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The EUR/USD pair fell to its lowest since last Thursday

3rd January 2017

EUR/USD

The EUR/USD pair fell to its lowest since last Thursday, ending the day around 1.0460 as dollar's buying resumed in another day of thin holidays' trading.  It was quiet day today in terms of major economic data releases, with only the final December Markit Manufacturing PMIs in the EU out, showing that growth in the region ended the last quarter of the year on a high note. According to the final Markit manufacturing PMIs, , the German factory sector grew by more than initially estimated,  with the index revised up to 55.6 from previous 55.5, its highest in 35 months, whilst the EU final figure matched the initial estimate of 54.9, its highest since April 2011. Japan and New Zealand will extend their holidays into Tuesday, which means full market activity won't resume until the next European opening.  

As for the technical picture of the pair, this Monday's decline reversed all of Friday's gains, leaving it vulnerable to further slides. The 4 hours chart shows that, after failing to sustain gains beyond a bearish 200 SMA, the pair is trading back below all of its moving averages, whilst technical indicators have continued retreating from overbought readings, decelerating their slides around their mid-lines, maintaining the risk towards the downside, although a downward acceleration through the mentioned daily low is required to confirm an extension towards 1.0420 first, en route to the 1.0350/70 region. 

Support levels: 1.0460 1.0420 1.0375 

Resistance levels: 1.0500 1.0530 1.0575 

USD/JPY

The USD/JPY pair advanced in thin Asian trading, reaching a daily high of 117.49 and settling a few pips below it, helped by the advance in European equities that weighed on the safe-haven currency. Japan is on a long 4-day holiday, with activity resuming early Wednesday. Until then, there are no macroeconomic releases scheduled. From a technical point of view, the daily advance was contained by a descendant trend line coming from December's high of 118.66, although the pair retains a bullish bias, given that in the 4 hours chart, the price has bounced from a bullish 100 SMA. Additionally and in the same chart, the Momentum indicator heads north well above its 100 level, whilst the RSI indicator consolidates around 56, this last, rather reflecting the absence of volume than lack of buying interest. The recovery needs to extend beyond 117.90 for the pair to retest the mentioned multi-month high, and advance even further towards the 120.00 region. A slide towards 116.00/20 on the other hand, will likely attract buying interest. 

Support levels: 117.00 116.60 116.20 

Resistance levels: 117.55 117.90 118.30

GBP/USD

After failing to extend its rally beyond the 1.2330 region, the Pound fell against its American rival, with the GBP/USD pair extending its decline below 1.2280 in thin holiday trading. There was a spike of activity during the European morning, with speculative interest adding to dollar's longs, with volumes shrinking quickly afterwards, but the pair remaining under pressure anyway. News coming from the UK were once again related to Brexit, as there were some reports indicating that  UK's PM, Theresa May, plans to stop EU migrants from claiming benefits as part of Brexit negotiations. The plan would affect over 300,000 EU migrants living in the UK who receive in-work benefits. This Tuesday, both economies will release their final December manufacturing PMIs, with US ones expected to receive upward revisions. Technically, and with the price back below the 1.2300 level, the risk has turned towards the downside for the GBP/USD pair, although it would need to break below 1.2260, the immediate support, to confirm a new leg lower, as in the 4 hours chart, the price is holding a few pips above a now horizontal 20 SMA, the Momentum indicator heads lower, still above its 100 level, while the RSI indicator entered negative territory, currently around 47.  

Support levels: 1.2260 1.2220 1.2170

Resistance levels: 1.2330 1.2385 1.2435 

AUD/USD

The AUD/USD pair opened modesty higher, but quickly turned south, weighed by worse-than-expected Chinese data released over the weekend. According to official data, the Non-Manufacturing December PMI came in at 54.5, below previous 54.7, while manufacturing activity slowed in the same month, as the NBS Manufacturing PMI came in at 51.4, against previous 51.7 and the expected 51.5. Australia will release its AIG Performance of Manufacturing index during the upcoming Asian session, while in China, attention will center in the Caixin Manufacturing PMI. Currently trading around 0.7180 after trading as low as 0.7164, the pair is poised to extend its decline during the upcoming Asian session, although a surge in Asian share markets will limit technical chances. In the  hours chart, the price is a handful of pips below its 20 SMA, but more relevant, below the 61.8% retracement of the early 2016 rally at 0.7210, while technical indicators head modestly lower within negative territory, supporting the case for a downward move, particularly on a break below 0.7145, May 2016 monthly low. 

Support: levels: 0.7145 0.7100 0.7060

Resistance levels: 0.7210 0.7250 0.7290 

Dow Jones

There was no activity in Wall Street this Monday, with most major markets closed around the world. The Dow Jones Industrial Average settled last Friday at 19,762.60, falling for a third consecutive day after trading just 24 points shy of the 20,000 threshold in the last week of December. Dollar's gains at the beginning of the week suggest that confidence in the US remains strong, and therefore, the benchmark may resume its advance this Tuesday, particularly if its overseas partners raise during the upcoming sessions.  Technically, the daily chart for the DJIA shows that the benchmark closed last Friday below a bullish 20 DMA, that the Momentum indicator heads sharply lower below the 100 level, while the RSI indicator heads north around 58, supporting further slides on a break below 19,715, Friday's low and the immediate support. In the 4 hours chart, the index has broken below the 20 and 100 SMAs both converging in the 19,840 region, offering a strong intraday resistance, whilst technical indicators have bounced modestly from oversold readings, but remains below previous daily highs, indicating limited buying interest ahead. 

Support levels: 19,715 19,688 19,627    

Resistance levels: 19,782 19,845 19,890

FTSE 100

The FTSE 100 may open higher this Tuesday, and extend its rally to fresh all-time highs, as the Pound weakened this Monday whilst local banks remained closed. The benchmark ended at 7,142.83 on Friday, pulling modestly lower in electronic trading. The Footsie has rallied over 14% during 2016, and the bullish potential remains strong, as the depreciation of the local currency benefited most of the FTSE 100 companies that made profits offshore.  Technically, the daily chart presents a bullish stance, with the benchmark advancing further above its moving averages, and technical indicators heading north within positive territory. In the same chart, the upward momentum is limited, but mode due to thin volume than the absence of demand. Shorter term, and according to the 4 hours chart, the index continues to find support on pullbacks towards a bullish 20 SMA, the Momentum indicator holds flat around its 100 level, while the RSI indicator heads north around 69, favoring a bullish extension once the market returns in full mode next Tuesday. 

Support levels: 7,089 7,054 7,010 

Resistance levels: 7,134 7,175 7,210

DAX

European markets closed with gains in this first of the year, with the German DAX up 117 points or 1.02%, to end at 11,598.33, its highest since August 2015. Strong EU economic data drove shares higher, also helped by news coming from Italy, as  local newspapers announced that the troubled Banca Monte dei Paschi di Siena will issue €15 billion of debt this year to help boost confidence and liquidity. Banks were the best performers, and within the DAX Commerzbank led gainers list, adding 2.64%, followed by Volkswagen that rose 3.30%. The index presents a strong upward potential in its daily chart, accelerating further above a sharply bullish 20 SMA, this last around 11,300, while technical indicators resumed their advances. The RSI heads higher around 76, with no signs of changing bias, despite being in extreme overbought territory. In the 4 hours chart, the index advanced beyond a still directionless 20 SMA, whilst technical indicators advanced within positive territory before turning flat on low volume, rather than suggesting upward exhaustion. The index has traded as high as 11,623 the immediate resistance and the level to surpass to confirm further gains for this Tuesday. 

Support levels: 11,569 11,512 11,458

Resistance levels: 11,623 11,689 11,743

Nikkei

Japanese banks will remain closed also this Tuesday amid a local holiday, with the Nikkei's latest close at 19,114.37. The index may gap higher once it resumes trading, supported by a weaker yen, as the USD/JPY pair regained the ¥117.00 level after Friday's decline, although it's still to be seen the full market reaction after year-end holidays are finally over. Despite the benchmark retreated around 600 points from its December high, it still managed to close the year in the green, with the latest decline attributed to profit taking.  Technically, however, the index is poised to fall further as it closed below its 20 DMA for the first time since early November, whist the Momentum indicator crossed below its 100 level, and the RSI pulled back from overbought territory to settle within neutral territory. In the 4 hours chart, the 20 SMA crossed below the 100 SMA, both well above the current level, while technical indicators have barely bounced from oversold territory, lacking upward momentum at the time being. 

Support levels: 18,980 18,932 18,867 

Resistance levels: 19,075 19,167 19,224

Gold

The ongoing holiday kept the COMEX division of the New York Mercantile Exchange closed this Monday, the primary market for trading metals such as gold, silver, copper and aluminum, with spot gold latest close registered last Friday at  $1,150.25 a troy ounce, its highest in two weeks. Activity will resume partially in Asia, as Japan and New Zealand will extend their holidays for one more day, but if the rest of the local share markets advance, gold will likely be in trouble, particularly considering latest dollar's strength. From a technical point of view, the latest recovery stalled short of the 23.6% retracement of the November/December slide at 1,173.10, the level to surpass to deny lower lows beyond December's one of 1,122.62. In the daily chart, indicators have turned back south after failing to overcome their mid-lines, whilst the price stands above a strongly bearish 20 SMA, currently at 1,145.60, the immediate support. In the 4 hours chart, the 20 SMA has advanced above the 100 SMA, both below the current level, while technical indicators have retreated from overbought readings, and head  towards their mid-lines within positive territory. A break below the mentioned support should put the metal back in the bearish track, towards 1,122.62, December monthly low. 

Support levels: 1,145.60 1,136.45 1,122.60    

Resistance levels: 1,159.50 1,173.10 1,182.90

WTI Crude Oil

There was no oil trading around oil this Monday with most major markets closed, and WTI latest close registered on Friday at $53.88 a barrel. The commodity was buoyant ever since the OPEC announced an agreement, which included some non-OPEC oil producers country, to trim output by around 1.8 million barrels per day starting this January. WTI rallied up to $55.42  after the official announcement early December, entering afterwards a consolidative stage with buyers aligned around 52.00. Investors are reluctant to push the price higher as the OPEC has a long record of not fulfilling its promises, but seems confidence among investors remains high anyway. Technically, the daily chat shows that the price holds above a bullish 20 SMA, although technical indicators lack directional strength, with the Momentum flat around 100 and the RSI consolidating around 61. In the 4 hours chart, the technical stance is neutral, given that the price has spent the last two days consolidating around a modestly bullish 20 SMA, while technical indicators hovered around their mid-lines. 

Support levels: 53.30 52.70 52.10    

Resistance levels: 54.40 54.90 55.45

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