Technical indicators have rebounded from intraday lows but lost directional momentum around their midlines. The pair seems poised to extend its advance, mainly if it breaks above 1.2275, the immediate resistance area.

Support levels: 1.2220 1.2170 1.2120

Resistance levels: 1.2275 1.2330 1.2385

USDJPY

Demand for the American currency on the run to safety sent USD/JPY to an intraday high of 103.88, from where the pair retreated to end the day pretty much unchanged from Friday’s close in the 103.30 price zone. The pair had limited bullish scope as global equities, and government bond yields were trading sharply lower. Wall Street managed to trim its early losses ahead of the close, while US Treasury yields also recovered the ground lost.

Japan didn’t publish macroeconomic data, and the calendar will remain empty until next Wednesday when the Bank of Japan will publish the Minutes of its latest meeting, and the country will release the October Leading Economic Index.

The USD/JPY pair retains its bearish stance. In the 4-hour chart, it met sellers around its 20 SMA, which heads firmly lower at around 103.90. The longer moving averages also present bearish slopes well above the shorter ones. Technical indicators turned flat within negative levels, indicating absent buying interest. The pair could accelerate its decline on a break below 103.15, the immediate support level.

Support levels: 103.15 102.70 102.20 

Resistance levels: 103.50 103.90 104.30 

GBPUSD

The Sterling Pound was the worst performer this Monday, plummeting against the greenback to 1.3187. The GBP/USD pair gapped lower at the weekly opening and spent most of the day in free-fall, weighed by the lack of progress in Brexit talks and the discovery of a new covid variant causing mayhem in the UK. UK PM Boris Johnson announced tougher restrictive measures, and several countries around the world banned flights coming from the United Kingdom.

On the Brexit front, Ireland’s Foreign Minister Simon Coveney said that they made significant progress on the level playing field last week but added that fisheries issues remain unsolved. "Brexit talks are not in a good place," Coveney added. Also, PM’s spokesman reiterated that the post-Brexit transition period would end on December 31, adding that “significant gaps remain in talks.”

 UK PM Boris Johnson addressed the nation during US trading hours, asking people to stay local to prevent the further spread of the novel coronavirus strain. He also referred to Brexit, saying that the UK will be OK trading in WTO terms. The pair later bounced as UK PM Johnson made an offer on fisheries which the EU is said to be studying, On Tuesday, the kingdom will publish the final reading of Q3 GDP, expected to be confirmed at -9.6% YoY.

The GBP/USD pair is heading into the Asian opening, trading around 1.3470, pretty much closing the early gap. The 4-hour chart shows that technical indicators corrected extreme oversold conditions and head north, the Momentum still within negative levels. The pair recovered up to a bearish 20 SMA, nos struggling to advance beyond it.

Support levels: 1.3410 1.3365 1.3320

Resistance levels: 1.3495 1.3550 1.3600

AUDUSD

The AUD/USD pair gapped lower at the weekly opening, dragged by a dismal market mood, and hit a daily low at 0.7461 before changing course during US trading hours. The pair now trades around 0.7590, bouncing alongside US stocks. Wall Street plummeted in pre-opening operations but trimmed most of its intraday losses after the close, helped by US stimulus news.

Australia didn’t publish macroeconomic data at the beginning of the week, but the country will release the preliminary estimate of November Retail Sales, previously at 1.4% MoM.

The AUD/USD pair has limited bullish potential at the current level. The 4-hour chart shows that it bounced nicely from around a bullish 100 SMA, now trying to move above a flat 20 SMA. Technical indicators corrected extreme oversold conditions, but the Momentum indicator remains below its midline while the RSI indicator lost directional strength around its midline. Bulls will have better chances if the pair recovers above the 0.7640 resistance level.

Support levels: 0.7550 0.7510 0.7470

Resistance levels: 0.7600 0.7640 0.7675 

GOLD

Gold had an extremely volatile session on Monday with a double whammy action that lifted the yellow metal to $1,900 then pushed back to $1,870 zones. Long waited for a stimulus deal in the pocket now as Americans will start receiving their $600 checks starting from next week also with additional tax benefits. As expected, the size of the deal worth $900 billion voted on Monday. The USD index DXY tested 91.00 levels but then failed to sustain its move and retraced to 90.00 zones. On the other hand, developments about the pandemic limited the gains seen for Gold. A new mutation of the Covid-19 virus which spreads faster compared to the earlier versions of the virus forced countries to ban flights from the UK, The Netherlands and Denmark. At this point, the stimulus deal looks like it is already buoyed by the markets. The new variant of the virus can be considered as a road accident in the aftermath of the vaccine roll-outs. Therefore, monetary drivers might continue to dominate the markets more than the pandemic worries in the short term.     

Gold tested its highest level since mid-November while the US 10-year continues its uptrend at 0.94%. From the technical point of view, below the $1,860 level, the supports can be followed at $1,800, $1,763 ($1,451-$2,075 61.80%) and $1,700 levels. Over the $1,860 level, the resistances can be followed at $1,900 with $1,956 ($1,451-$2,075 38.20%) and $2,000 levels.

Support Levels: $1,800 $1,763 $1,700

Resistance Levels: $1,900 $1,956 $2,000

SILVER

Silver outperformed Gold during the volatile Monday session as precious metals are stuck between stimulus deal outcome and virus developments. The fear wave triggered by the new variant on the virus lifted the USD index DXY to 91.00 levels. Later in the day, the index retraced back to 90.00 levels giving precious metals a lifeline. Gold to Silver ratio declined through mid-71.00 levels indicating the better performance from Silver as the white metal managed to stay in the positive zone on a daily basis. On a broader perspective, physical Silver demand continued to surge with the US in the lead in 2020 so far. The United States imported 66 times more Silver than India in September. In just the past three months (JUL-SEP), U.S. Silver imports totalled 2,309 mt or 74 million oz. As we can see, the U.S. has imported roughly 2.5 times more Silver than India during the first three-quarters of the year. The majority of U.S. silver imports were in bullion form.   

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 

SUDODO

Global markets had a highly volatile session on Monday hit by two major developments. As widely expected, Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer stated that members of Congress had reached consensus on a stimulus package worth $900 billion which was voted later on Monday. As the deal is done, the US citizens will start to receive $600 checks starting from next week. Especially in California, intensive care capacity dropped to single-digit levels due to the surge in the pandemic. Also, it has been reported that a record number of retail companies in the US filed bankruptcy due to the limited economic activity caused by the lockdown measures. While the stimulus deal gave markets hope, a new variant of the virus forced countries to ban flights from the UK, The Netherlands and Denmark triggered risk aversion. However, by the end of the session, the US indexes managed to regain their losses as it is highly expected that the latest vaccine will be effective against the new variant of the virus.     

From the technical point of view, if the index stays over 29,000, 29,500 and 30,000 levels can be followed as new targets high while below the 28,400 level, 28,000 and 27,770 can be followed as supports.

Support Levels: 28,400 28,000 27,770

Resistance Levels: 29,500 30,000 30,500 

WTITIITIT

As the news about the new variant of Covid-19 hit the markets, WTI retraced hard in-line with risk aversion in the markets. The new string of coronavirus in the UK forced major European economies to shut their borders and many countries announced travel restrictions, reviving concerns over an unsteady recovery in global energy demand. On the other hand, a much-awaited stimulus deal was voted on Monday giving a life-line to US citizens. However, the positive development is shadowed by the virus developments weighing on the prices. Also, several news outlets reported that Russia is favouring a 500,000 barrels per day increase in OPEC+ crude oil production when the group reassessed the output strategy in February did not help oil prices to gain ground.

Next supports can be seen at $47.00, $45.00 and $43.88 respectively while the resistances can be followed at $48.00, $48.50 and $49.00 levels.

Support Levels: $47.00 $45.00 $43.88

Resistance Levels: $48.00 $48.50 $49.00

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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