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The EUR/USD pair advanced up to 1.0709 late Friday

23rd January 2017

EUR/USD

The EUR/USD pair advanced up to 1.0709 late Friday, with the dollar coming under selling pressure amid disappointing Trump's inaugural speech. The 45th US president said that policy will follow two simple rules: buy American, and hire American, prompting concerns about protectionist trade policies, but also pledged large infrastructure investment. Pretty much, he reiterated his campaign speeches, disappointing investors looking for clearer clues on fiscal stimulus. EUR's recovery was moderated by the dovish comments coming from ECB's Draghi on Thursday, but the risk for the pair is now towards the upside. This week, attention will center in growth, as the US will release its first GDP estimate for the last quarter of 2016, with the Markit January PMIs for the EU and the US   will also come out to  give a clearer picture of how economic growth is starting this 2017 in both economies. 

In the daily chart, he pair is pressuring the 38.2% retracement of its November/January slide at 1.0710. The price is well above a bullish 20 DMA, now converging with the 23.6% retracement of the same decline around 1.0565, a line in the sand for bulls, as they would probably give up only on a break below it. The RSI indicator in the same chart heads higher around 59, while the Momentum indicator is easing modestly from overbought territory. Lastly, the 100 DMA maintains  a sharp bearish slope around 1.0780, the next probable bullish target on a break above the mentioned Fibonacci resistance. Shorter term, the 4 hours chart shows that the price is above its 20 SMA, although technical indicators lack clear directional strength, hovering around their mid-lines. A daily ascendant trend line at 1.0610 this Monday, should offer support in case of retracements ahead of the mentioned 1.0565 level. 

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0750 1.0780

USD/JPY

The USD/JPY pair closed the week marginally higher in the 114.50 region, back from a two-month low of 112.56 achieved mid-week.  The recovery was triggered by comments from FED's head Janet Yellen, who surprised markets with hawkish comments, as she warned about the risk of not raising rates, given the increasing inflationary pressures on the economy, saying that the Federal Reserve is ready to hike "a few times a year" until reaching 3.0% by 2019. Also, backing the advance in the USD/JPY pair, as the benchmark for the 10-year note bounced back from a weekly low of 2.309% to settle on Friday at 2.47%. The Japanese calendar was quite light these past few days, but this week, the country will release its latest inflation figures, expected to remain within deflationary territory, but slightly above previous ones. Despite the sharp bounce, the downward risk persists, as the price settled around the 23.6% retracement of the latest bullish run, unable to confirm a recovery above it, whilst technical indicators remain within bearish territory, slowly turning lower. In the same chart, the 100 DMA has advanced above the 200 DMA, with the shortest now converging with the 50% retracement of the same rally at 100.25. In the 4 hours chart, the pair presents a modest upward potential, as indicators are turning slightly higher within positive territory, but the price remains well below its 100 DMA, currently around 115.60. 

Support levels: 114.30 113.80 113.45

Resistance levels: 115.10 115.60 116.05 

GBP/USD

The  Sterling closed the week with a positive tone against the greenback, reversing most of its January losses and with the GBP/USD pair settling at 1.2373, not far from the monthly high of 1.2415. After UK's PM Theresa May confirmed government's plans for a "hard-Brexit," the Pound surged in a kind of "sell the rumor, buy the fact" rally, with following retracements meeting buying interest in the 1.2250/60 region, now a major support. On Friday, UK retail sales hit the pair as sales fell by 1.9% in the month, when compared to November, sending the year-on-year reading down to 4.3% from an expected 7.2% advance. Core figures ex-fuel, also missed expectations,  down by 2.0% monthly basis, and up by just 4.9% when compared to a year before, against market's forecast of 7.2%, but the pair recovered on broad dollar's weakness. Next Tuesday, the  Supreme Court ruling on Parliament's participation in the Brexit decision. May's conciliatory speech said that the government is willing to put the final deal to vote in both Houses, but she insisted that they will trigger art. 50 by the end of March. Pound's recovery was enough to erase the two previous weeks' losses, but not confirm further gains ahead, given that technical indicators lack directional strength within neutral territory, although the pair has held above a horizontal 20 DMA ever since breaking above it, now at 1.2250. In the 4 hours chart, the price is above its 20 SMA, whilst technical indicators hold directionless within positive territory. Above 1.2415, the weekly high, the pair can extend its gains towards the 1.2500 where strong selling interest will likely reject the advance.  

Support levels:  1.2260 1.2225 1.2190 

Resistance levels: 1.2330 1.2375 1.2415

AUD/USD

The AUD/USD pair closed a third consecutive week with solid gains, having reached 0.7588, its highest since early November last Friday. Backing the Aussie were Chinese growth figures, as the annualized fourth quarter GDP resulted at 6.8%, slightly above consensus estimates.  The figure has a downside as it confirmed that during 2016, Chinese economy recorded its lowest pace of growth in 26 years. Nevertheless, bouncing commodities at the end of the week, on hopes China's slowdown is beginning to reverse, underpinned the Aussie. During the upcoming days, Australian Q4 inflation next Wednesday will take center stage. Daily basis, technical indicators are giving some modest signs of upward exhaustion, retreating from extreme overbought territory, although the price is far above a bullish 20 SMA and near the multi-month high, maintaining the risk towards the upside. Shorter term, the 4 hours chart technical indicators diverge lower, sliding as the price reaches fresh highs, but are currently flat around their mid-lines, lacking directional strength, whilst the price is a few pips above a horizontal 20 SMA. The pair needs now to surpass the 0.7600 level to be able to extend its gains towards the 0.7700 region, where the bullish trend will likely decelerate. Near this last, the risk of a steeper downward corrective will increase exponentially. 

Support levels: 0.7525 0.7490 0.7450 

Resistance levels: 0.7600 0.7640 0.7690

Dow Jones

US indexes closed higher on Friday, with the Dow Jon Industrial Average up by 94 points to 19,827.25, the Nasdaq Composite adding 0.28% to 5,555.33 and the S&P advancing 7 points to close at 2,271.31. The Dow reversed part of its latest losses, having closed in the red for five consecutive days, aided by positive earnings reports coming from Procter & Gamble and International Business Machines. General Electric shares, however, dropped as revenues fell short of market's estimates. The Dow eased from a daily high of 19,845 following Trump's inaugural speech, which failed to motivate buyers. From a technical point of view, the daily chart shows that the index remains below its 20 DMA, whilst technical indicators remain within neutral territory, indicating the absence of clear directional strength. Shorter term, and according to the 4 hours chart, the technical stance is also neutral, with indicators hovering around their mid-lines, and the index struggling with the 200 SMA, and below the 100 SMA, this last at 19,862. 

Support levels: 19,769 19,704 19,676    

Resistance levels: 19,862 19,918 20,000

FTSE 100

The FTSE 100 remained under pressure on Friday, shedding 10 points to close the day at 7,198.44, ending the week in the red, down by 1.9%, for the first time in two months. Undermining the benchmark were poor UK retail sales figures last Friday, alongside with continued Pound's strength. Within the Footsie, the banking sector remained strong, with Lloyds Banking group up by 0.51& and Royal Bank of Scotland adding 0.36%, while mining-related equities closed mixed, AstraZeneca was the worst performer, down 3.36%. Daily basis the risk is towards the downside, as technical indicators keep heading lower from overbought territory, still within positive territory, whilst the benchmark is currently pressuring a still bullish 20 DMA. The daily low last Friday was set at 7,176, the level to break to confirm additional declines. Shorter term, and according to the 4 hours chart, further slides are yet to be confirmed, as technical indicators are bouncing from oversold territory, although the index is currently below a bearish 20 SMA, this last providing a strong dynamic resistance at 7,241. It would take a recovery above this last to deny a bearish extension and see the index recovering further towards its record highs. 

Support levels: 7,176 7,140 7,085 

Resistance levels: 7,241 7,288 7,354 

DAX

Stocks in Europe closed marginally higher last Friday, with the German DAX up 33 points or 0.29%, closing the week at 11,630.13, unchanged weekly basis. Uncertainty ruled within European equities ahead of Trump's inaugural speech, alongside with self political woes. The banking sector maintained  its  positive tone, despite Trump failed to clarify regulatory laws, with Commerzbank advancing 2.82% and Deutsche bank up by 1.50%. The index is still within a consolidative phase, as the daily chart shows that it held above a horizontal 20 DMA, while the Momentum indicator remains within neutral territory. The downward potential however, seems limited as the RSI indicator turned modestly higher, now around 63. In the 4 hours chart, the DAX maintains the neutral stance seen on previous updates, with the benchmark anyway above its moving averages, but technical indicators lacking directional strength, right above their mid-lines.  

Support levels: 11,554 11,490 11,440 

Resistance levels: 11,629 11,694 11,740

Nikkei

The Nikkei 225 closed higher on Friday, adding 65 points to settle at 19,137.91, having trimmed most of its weekly losses, although down for a second consecutive week. The index had little life of its own, mostly following yen's behavior, recovering from a multi-month low of 18,650 after Yellen's hawkish comments sent the JPY sharply lower mid week. On Friday, trading was thin as investors waited for Trump's inaugural speech, although export-oriented equities edged higher, with Sumco up 5.29% leading advances, followed by Fuji Electric which added 4.44%. Holding near the mentioned close ahead of the weekly opening, the daily chart shows that the index met selling interest around a moderately bearish 20 DMA, whilst the Momentum indicator maintains a bearish slope within negative territory, indicating a limited upward potential. Short term, the 4 hours chart, shows that the benchmark is now below its 100 and 20 SMAs, but holding above a bullish 20 SMA, now at 18,990, whist technical indicators posted marginal bounces from near their mid-lines. 

Support levels: 19,077 18,990 18,932 

Resistance levels: 19,210 19,280 19,362

Gold

Spot gold closed the week at $1,207.44, up for a fourth consecutive week although the upward momentum moderated as the commodity reached the 1,200 threshold. Gold traded as high as 1,218.77 at the beginning of the week, but retreated on the back Yellen's hawkish comments over upcoming rate hikes. Nevertheless, it quickly recovered on a brief decline the mentioned figure, suggesting that the negative sentiment towards the greenback prevails. Technically, the daily chart shows that the price remains below a bearish 100 DMA at 1,219.63, but also well above a bullish 20 SMA, whilst the RSI indicator in the mentioned chart resumed its advance within bullish territory, after a limited downward correction from overbought readings, all of which supports some additional gains, particularly on a break above the mentioned 100 DMA. Shorter term, however, the risk is towards the downside, given that in the 4 hours chart, technical indicators failed to overcome their mid-lines and turned lower, whilst the price is struggling around a horizontal 20 SMA. 

Support levels: 1,204.70 1,195.80 1,182.90    

Resistance levels: 1,219.65 1,229.90 1,241.35 

WTI Crude Oil

West Texas intermediate crude oil futures closed the week flat at $53.20 a barrel, helped by a weaker greenback and comments from Saudi Arabia's energy minister, who said that 1.5 million bpd had already been taken out of the market, adding to signs that the oil market is rebalancing. Energy ministers from OPEC and non-OPEC countries met in Vienna on Sunday to monitor compliance with the deal to trim output, and comments are quite positive, as Saudi energy minister Khalid al-Falih said that compliance had been "fantastic," anticipating a strong opening for oil. Still, gains are expected to remain limited, on speculation countries outside the OPEC will increase pumping in the months to come. The US Baker Hughes report late Friday showed that the number of active oil rigs in the county, rose sharply, increasing by 29 to 522 for the week ending January 20, the largest weekly jump since the week of April 12, 2013. Technically, the daily chart shows that the price remains far above its 100 and 200 DMAs, but struggling around a horizontal 20 DMA, whilst technical indicators hold within neutral territory, with no clear directional strength. In the 4 hours chart, WTI presents a modest positive tone, with the price above all of its moving averages that anyway remain flat within a tight range, whilst technical indicators aim modestly higher within positive territory. 

Support levels: 52.80 52.10 51.50    

Resistance levels: 53.65 54.30 55.00

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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.