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The American dollar surged against all of its major rivals

2nd March 2017

EUR/USD

The American dollar surged against all of its major rivals, but the Aussie, rallying after a couple of FED officers hinted a rate hike for March, and after US President Trump revived the "Trump-trade" among equities, after speaking before a joint session at the Congress. Trump repeated his campaign promises, and gave little detail on  how he will achieve such goals, but with a more conciliatory, "presidential," tone. He defended its nationalist stance, and asked the Congress to approve a $1 trillion plan for infrastructure investment, while confirmed tax cuts will extend beyond the mid-class, and reach corporations, to make local products more competitive worldwide. The EUR/USD pair fell down to 1.0513, its lowest since February 22nd, but bounced from the level, up to the 1.0565 Fibonacci resistance, where selling interest contained the recovery. 

News were mostly positive both shores of the Atlantic, as the final EU February PMIs  confirmed the growth´s path the area got into last December as the index came at 55.4, up from 55.2 in January, its highest in almost six years, although below market's expectations of 55.5. In Germany, growth reached its highest level since May 2011, with the PMI up to 56.5 from January's 56.4, while inflation jumped above 2.0% in the country, for the first time since August 2012. German headline came in at 2.2% YoY in February versus 1.9% YoY in January.  Finally in the US, Core PCE inflation surged to 1.9% in January, from previous 1.6%. 

There are little chances of further recoveries, although the 1.0520 price zone continues to prove to be a tough bone to break. Technically, and ahead of the Asian opening,  the pair presents a moderate bearish risk in the short term, given that in the 4 hours chart, the price settled below all of its moving averages, with the 20 SMA just a few pips above the current level, and technical indicators recovering some ground within bearish territory. The lower low for the week also favors additional declines as long as the prices remains below the 1.0600 level, and with a break below 1.0520 required to confirm further declines. 

Support levels: 1.0590 1.0565 1.0520

Resistance levels: 1.0635 1.0660 1.0710

USD/JPY

The USD/JPY pair advanced up to 114.04, its highest since mid February after trading as low as 111.68 on Tuesday, on renewed optimism the new US administration will boost growth and inflation, and following comments from several US FED officers, which lifted odds for a March rate hike up to 80%. In separated events, San Francisco Williams and New York Dudley signaled that a rate hike is on the table, on accelerating inflation and employment at its best level in years. The rally triggered by US President Trump in stocks fueled the advance of the pair, although the upward momentum eased in the US afternoon, with the USD/JPY pair now trading around 113.50. News coming from Japan were encouraging, as the Nikkei Manufacturing PMI continued to expand in February to 53.3 from January's 52.7, marking the highest reading since March 2014. Also, supporting the rally in the pair was a sharp comeback in US Treasury yields that are still the main motor for the JPY. If yields retreat from their recent highs, the pair will likely follow-through. Technical readings in the 4 hours chart indicate that the pair may correct lower, as indicators are retreating strongly from overbought levels, but the price has recovered above its 100 and 200 SMAs, with the largest at 113.30, and offering an immediate support. The risk will turn towards the downside in the short term, on a break below 113.00. 

Support levels: 113.00 112.50 111.95 

Resistance levels: 114.00 114.40 114.85

GBP/USD

The Pound was hit not only by dollar's strength, but also suffered from poor local data and Brexit jitters, leading the GBP/USD pair to close the day near a fresh six-week low set early Wednesday at 1.2280.  The UK Markit manufacturing PMI came in at 54.6 in February, below January's 55.9 and a fresh three-month low. Also, and ahead of Wall Street's close, news showed that UK PM May suffered her first parliamentary defeat on the Brexit bill, as in the House of Lords, policy makers voted for an amendment to protect the rights of EU citizens living and working in Britain after the Brexit. Trading below the 1.2300 threshold, technical readings maintain the risk towards the downside after the bearish breakout of February's range. In the 4 hours chart, the 20 SMA has accelerated its slide, currently around 1.2410, while technical indicators have lost downward momentum, but remain well into negative territory. The pair has its next relevant support at 1.2260, the 61.8% retracement of the January rally, with little in the way below it, until 1.2100. 

Support levels:  1.2260 1.2225 1.2170

Resistance levels: 1.2345 1.2390 1.2440

AUD/USD

The Australian dollar closed the day with gains against its American rival at 0.7678, supported by rallying equities and positive macroeconomic news from the region. In Australia, Q4 GDP came in at 1.1%, bouncing sharply from previous' quarter 0.5% decline, on the back of rising commodities prices and a surge in exports that fuelled corporate profits. Also, Chinese official manufacturing PMI accelerated at a faster pace in February, reaching 51.6 from previous 51.3. The Caixin Manufacturing PMI rose to 51.7 points in February, helped by a strong jump in exports. The AUD/USD pair bottomed at 0.7636, and settle some 20 pips below the 0.7700 mark, still trapped in range. The 4 hours chart shows that the price is trying to overcome a modestly bearish 20 SMA ahead of the Asian opening, whilst technical indicators have recovered within negative territory, now aiming to cross their mid-lines, limiting chances of a deeper decline, but not enough at this point to confirm a new bullish rally. 

Support levels: 0.7660 0.7620 0.7570

Resistance levels: 0.7710 0.7740 0.7770 

Dow Jones

After closing in the red on Tuesday, US equities rallied to all-time highs late Tuesday, as the "Trump-trade" came back to life following US president speech before the Congress. The DJIA traded as high as 21,016 ahead of Wednesday's opening, ending the day at 21.115.42, up by 303 points or 1.46%. The index set a record high intraday of 21,168. The Nasdaq Composite and the S&P also closed at record levels, with the first up 1.35%, to 5,904.03, and the second adding 1.37%, to 2,395.95. Financials were among the best performers worldwide, and within the Dow, JPMorgan Chase led gainers, up 3.47%, followed by American Express that closed 2.39% higher. Wall-Mart changed course and was the worst performer, ending the day 0.72% lower. Technical readings in the daily chart have accelerated their advances within extreme overbought levels, with the RSI indicator currently at 88, yet a downward corrective move remains unlikely for now, as market sentiment favors additional advances. In the shorter term, and according to the 4 hours chart, technical indicators retreated within overbought levels, but the benchmark is far above its moving averages, maintaining the upside favored. 

Support levels: 20,779 20,724 20,668

Resistance levels: 20,855 20,900 20.940

FTSE 100

The Footsie rallied pass February high, and ended at record highs, as equities' traders worldwide cheered Trump's words late Tuesday. A weaker Pound added to the FTSE 100 advance that managed to close at 7,382.90, up daily basis by 121 points or 1.64%. Persimmon led advancers, adding 5.91% while Ashtead Group followed, ending the day 5.74%. Mining-related equities, however, closed in the red as gold fell sharply intraday, with Randgold Resources shedding 2.69% and Fresnillo 0.87%. The daily chart shows that the upward potential increased, as technical indicators turned higher after several days of consolidating within positive territory, and extended far above all of its moving averages. In the 4 hours chart, technical indicators pulled back modestly within overbought territory, but the index is also above all of its moving averages, with the 20 SMA gaining upward strength, all of which supports additional advances on a break above 7,397, the intraday high. 

Support levels: 7,238 7,195 7,160 

Resistance levels: 7,285 7,315 7,342

DAX

The German DAX surged by  whopping 237 points or 1.97%, to close the day at 12,067.19, level last seen in April 2015. Strong local data supported the rally, as German's inflation is expected to be at 2.2% in February according to preliminary estimates, whilst the German manufacturing PMI reached its highest level since May 2011 in February according to Markit, up 56.8 from 56.4 in January. All components closed in the green, with banks leading the way higher, as Deutsche Bank added 5.31%, while Commerzbank gained 4.13%.  The daily chart for the benchmark shows that it stands some 20 points above the mentioned close, having extended well above a bullish 20 DMA after failing to break below it, whilst the RSI indicator heads sharply higher around 68, and the Momentum indicator also turned higher, all of which supports some further gains ahead. In the 4 hours chart, technical indicators have partially lost upward momentum, but remain in overbought territory, whilst the index is also developing far above all of its moving averages, supporting the longer term perspective. 

Support levels: 12,031 11,982 11,938 

Resistance levels: 12,100 12,148 12,183 

Nikkei

The Japanese Nikkei  added 1.44% or 278 points, to close at 19,393.54, fueled by yen's decline and renewed enthusiasm among equity traders, following Trump's speech before the US Congress. The index closed at its highest in over two weeks, after Trump promised massive tax relief to the middle class and tax cuts also for companies, alongside with a  $1 trillion investment in infrastructure investment. Export oriented  and industrial equities led the way higher, with Tokai Carbon up 5.71%, being the best performer, followed by Mazda that added 4.63% and Sumco that closed 4.60% higher. Only 17 out of 225 components closed in the red, with Nippon Suisan Kaisha being the worst performer, down 1.23%. The index advanced further in after-hours trading, tracking Wall Street's gain, poised to enter the Asian session at 19,588. In the daily chart, technical indicators have turned higher, entering positive territory, whilst the index rallied above a modestly bullish 20 DMA, favoring further gains for this Thursday. In the 4 hours chart, technical indicators have lost upward strength and turned marginally lower, but hold within overbought levels, far from indicating that the benchmark has reached a top, whilst the 20 SMA is gaining upward strength, well below the current level, being irrelevant short term. 

Support levels: 19,583 19,533 19,478

Resistance levels: 19,610 19,654 19,702

Gold

Gold fell to $1,236.83 a troy ounce intraday, as increased chances of a FED March hike weighed on the commodity. The metal bounced, however, as dollar's demand eased mid American afternoon, ending the day around 1,246.90, pretty much flat. Despite spot set a lower low and a lower high daily basis, the dominant bullish trend has been barely affected, white surprising considering odds for a March hike rose to around 80%. That said, it will take the slightest dovish comment from any FED officer to see the commodity recovering its shine. From a technical point the daily chart shows that the price bounced strongly after testing its 20 DMA, while the Momentum indicator resumed its advance within positive territory, and the RSI indicator also turned south after correcting overbought conditions. In the 4 hours chart, the price bounced from a bullish 100 SMA, although a bearish 20 SMA caps the upside whilst technical indicators have recovered within negative territory, maintaining their upward slopes, but still not enough to confirm further gains. A recovery above 1,255.25, the 61.8% retracement of the post-US election decline, however, will likely see the metal testing its recent highs around 1,263.80.

Support levels: 1,238.90 1,230.00 1,222.10

Resistance levels: 1,255.25 1,263.80 1.273.20 

WTI Crude Oil

Crude oil prices ended the day marginally lower, with West Texas Intermediate futures closing at $53.79 a barrel, weighed by news that US stockpiles inched higher for an eighth consecutive week, although the decline was limited, as the build was smaller-than-expected. According to the EIA, the country added 1.501M barrels last week, against expectations of 3.079M. Commercial stockpiles stand at 520.2 million barrels, exceeding the seasonal maximum. WTI has continued to make no progress from the technical point of view, stable above a horizontal 20 DMA in the daily chart and with technical indicators hovering around their mid-lines, lacking directional strength. In the 4 hours chart, the price has settled below a modestly bearish 20 SMA, but above a flat 100 SMA, whilst technical indicators lack directional strength slightly below their mid-lines. The commodity will likely continue in its 50/55 range, with increasing bearish odds coming from the macroeconomic background. 

Support levels: 53.40 53.00 52.50

Resistance levels: 54.75 55.30 56.00

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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.