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The common currency underperformed this past week

27th February 2017

EUR/USD

The common currency underperformed this past week, down against the greenback to 1.0558, not far from a fresh 6-week low posted last Wednesday at 1.0493. Political uncertainty ahead of elections in Europe weighed on the EU, with France in the eye of the storm these days, as Marine Le Pen, the most popular candidate, has pledged to call for a "Frexit" referendum, should she win the election. Confidence in the USD was eroded by an unclear FED on when the next rate hike will come, and comments from US Treasury Secretary Mnuchin, supporting a weaker dollar and delaying the "phenomenal" tax reform to after August.  

US data released on Friday missed expectations, weighing on the USD across the board, and preventing the EUR/USD pair from falling further. Consumer confidence fell in February for the first time since the US election, according to the University of Michigan's monthly survey, as the index came  in at 96.3 from January's 98.5. Sales of new homes during January rose at a slower-than-expected pace, as sales climbed by 3.7% to an annualized pace of 555,000. The upcoming week will be quite a busy one in the US, starting with the release of Durable Goods Orders for January this Monday, expected to have improved from December's figures. 

From a technical point of view, the pair is biased lower, as Friday's spike was contained by a daily descendant trend line coming from this year high of 1.0828, whilst the price settled below the 23.6% retracement of the post-US election rally, at 1.0565, the immediate resistance. In the daily chart, indicators have turned south within negative territory, whilst the price remained well below bearish 20 and 100 SMAs all the week, supporting some further slides on a break below 1.0520, the weekly low. In the 4 hours chart, the price settled around a flat 20 SMA, whilst the Momentum indicator has turned sharply lower and is about to cross its 100 level, while the RSI indicator presents a modest bearish  slope around 45, also supporting a bearish extension on a break below the mentioned support. 

Support levels: 1.0520 1.0470 1.0440

Resistance levels: 1.0590 1.0635 1.0660

USD/JPY

The USD/JPY pair fell down to 111.93 on Friday to settle a few pips above the 112.00 level, undermined by plummeting US Treasury yields and a soft tone in equities all through the day. Asian and European ones closed in the red, while US indexes managed to post marginal gains, after being under pressure for most of the session. Tepid US data, with worse-than-expected US New Home Sales and Michigan Consumer Confidence, also weighed on the pair. Yields closed at their lowest levels for the year, with the 10-year not benchmark down to 2.32% and the 30-year note yield falling to 2.96% from previous 3.02%. In the daily chart, the price has closed the day below its 100 DMA for the first time since early October, whilst the RSI indicator heads south around 40. The Momentum indicator, however, remains flat around its 100 level, whilst the pair has bottomed this February around 111.60, meaning that it will take a break below this last to confirm a bearish extension. In the 4 hours chart, the price is well its moving averages, whilst the Momentum indicator heads south at 1-week lows and the RSI consolidates around 30, in line with the longer term technical outlook. 

Support levels: 111.90 111.60 111.20

Resistance levels: 112.50 113.00 113.45

GBP/USD

The British Pound maintained the status quo against the greenback for a third consecutive week, as investors are waiting for clearer clues on what's next on Brexit before taking positions in the pair. So far, data has been resilient, with the economy nowhere the chaotic situation forecasted by policy makers and central bankers.  The House of Lords will discuss on Monday and Wednesday the Brexit bill, and PM Theresa May faces a big challenge, as most peers seem to be backing amendments particularly focused on guarantee the rights of EU citizens to stay in the UK after Brexit and to ensure the Parliament has a binding vote on the final departure deal before it's too late for it to be changed, an effective veto. The GBP/USD pair closed the week at 1.2460, and the daily chart shows that the price settled below a bearish 20 SMA, whilst technical indicators have turned modestly lower around their mid-lines. In the 4 hours chart the neutral stance persists, with the price moving back and forth around its 20 SMA and technical indicators heading nowhere around their mid-lines. The pair has been finding buying interest around 1.2380, while February low converges with the 50% retracement of the latest bullish run at 1.2345, the level to break to confirm a bearish breakout. The upside on the other hand, remains contained by selling interest around 1.2560/80, from where the pair retreated multiple times during the past three weeks.  

Support levels:  1.2430 1.2380 1.2345 

Resistance levels: 1.2485 1.2530 1.2565

AUD/USD

The AUD/USD pair advanced to a fresh 3-month high of 0.7740 this past week, but was once again unable to sustain gains beyond 0.7700. The pair retreated at the beginning of the day, after RBA's Governor Lowe said that he expects "a period of stability" in interest rates, when testifying before a parliamentary committee. Lowe also dismissed the possibility of a rate cut, indicating that such move won't fund consumption but house buying, which will push up house prices even higher. Dollar's demand fueled the slide on Friday, although the pair settled at the higher end of its latest range, and unless it break below 0.7600, the downside will likely remain limited. Technically, the daily chart shows that the price converges with a bullish 20 SMA around 0.7670, whist technical indicators eased within positive territory, with not enough directional Momentum. Shorter term, the 4 hours chart shows that the price is below its 20 SMA and that it has broken below a daily ascendant trend line coming from January 27th low of 0.7511, currently around 0.7680. In the same chart, technical indicators have turned flat after entering bearish territory, limiting chances of a downward move, unless the price accelerates below 0.7640, the immediate support. 

Support levels: 0.7640 0.7600 0.7555

Resistance levels: 0.7700 0.7740 0.7770 

Dow Jones

Following a soft opening, US indexes managed to close the day marginally higher and at all-time highs, with the Dow Jones Industrial Average up 11 points or 0.05%, and settling at 20,821.76, its eleventh consecutive record in-a-row. The Nasdaq Composite added 9 points on Friday and closed at 5,845.31, while the S&P advanced 3 points, to 2,367.34. The positive momentum in sentiment eased following comments from US Treasury Secretary Mnuchin, indicating that the new policies will take longer-than-expected to be implemented, but speculative interest took the early slide as a buying opportunity keeping the euphoria alive, at least within equity traders. Banks were the worst performers, following the lead of their European counterparts, with Goldman Sachs Group topping losers' list, down by 1.53%, followed by JPMorgan Chase that shed 0.88%. Energy-related equities suffered from lower oil prices, with Exxon Mobil down 0.86%. Wal-Mart lead gainers, up 1.51%, followed by Intel that added 0.97%. From a technical point of view, the daily chart shows that technical indicators have lost upward strength, turning horizontal in extreme overbought levels, still far from supporting a bearish corrective move, whilst the index is far above bullish moving averages. In the 4 hours chart, the index closed above a still bullish 20 SMA, after briefly falling below it, the RSI indicator resumed its advance around 59, but the Momentum indicator eases within positive territory, indicating that the market will need a strong trigger to resume buying.

Support levels: 20,730 20,692 20,637

Resistance levels: 20,839 20,860 20,900

FTSE 100

The FTSE 100 closed at 7,243.70, down by 27 points, weighed by the Royal Bank of Scotland as the bank posted a loss of 6.96 billion pounds for 2016, its ninth consecutive year of losses. The bank lost 4.49% topping losers' list, followed by mining and energy equities, with Rio Tinto down 3.00% and BHP Billiton losing 2.93%. International Consolidated Airlines Group was the best performer, up 4.46%. The index trimmed most of its daily losses ahead of the close, but bouncing from a fresh two-week low on Pound's weakness. Technical readings in the daily chart show that the benchmark closed above its 20 DMA and that the Momentum indicator holds flat above its 100 level, while the RSI indicator kept correcting overbought conditions, now around 55, all of which limits chances of a sustainable decline. In the 4 hours chart, the 20 SMA gains bearish strength above the current level, now around 7,282 whilst technical indicators bounced from oversold readings, maintaining their bullish slopes, but still below their mid-lines, indicating that a recovery above the mentioned resistance is required to confirm further gains ahead. 

Support levels: 7,238 7,200 7,165 

Resistance levels: 7,282 7,315 7,342 

DAX

The German DAX closed the week at 11,804.03, down on Friday 142 points or 1.20%, with financials and auto-makers leading the way lower. Banks were among the worst performers, with Commerzbank down 3.22% and Deutsche Bank shedding 2.74%, after the Royal Bank of Scotland reported a £6.96 billion pounds' lost for 2016. Only 5 components closed with gains, with Deutsche Lufthansa being the best performer, up 0.58%. The sharp retracement in the German benchmark is a first sign of warning against the dominant bullish trend, but it´s still not enough to confirm a sustainable reversal. In the daily chart, the index bounced strongly after testing its 20 SMA, currently at 11,737, while the Momentum indicator continues consolidating within positive territory, and the RSI indicator retreated from overbought readings, heading south now around 57. In the 4 hours chart, the index bounced strongly from a bullish 100  SMA, but established far below its 20 SMA, the Momentum indicator maintains its bearish strength within negative territory, while the RSI turned modestly higher around 45, in line with the longer term perspective at supporting a bearish extension only with a break below the mentioned support. 

Support levels: 11,781 11,737 11,692

Resistance levels: 11,860 11,902 11,945 

Nikkei

The Japanese Nikkei  fell 85 points or 0.45% on Friday to settle at 19.283.54, on persistent yen's strength. Toshiba extended its recovery, adding 4.65%, topping winners' list after revealing a new 3D flash chip that can store up to 1TB. The new technology attracted buyers, expected to enter massive production during the second half of this year. Still only 52 components out of 225 closed in the green. The worst performer was Komatsu, down 5.44%, followed by Sumimoto Heavy Industries that lost 4.91%. The index fell further in after-hours trading, poised to open the week around 19,140, although further declines are yet to be confirmed, as in the daily chart, the benchmark closed a few points below a horizontal 20 SMA, whilst technical indicators have turned lower, but with the Momentum still within positive territory, and the RSI around 47. In the 4 hours chart, the index is below all of its moving averages, with the 20 SMA gaining bearish momentum, whilst technical indicators hold within bearish territory, lacking clear directional strength. February 17th daily low at 19,029 is the level to break to confirm a steeper decline for the upcoming week.  

Support levels: 19,080 19,029 18,939

Resistance levels: 19,185 19,229 19,277

Gold

Gold prices surged to their highest in over three months, after FED's Minutes failed to confirm a rate hike for March and over increasing uncertainty over the economic impact of US's new administration policies. Spot gold surged up to $1,260.07 a troy ounce and closed the week at 1,256.62, above the 61.8% retracement of the post-US election slump. Political uncertainty in Europe and the US maintain safe-haven assets on demand, with gold and yen poised to extend their gains during the upcoming days. Gold's daily chart shows that the price accelerated further above a bullish 20 DMA, but met some selling interest around the 200 DMA, the immediate resistance at 1,260.10. In the same chart, the Momentum indicator has lost upward strength, but remains within positive territory, whilst the RSI indicator maintains its bullish slope within overbought readings. In the 4 hours chart, the price is far above all of its moving averages, with the 20 SMA having accelerated its advance, now around 1,240.00 and technical indicators holding within overbought territory. 

Support levels: 1,253.20 1,242.50 1,230.00 

Resistance levels: 1,261.10 1.273.20 1,281.70

WTI Crude Oil

Crude oil prices retreated on Friday, with West Texas Intermediate crude oil prices settling at $54.00 a barrel, undermined by news that non-OPEC countries which joined efforts with the organism to trim output, has compiled with around 50% of the cut pledged last November. Increasing US production and stockpiles also weighed on prices this past week. On Friday, Baker Hughes reported that the number of active US rigs drilling for oil rose by 6 to 597 this week, the fifth consecutive weekly advance. Crude has been range bound pretty much since last December, leaving a neutral stance in the daily chart, as the price holds above a horizontal 20 DMA, while technical indicators head nowhere around their mid-lines. In the shorter term, and according to the 4 hours chart, the price settled a few cents below a modestly bearish 20 SMA, whilst technical indicators diverge from each other within neutral territory, as the Momentum aims higher, whilst the RSI lower. 

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.