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The American dollar recovered modestly as risk aversion eased

19th January 2017

EUR/USD

The American dollar recovered modestly as risk aversion eased, but the common currency refused to give up, with the EUR/JPY pair closing the day marginally lower in the 1.0680 region. The release of December final inflation figures in Europe and the US hardly affected the pair, as the number matched previous estimates and market's estimates.  Investors are now waiting for this Thursday's ECB monetary policy meeting, mostly expected to remain on hold, but hoping for some clues about tapering. Despite that Draghi affirmed that the policy makers didn't discuss the subject in their December meeting, investors refuse to believe his words, moreover after the minutes, released last week, showed dissention among members. 

From a technical point of view, the pair remains bullish, although the daily consolidation has made technical indicators lose upward momentum. Nevertheless and in the 4 hours chart, the price is above a bullish 20 SMA, whilst the 100 SMA advanced to meet the 200 SMA, both around 1.0550 now. A major Fibonacci resistance comes at 1.0710, as the level stands for the 38.2% retracement of the November/January slide, with renewed buying interest above it opening doors for an advance towards the 1.0800 region. An unexpectedly dovish Draghi can trigger a downward correction, although declines beyond 1.0565 are unlikely during the upcoming sessions. 

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0750 1.0800

USD/JPY

The USD/JPY pair recovered some ground after falling almost vertically for over a week, as risk-averse trading eased. A recovery in worldwide stocks and US yields, also helped the pair, with the US Treasury 10-year note benchmark up to 2.38% from previous 2.33%. There's no relevant data coming from Japan during the upcoming Asian session, anticipating some thin trading around the pair, particularly ahead of the upcoming ECB meeting, and a busy US calendar. From a technical point of view, the short term picture presents a limited upward scope, given that in the 1 hour chart, technical indicators lost  their upward strength and are slowly turning south, whilst the price remains well below its moving averages, with the 100 SMA currently reinforcing the static  resistance around 114.00. In the 4 hours chart, technical indicators extended their recovery from oversold readings, maintaining their upward slopes within bearish territory, whilst the 100 SMA extended its downward move, converging now with the 200 SMA at 116.00.

Support levels: 113.10 112.65 112.20 

Resistance levels: 113.70 114.00 114.45

GBP/USD

The GBP/USD pair retreated from Tuesday's high and settled around 1.2280, not far from a daily low of 1.2266 achieved after London's opening. Solid UK employment data gave the Pound a brief relief, as the pair bounced back up to 1.2348, but was unable to sustain gains above the 1.2300 level.   According to official data,  the number of unemployment people decreased in the three months to November, leaving the unemployment rate unchanged at 4.8%. In December, jobless claims decreased by 10.1K against an expected advance of 5K, while wages were up, with average weekly earnings for employees in Great Britain in nominal terms increased by 2.8% including bonuses and by 2.7% excluding bonuses compared with a year earlier. The pair was anyway unable to sustain gains above the 1.2300 level, and trades a handful of pips below it at the end of the day. The 4 hours chart shows that the price is still well above a bullish 20 SMA, currently at 1.2190, but that technical indicators keep retreating from overbought territory, suggesting some further slides ahead, particularly on a break below the mentioned daily low. 

Support levels:  1.2260 1.2225 1.2190 

Resistance levels: 1.2330 1.2375 1.2415

AUD/USD

The AUD/USD pair gave back some of its latest gains ending the day lower in the 0.7530 region. Data coming from Australia showed that consumer confidence advanced in January, as the Westpac index came in at 97.4 from previous 97.4. During the upcoming Asian session, the country will release its December employment figures, expected to have added 10.0K new jobs in the month, and the unemployment rate steady at 5.7%. The pair is developing within a strong ascendant channel ever since the month started, with the base of the figure for this Thursday around 0.7500, which means intraday declines towards the level will hardly affect the dominant trend. Below it, however, the pair can quickly fall down to 0.7450, a major long term static support. Technically, the 4 hours chart shows that the price remains above a bullish 20 SMA, whilst technical indicators are correcting modestly from overbought readings, still well above their mid-lines but gaining downward strength. If the employment report comes better-than-expected, the pair will likely extend its advance beyond the weekly high of 0.7568, with scope then to approach the 0.7700 region. 

Support levels: 0.7500 0.7450 0.7415

Resistance levels: 0.7565 0.7600 0.7640

Dow Jones

Wall Street closed mixed, with the Dow Jones Industrial Average down for the fourth consecutive session, settling 22 points lower at 19,804.72. The Nasdaq Composite added 17 points and closed at 5,555.66, while the S&P advanced 0.18%, to 2,271.89. Financial shares were the best performers in the US after Citigroup Inc. reported fourth-quarter profit that surpassed  estimates as trading revenue jumped 31%, more than the bank had forecast last month, whilst net  income rose 7.1% to $3.57 billion, or $1.14 a share, from $3.34 billion, or $1.02, a year earlier. Gains in the sector were offset by a decline in retailers, following report of soft holiday's sales. Within the Dow, American Express led advancers, up by 1.16%, while the worst performer was  UnitedHealth Group, down by 1.82%. Daily basis, the index remained below a horizontal 20 DMA while the Momentum indicator remains around a horizontal 100 SMA and the RSI indicator heads lower around 49, this last somehow anticipating some additional declines ahead. In the 4 hours chart, technical indicators head modestly lower within negative territory, with no certain downward strength, whilst the index remains below a bearish 20 SMA, but above a bullish 200 SMA, this last a few points below the current level. 

Support levels: 19,773 19,715 19,658    

Resistance levels: 19,846 19,895 19,952 

FTSE 100

The FTSE 100 gained 27 points or 0.38% this Wednesday, settling as 7,247.61, led by mining and consumer goods´ equities. Gains were limited, however, as Pearson plunged 29.35% after the company warned of lower future dividends and profit, citing diminishing US demand. The best performer was Hikma Pharmaceuticals, which added 3.0%, followed Whitbread, up by 2.18% and Antofagasta that added 1.84%. The daily chart for the Footsie shows that the index remains above a bullish 20 SMA, while technical indicators have pared their declines, and turned flat well above their mid-lines, indicating that the bullish sentiment remains strong. Shorter term, and according to the 4 hours chart, however, the upward potential remains limited, with the benchmark below a bearish 20 SMA, currently at 7,288, whilst the Momentum indicator turned flat below its 100 level, indicating limited buying interest, as the RSI heads higher around 47. Further gains are likely only on a break above the mentioned dynamic resistance at 7,288. 

Support levels: 7,220 7,167 7,120 

Resistance levels: 7,288 7,354 7,500

DAX

The German DAX advanced 59 points or 0.51%, closing the day at 11,599.39 helped by better-than-expected German data and easing risk aversion. During the London morning, German's inflation was confirmed at its highest level for 2016 last December, whilst the EU inflation rose above 1.0% for the first time in over two years in the same month. Pharmaceutical equities advances, although energy-related ones edged lower. Within the DAX, most members closed higher, with Adidas leading the advance, up by 2.77%, followed by E.ON, which added 1.61%. The daily chart shows that the index remains within its latest range, after a short-lived decline below the base last Tuesday. The benchmark bounced from its 20 DMA, whilst the Momentum indicator is slowly grinding higher above its 100 level and the RSI indicator resumed its advance, now around 65, all of which supports an upward extension. In the 4 hours chart, the index has recovered above an anyway horizontal 20 SMA, whilst the Momentum indicator is flat around 100 and the RSI heads north at 57, in line with the longer term perspective. 

Support levels: 11,554 11,490 11,440 

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

Nikkei

The Nikkei recovered some ground on Wednesday, up 80 points to close at 18,894.37, helped by a bounce in the USD/JPY pair back above ¥113.00. A cautious mood persisted, however, ahead of the key inflation releases in the US and as US equities maintained the soft tone. Among the Nikkei, JFE Holdings was the best performer, up by 4.36%, whilst MEIJI Holdings topped loser's list, down by 1.34%. Toshiba added 2.38%, after the company announced that it is considering spinning off semiconductor operations and selling a partial stake to Western Digital as it tries to cope with a massive impairment loss in its US nuclear power unit. Daily basis, the index remains well below a bearish 20 SMA, although its nearing the 19,000 level ahead of the opening, while technical indicators have lost their bearish strength, still within negative territory. In the 4 hours chart, the benchmark is advancing above a bearish 20 SMA, whilst technical indicators extended their recoveries from oversold readings, still holding below their mid-lines. 

Support levels: 18,940 18,882 18,825

Resistance levels: 19,038 19,102 19,188

Gold

Gold prices retreated after rallying for seven days in-a-row, with spot ending the day lower at $1,206.60 a troy ounce. Easing risk aversion and a modest recovery in dollar index that settled above 101.00 after flirting with 100 last Tuesday, pushed the price lower, although it's still holding above 1,204.50, the 38.2% retracement of the latest monthly decline.  With US inflation above the 2% threshold, chances of a FED's rate hike remain high, adding pressure to the bright metal. In the daily chart, the price is retreating from near a bearish 100 SMA, whilst technical indicators are barely correcting overbought conditions, not enough to confirm further declines, but good enough to limit the upside. A steeper decline seems more likely below the psychological 1,200 mark. Shorter term, the 4 hours chart shows that  the price is breaking below a bearish 20 SMA, whilst technical indicators are crossing their mid-lines into negative territory with sharp downward slopes, supporting the case of a bearish extension on a break below the mentioned 1,200 figure. 

Support levels: 1,200.00 1,193.80 1,182.90    

Resistance levels:  1,215.60 1,223.60 1,233.00 

WTI Crude Oil

Crude oil prices plummeted this Wednesday with West Texas Intermediate futures setting at $52.03, down 2.75 daily basis as the EIA reported that US production is set to rise in February, after declining for the past three months. According to the organism, US production is expected to drop by 5,900 bpd during January, but to rise by around 40,000 bpd in February. Ahead of the release of US inventories, the daily chart for the commodity shows that the bearish momentum accelerated, as technical indicators turned lower after spending most of this January consolidating within neutral territory. The 100 DMA in the mentioned chart provides a critical support at 49.65, a probable bearish target on a downward acceleration below the current region. Shorter term, the 4 hours chart shows that oil is currently trading below its 100 and 200 SMAs, whilst technical indicators maintain modest bearish slopes within negative territory, maintaining the risk towards the downside. 

Support levels: 51.40 50.70 50.00    

Resistance levels: 52.40 53.10 53.80

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.3% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.