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The EUR/USD pair broke its recent range towards the downside

27th January 2017

EUR/USD

The EUR/USD pair broke its recent range towards the downside, closing the day around 1.0680, after repeatedly failing to surpass the key 1.0770 level, where the 100 DMA capped the upside for most of this week. Demand for the USD, on hopes that the new administration will work on boosting growth and inflation, resumed this  Thursday, after President Trump announced this week some large  infrastructure investment that triggered a sharp rally in local stocks.  Data coming from Germany was again encouraging, as the  German GFK Consumer Confidence Survey index rose more-than-expected to 10.2 in February from 9.9 in January, indicating that consumers believe local growth will continue next month. 

In the US data came mixed, as weekly unemployment claims rose to 259K in the week ending January 21, above the upwardly revised figure of the previous week of 237K, still at multi-decade lows. Also, New Home sales fell to a 10-month low in  December, reaching a seasonally-adjusted annual rate of 536,000, below the 588K expected. The positive note came from the preliminary Markit Services PMI for January, up to 55.1 from 53.9 in December, the fastest expansion rate since November 2015.

As for the EUR/USD technical picture, the pair settled around 1.0680 after briefly falling below a daily ascendant trend line coming from the multi-year low posted early January at 1.0340, and trades a few pips above it, maintaining the negative tone in its 4 hours chart, as the price is well below a now modestly bearish 20 SMA, whilst technical indicators entered bearish territory, now losing bearish strength. Supporting some further declines is the fact that the pair failed to surpass the 1.0770 region, where the pair has its 100 DMA, although a break below 1.0657, the daily low, is required to confirm such move for this Friday. 

Support levels: 1.0655 1.0610 1.0565

Resistance levels: 1.0710 1.0740 1.0770

USD/JPY

The USD/JPY pair closed the day at 113.34 after trading as high as 114.85 this Thursday, a fresh weekly high, trading positively for the first time this week. The Japanese yen fell on continued demand for high-yielding assets, with US stocks extending their record gains and US yields advancing earlier on the day. The yield on benchmark 10-year Treasury note surged up to  2.55%, but eased in the American afternoon, now down to 2.51%, helping the JPY to recover some ground. Japan will release its Tokyo and National CPI figures during the upcoming Asian session, with the YoY readings expected to remain within deflationary territory below 0.0%. BOJ's efforts to end decades of deflation have so far been vain, and the new monetary policy, focused on keeping rates differentials near zero, has did as little as money printing. Inflation may raise for the wrong reasons, named higher energy prices rather than more consumption, which at the end, will force the BOJ to cut rate further into negative territory. At this point, the risk of another run towards 110.00 is still high, as the pair remains below some strong resistances, the 23.6% retracement of the latest daily advance at 114.50, and a bearish 100 SMA in the 4 hours chart, a few pips above it. In the same chart, technical indicators have turned lower, but hold well above their mid-lines, indicating that some further slides are required to confirm a steeper decline. 

Support levels: 114.00 113.60 113.20 

Resistance levels: 114.50 114.90 115.35

GBP/USD

The GBP/USD pair settled around 1.2590, pulling back from a fresh monthly high of 1.2673 and despite encouraging UK data. According to the official release, the first estimate of the UK's Q4 GDP came in better-than-expected, as the economy is estimated to have grown by 0.6% in the three months to December,  above the 0.5% expected whilst the year-on-year figure came in at 2.2% against an expected 2.1%. Mortgage approvals rose beyond expected in December, up to 43.228K against a previously revised 41.003K, whilst borrowing rose in December 2016, but there are signs that demand may soften in 2017 as consumers and businesses anticipate higher interest rates, according to the official release. Also, Theresa May published the Brexit bill, in preparation for MPs' vote, which generate anger among policy makers, as the bill is just eight line long, designed to prevent any Parliamentary attempt to amend it, and gives the Houses just five days to debate it. The intraday decline looks just corrective as in the 4 hours chart, the decline stalled around a sharply bullish 20 SMA, whilst technical indicators have resumed their advances within positive territory, although stand now below previous daily highs. The mentioned 20 SMA stands at 1.2550, the level to break to see the pair falling further this Friday. 

Support levels:  1.2550 1.2510 1.2470 

Resistance levels: 1.2595 1.2635 1.2680 

AUD/USD

The AUD/USD pair edged lower for a second consecutive day, and despite it remained within Wednesday's range, there are increasing signs of fading momentum, triggered by disappointing inflation figures  earlier this week and a slump in gold prices. During the upcoming Asian session, Australia will release its Q4 PPI figures, alongside with export and import  price indexes for the same period. If data result disappointing again, the decline will likely extend, aiming to test the 0.7450 mark, a critical long term static support. In the 4 hours chart, the pair seems to be drawing a rounded top, still to confirm, but the price is also developing below its 20 SMA that slowly gains bearish strength, whilst technical indicators hold within bearish territory, albeit lacking directional strength. The mentioned 0.7450 level stands as the neckline for the mentioned figure, which means that a break below could see the pair extending its decline by around 150 pips. 

Support levels: 0.7530 0.7490 0.7450 

Resistance levels: 0.7610 0.7645 0.7690

Dow Jones

Following a positive start, US stocks closed mixed, with the DJIA settling at fresh record highs of 20,100.91, up by 32 points or 0.16%, while the Nasdaq Composite and the S&P closed 1 point lower each, at 5,655.18 and 2,296.68 respectively. Du Pont was the best performer within the DAX, up by 1.72% followed by Boeing that added 1.95% and Goldman Sachs, up by 0.98%. Verizon topped losers' list, down by 1.31%. The DJIA retains the positive momentum seen on previous updates, advancing further beyond its 20 DMA, whilst technical indicators have extended their advances within positive territory. In the shorter term,  the index is also biased higher, as the 20 SMA crossed well above the 100 and 200 SMAs, whilst technical indicators hold within overbought territory, with the RSI indicator resuming its advance around 76, as the index holds around its intraday high of 20,123 after the close. 

Support levels: 20,037 19,949 19,878    

Resistance levels: 20,090 20,150 20,200

FTSE 100

London equities closed lower, with the Footsie down by 3 points, to 7,161.49. Despite the great performance of banks, the index was weighed by mining-related equities, pressured by a sharp retracement in gold prices. Royal Bank of Scotland was the best performer, adding 5.86%, while leading losers' list was Fresnillo, down by 7.42%, followed by Randgold Resources that shed 6,35%. Earnings reports were mixed, with Unilever reporting that difficult market conditions are likely to persist during the first half of 2017, although its pre-tax profit rose 4.2% in 2016. The index has been confined to a tight range ever since the week started, but presents a negative tone daily basis, contained by selling interest around the 20 DMA and with technical indicators slowly heading lower within negative territory. In the 4 hours chart, technical indicators have turned modestly higher, with the RSI still below its mid-line and the Momentum within neutral territory, but with the index below a bearish 20 SMA, limiting chances of a recovery for this last day of the week.

Support levels: 7,130 7,085 7,025 

Resistance levels: 7,180 7,241 7,288 

DAX

European indexes closed mixed, with the German DAX managing to add 42 points to 11,848.63, underpinned by a recovery in pharmaceuticals and health care companies. Also, a continued advance in banking-related stocks across the region fueled the advance. Bayer was the best performer, ending the day up by 1.85%, whilst Fresenius Medical Care added 1.57%. Despite an early rally, Commerzbank closed the day pretty much flat, down 0.04%, while Volkswagen was the worst performer, shedding 1.70%.  Technically, the daily chart shows that the index holds well above bullish moving averages, with the shortest being the 20 DMA at 11,605, but also that technical indicators have lost their upward strength, holding anyway within positive territory. In the 4 hours chart, the technical picture is quite alike, with the RSI indicator flat around 70 and the Momentum consolidating at weekly highs, not enough to support a downward move. The index has traded as high as 11,891, but faces a strong resistance at  11,920, May 2015 high, with gains beyond this last probably fueling the advance. 

Support levels: 11,796 11,757 11,694 

Resistance levels: 11,865 11,920 11,975

Nikkei

Japanese shares kept rallying this Thursday, with the Nikkei adding 351 points or 1.81% closing the day at 19,402.39, underpinned by Wall Street's record closes last Wednesday. The benchmark advanced further in futures trading, now poised to open the day at 19,500, as the yen weakened during the past two sessions. Financial-related equities led the advance, with Shinsei Bank up 5.21% Chiba Bank adding 5.19% and T&D holdings closing 5.12% higher. The index maintains a positive tone daily basis, as it extended its advance beyond its 20 DMA whilst technical indicators entered positive territory, maintaining their bullish slopes. In the 4 hours chart, the 20 SMA turned sharply higher, but is still below the 100 and 200 SMAs, all of them far below the current level, reflecting the strong ongoing momentum. In this last chart, technical indicators have stabilized within overbought territory, not enough to support an upcoming downward move.  

Support levels: 19,430 19,365 19,289 

Resistance levels: 19,560 19,632 19,700    

Gold

Gold slide extended to fresh 2-week lows, with spot settling at $1,188.80 a troy ounce. The bright metal attempted to recover some ground early Asia, but turned south on dollar's broad recovery mid London session, falling as low as 1,184.38 before being able to bounce some. Nevertheless, the commodity seems to have found and interim top, and technical readings in the daily chart favor some further declines for this Friday, as not only the price was rejected by a bearish 100 DMA, but also broke below the 20 SMA for the first time since mid December. In the same chart, technical indicators present sharp bearish slopes and are currently crossing their mid-lines into negative territory, supporting a downward extension. In the shorter term, and according to the 4 hours chart, the risk is also towards the downside, as technical indicators are currently consolidating near oversold readings, whilst the 20 SMA has turned sharply lower, now converging with a Fibonacci resistance at 1,204.50.  

Support levels: 1,184.40 1,173.15 1,162.10    

Resistance levels: 1,196.00 1,204.50 1,214.60 

WTI Crude Oil

Crude oil prices advanced this Thursday, with West Texas Intermediate crude futures settling at $53.80 a barrel, holding however, within familiar ranges. Oilfield services company Baker Hughes published its quarterly earnings which showed its losses continued, despite an uptick in exploration and production activity, blaming it on the 32% decline in the average rig count through 2016. The news contained the advance, triggered by the sharp rally in US stocks and general market's optimism. Trading at fresh weekly highs, the daily chart favors additional advances, as the price recovered from a horizontal 20 DMA, whilst technical indicators head north within positive territory after spending most of the last two weeks in neutral territory. Shorter term, however, the commodity maintains its neutral stance, given that in the 4 hours chart, the moving averages remain all together and directionless in a tight range, in the 53.00 region, whilst technical indicators have turned lower within positive territory.  

Support levels: 53.60 53.00 52.55    

Resistance levels: 54.30 55.00 55.60

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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.