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Dollar's decline continued this past week, with the USD still in retreated mode after Donald Trump

16th January 2017

EUR/USD

Dollar's decline continued this past week, with the USD still in retreated mode after Donald Trump, the upcoming US president, offered a press conference that had little of policies and much  trouble ahead. Trump's battle with Mexico and Russia extended into China last Friday, as he expressed his willingness to end the "one-China" policy, the one that considers Taiwan as a part of the country, as he said that "everything is under negotiation, including one-China." The country quickly responded on Sunday, saying that its one-China policy is “non-negotiable.” Trump will take the office this upcoming Friday, and the market will be eagerly waiting for his words, although more of the same is expected. During this week, the US will release its latest CPI inflation figures, while several FED's officers, including Janet Yellen, will offer speeches. 

During this past week, the ECB released its account of its December Monetary Policy Meeting, indicating that political uncertainty has also taken center stage in Europe. The Central Bank will have a new meeting this upcoming week, and whilst late data suggest some steady growth in the region for the last quarter of 2016, Draghi is expected to maintain a cautious stance, but also cheer the fact that inflation has risen above 1.0% for the first time in three years.

The EUR/USD pair closed the week at 1.0638, above the 1.0600 threshold for the first time since early November, and technically,  daily chart shows that the latest recovery has stalled below the 38.2% retracement of the November/January decline at 1.0710, now the critical resistance to break to confirm additional advances during the upcoming days towards the long term resistance in the 1.0800/40 region. In the mentioned chart, the price remains well below its moving averages, whilst technical indicators maintain their upward potential, heading north within positive territory, supporting a new leg higher for the days ahead. Shorter term, and according to the 4 hours chart, the risk is also towards the upside, as the price has been finding intraday support on a bullish 20 SMA, now around 1.0610, while the Momentum indicator keeps heading higher well above its mid-line. 

Support levels: 1.0610 1.0565 1.0520 

Resistance levels: 1.0710 1.0750 1.0800

USD/JPY

The USD/JPY pair closed the week sharply lower at 114.44, the largest weekly decline since mid July 2016, as confidence in the US future economic growth kept decreasing, following Trump's press conference. Better-than-expected data coming from Japan, as the Leading Economic Index rose to 102.7 in November from previous 100.8, was not enough to offsets concerns about a stronger yen, as if the currency keeps appreciating, the BOJ will have to take additional easing steps. The pair closed in the red on Friday, despite US inflation, in the form of PPI, came in better-than-expected, and that US Treasury yields recovered from the multi-month lows seen earlier in the week, indicating that further declines are likely for the upcoming days. From a technical point of view, the daily chart shows that the price has retraced just the 23.6% of its latest bullish run, but also that it stands a few pips above 114.00, the 23.6% retracement of the 2011/2015 rally, with renewed selling pressure below this last probably resulting in a steeper slide. In the same chart, technical indicators head sharply lower within negative territory, while a bullish 100 DMA stands around 109.10, too far away to be relevant as support. Shorter term, technical readings in the 4 hours chart favor a bearish extension, given that indicators head south within negative territory, whilst the price remains far below its 100 and 200 SMAs, with the shortest gaining downward strength for the first time in over three  months. 

Support levels: 114.00 113.65 113.20

Resistance levels: 114.70 115.20 115.60

GBP/USD

The British Pound was immune to dollar weakness, and fell for a second consecutive week against its American counterpart, weighed by Brexit-related woes. The GBP/USD pair fell down to 1.2037, level last seen late October, and settled at 1.2165, plummeting after Downing Street confirmed that UK's PM Theresa May will outline the government's Brexit strategy in a speech this Tuesday. Over the previous weekend, May hinted that the UK will leave the EU single market, by saying that Britain couldn't hang on to "bits of EU membership," but reaffirmed her pledged to keep borders under control, fueling the negative sentiment towards the Pound. During the upcoming days, the UK High Court will likely unveil its decision on whether the Parliament has to vote, or not, on the date of the beginning of Brexit. Despite closing flat on Friday, the pair is poised to extend its decline, as in the daily chart, a bearish 20 DMA keeps capping the upside, while the RSI indicator heads north around 38, although the Momentum indicator lacks directional strength, but holds within negative territory. In the 4 hours chart, the price is hovering around a horizontal 20 SMA, whilst the RSI indicator heads south around 44, supporting some further slides, despite the diverging Momentum. 

Support levels: 1.2130 1.2080 1.2040

Resistance levels: 1.2190 1.2235 1.2280 

AUD/USD

The Australian dollar was among the best performers this past week, up against the greenback to 0.7518 and settling around 0.7500. The AUD/USD pair trimmed most of its December losses on the back of strong recovery in metals' prices, as Chinese Trade Balance figures showed imports continued rising in the world's second largest economy by the end of 2016, reassuring demand for the consumer country. Early Monday, the Australian  Melbourne Institute will release the TD Securities inflation figures for December, which may fuel Aussie's advance on improved numbers. In the meantime, the daily chart shows that the latest daily is a bit overstretched, with technical indicators showing some signs of exhaustion  in overbought territory, although without confirming an upcoming retracement. The pair has an immediate resistance at 0.7524, December's high, and further gains below the level will deny chances of a downward correction for the upcoming sessions. In the 4 hours chart, the 20 SMA maintains a sharp bullish slope below the current level, acting as dynamic support around 0.7450, also a major static support, whilst technical indicators are holding within overbought readings, with the Momentum indicator aiming modestly higher, indicating a limited downward scope at the time being. 

Support: levels: 0.7450 0.7410 0.7365  

Resistance levels: 0.7525 0.7560 0.7600

Dow Jones

US stocks closed mixed last Friday, with the Dow Jones Industrial Average down 0.03%, to 19.885.73, but the Nasdaq Composite and the S&P up by 0.48% and 0.18%, to 5.574.12 and 2,274.4 respectively. The banking sector began reporting quarterly earnings, with upbeat results keeping indexes afloat. Among the best performers were JP Morgan Chase, reporting a profit of $6.73 billion, or $1.71 a share. Bank of America announced its earnings rose by 43%, although Wells Fargo reported a profit of $5.27 billion, or 96 cents a share, below the $5.58 billion, or $1 a share, in the same period of 2015. The Dow closed the week modestly lower, having been in consolidative mode for most of the week, and the daily chart shows that the index remains stuck around a horizontal 20 SMA, whilst technical indicators maintain a neutral stance, as increasing uncertainty in the US keeps investors clueless. In the 4 hours chart, the benchmark is hovering around its 20 and 100 SMAs, both flat and within a tight range, a clear sign of the absence of directional strength, whilst technical indicators head modestly lower around their mid-lines, lending the scale towards the downside for the upcoming sessions. 

Support levels: 19,869 19,806 19,805    

Resistance levels: 19,928 19,974 20,045

FTSE 100

The FTSE 100 kept posting all-time highs daily basis this past week, adding 45 points or 0.62% on Friday to end the week at 7,337.81, aided by a weaker Pound. On Friday, pharmaceutical equities reversed their previous´ day losses, with Shire up 2.34% and Hikma Pharmaceuticals by 1.99%. Mining-related equities, on the other hand, ended mostly lower, as gold eased last Friday, with Randgold Resources down 1.25% and Fresnillo shedding 0.63%. Retailers benefited from the positive mood around the sector, with Barratt Developments leading winners' list, up by 3.61%. Technically, the index maintains its bullish tone according to the daily chart, given that it has extended further above a bullish 20 DMA, whilst the RSI indicator keeps heading north around 80, and the Momentum indicator holds well above its mid-line, although with limited directional strength. In the 4 hours chart,  technical indicators hold directionless within bullish territory, while a bullish 20 SMA keeps leading the way higher, offering a dynamic intraday support at 7,286.

Support levels: 7,286 7,241 7,178 

Resistance levels: 7,365 7,400 7,440

DAX

European equities advanced on Friday, with the German DAX up by 0.94% or 109 points, to close at 11,629.18. The DAX found support on better-than-expected Wholesale prices that rose by 1.2% monthly basis in December, whilst the annual figure jumped to 2.8% from previous 0.8%, somehow indicating upcoming inflationary pressure. Financial-related equities were among the best performers, with Deutsche Bank up 2.21% and Commerzbank adding 1.66%. Technically, the index is within a consolidative phase near an over one-year high, and could extend its advance during the upcoming sessions, given that in the daily chart it held above a bullish 20 DMA, now around 11,515, whilst the Momentum indicator remains flat, slightly above its 100 level and the RSI indicator resumed its advance after a modest downward correction from overbought territory. In the 4 hours chart, the technical picture is neutral-to-bullish, as the index continues hovering around a flat 20 SMA, whilst technical indicators lack directional strength around their mid-lines.  

Support levels: 11,542 11,500 11,449

Resistance levels: 11,657 11,694 11,739

Nikkei

The Nikkei 225 advanced 153 points, last Friday to close at 19,287.28, ending the week in the red amid continued yen's strength. The index managed to bounce from a two-week low of 18,954, as local retailers began reporting earnings for the last quarter of 2016. Retailer Seven & I Holdings was the best performer, up by 8.58% after it posted strong earnings,  whilst Fast Retailing, the operator of Uniqlo casual clothing chain, rose 1.1%  after  posting its biggest quarterly operating profit in two years. Technically, the daily chart shows that the benchmark's recovery was not enough to push it above a horizontal 20 DMA, whilst technical indicators lack directional strength within neutral territory, indicating that further gains are not yet confirmed. In the 4 hours chart, the index hovers around its 20 SMA and contained by the 100 SMA, whilst technical indicators present modest bearish slopes within negative territory, confirming the longer term perspective. 

Support levels: 19,210 19,150 19,072

Resistance levels: 19,358 19,415 19,473

Gold

Gold prices posted solid gains for a third consecutive week, with stop trading as high as $1,209.93 a troy ounce before settling around 1,198.20, the highest settlement in almost two months. A weaker dollar alongside with increased physical demand fueled the advance of the metal, although some follow-through the critical 1,200 is required to confirm a steadier recovery. Daily basis, gold pared gains around the 38.2% retracement of its latest monthly decline, confirming the corrective nature of the latest advance. In the same chart, the price is firmly above a bullish 20 DMA, while the 100 DMA presents a bearish slope around the 50% retracement of the same decline, making of the $1,230.00 region a critical resistance for the upcoming days. Technical indicators in the mentioned chart are losing upward strength, but holding near overbought levels, far from indicating a downward move. In the 4 hours chart, a bullish 20 SMA leads the way higher, offering an intraday dynamic support at 1,193.80, while technical indicators resumed their advances within positive territory, limiting chances of a bearish move. 

Support levels: 1,193.80 1,182.50 1,173.45    

Resistance levels: 1,204.50 1,211.90 1,220.30

WTI Crude Oil

Crude prices fell for a second consecutive week, with the US benchmark settling at $52.52 a barrel, having recovered from a multi-week low of 50.71 posted last Tuesday. Lingering doubts about OPEC's ability to trim production were partially offset by news that China imported 8.7 million barrels per day in December. Also, helping the commodity recover some ground was the Baker Hughes report last Friday, which showed that that the number of rigs drilling for oil in the US fell by 7 to 522, the first fall in almost three months.  Oil's rally seems to have found an interim top for now, and investors will likely wait for the OPEC to continue reducing output this month before attempting a new push higher. Technically, the daily chart shows that the pair broke below its 20 DMA at the beginning of the week, meeting selling interest around it on recoveries, whilst technical indicators present modest bearish slopes within neutral territory. In the 4 hours chart,  the Momentum indicator turned lower above its mid-line, the RSI stands pat around 50, while the price is trapped between its 100 and 200 SMAs, with the shortest capping the upside around 53.10.

Support levels: 52.00 51.40 50.70    

Resistance levels: 53.10 53.80 54.55

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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.