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The EUR/USD pair fell this Monday, undermined by European political woes

7th February 2017

EUR/USD

The EUR/USD pair fell this Monday, undermined by European political woes and in spite of another round of encouraging data in the country. Data coming from Europe at the beginning of the day showed  that the economic recovery in the region is accelerating its pace, after EU Sentix Investor Confidence Index for February, came in at 17.4, matching market's expectations, but below previous 18.2. In Germany, Factory Orders rose by 5.2% in December, from a previously revised -3.6%, while the year-on-year reading resulted at 8.1% from previous 2.0%.

The pair however, fell to a daily low of 1.0710 early US session weighed by news that Merkel’s Christian democrats have fallen into second place behind Germany’s centre-left opposition for the first time in a decade, according to a poll carried by INSA for Germany’s Bild newspaper. Also, ECB's President, Mario Draghi, said before the Committee on Economic and Monetary Affairs of the European Parliament that the Bank is prepared to increase both the size and duration of its bond-buying program  if the inflation outlook remains low.

The EUR/USD pair bounced from the mentioned low was purely technical, given that the pair has the 38.2% retracement of the November/January slide around it, while in the daily chart a bullish 20 DMA converges with a bearish 100 DMA also around the level. The tepid posterior recovery, however, maintains the risk towards the downside for the upcoming sessions. In the 4 hours chart, the 100 SMA stands a few pips above the mentioned critical support, whilst the 20 SMA has turned flat around 1.0770. Indicators in this last time frame have lost their bearish strength, but remain within negative territory, supporting a downward extension on a breakout of the 1.0700/10 support area. A recovery beyond 1.0770 on the other hand, will favor another attempt of breaking beyond the 1.0800/40 price zone. 

Support levels: 1.0710 1.0660 1.0620

Resistance levels: 1.0770 1.0800 1.0840

USD/JPY

The USD/JPY pair broke below the 112.00 level late in the US session, with the Japanese currency benefiting from market's turmoil.  Uncertainty surrounding the US future, alongside with increasing political woes across Europe, has sent investors into safe haven assets, with the JPY and gold benefiting by the most daily basis. Adding to the bearish case of the pair were US Treasury yields that edged sharply lower at the beginning of the week, with the 10-year benchmark down to 2.42% from 2.49% last Friday, and  the 30-year yield falling from 3.11% to 3.06%. Japan will release December preliminary coincident and economic indexes during the upcoming Asian session, expected to have improved from November's readings. Trading below the key 112.00 level, the 38.2% retracement of the latest bullish run, the 4 hours chart shows that the 100 SMA has accelerated its slide above the current level, whilst the Momentum indicator has been rejected from its mid-line on multiple attempts to  regain the level, as the RSI extends its slide around 36, supporting further slides ahead, moreover on a break below 111.60, the 100 DMA. 

Support levels: 111.60 111.25 110.80

Resistance levels: 112.00 112.45 112.80 

GBP/USD

The Pound remains subdued, weighed by Brexit woes, having fell down to 1.2427 against the greenback this Monday before settling at 1.2465. The absence of macroeconomic clues also kept the Sterling pressured, as attention centered around the ongoing Parliament´s discussion over the Brexit bill. Policymakers are willing to make amendments to May's proposal, but the government said that they won't allow any Brexit legislation that attempts to keep Britain inside the EU. The House will vote next Wednesday, and in the meantime, tensions surrounding the matter will likely keep the Pound subdued. Short term technical readings are biased towards the downside, supporting additional declines ahead, particularly on a break below the mentioned low, as the level stands for the 38.2% retracement of this year's bullish run. In the 4 hours chart, the 20 SMA has turned south above the current level, now converging with the 23.6% retracement of the same rally at 1.2530, while the Momentum indicator has bounced from oversold readings, heading north below its 100 level, and the RSI indicator consolidates around 37. A break below the mentioned Fibonacci support, should lead to a steady decline towards the 1.2330 region a major static support. 

Support levels:  1.2425 1.2390 1.2350

Resistance levels: 1.2495 1.2540 1.2585

AUD/USD

The AUD/USD pair fell down to 0.7629, but trimmed half of its daily losses and settled in the 0.7650 region, not far from the multi-month high posted last week at 0.7695. The Aussie was backed by a rally in base metals, with gold above $1,230 a troy ounce for the first time this year, and local data beating expectations. The Melbourne institute inflation forecast released early Monday reported that the CPI is expected to have risen by 0.6% during January, from December's 0.5%, while year-on-year inflation is seen rising by 2.1% against previous 1.8%. Also, job advertisements jumped 4% in January from a 2.2% decline in December, suggesting a rebound in the labor market. From a technical point of view, the pair is trading around a bullish 20 SMA in the 4 hours chart, whilst the Momentum indicator turned higher, but stands below its 1000 level, but the RSI remains within positive territory, regaining the upside and currently around 55, supporting some additional gains for the upcoming hours. The 0.7700 is the level to watch, as a break above it should see the recovery extending up to 2016 highs in the 0.7830 region. 
 
Support levels: 0.7630 0.7590 0.7550

Resistance levels: 0.7695 0.7735 0.7770

Dow Jones

US indexes closed with modest losses this Monday, with  the Dow Jones Industrial Average down by 19 points or 0.09%, to settle at 20,052.42. The Nasdaq Composite closed the day at 5,663.55, down by 3 points, while the S&P lost 0.21%, to 2,292.56. Energy-related equities dragged Wall Street's lower, although strong earnings reports limited declines. Hasbro Inc. shares rose to their highest on record, after reporting an 11% increase in revenues during the last quarter of 2016. Within the Dow, Boeing was the best performer, up by 1.00%, whist Verizon Communications topped losers' list, down by 1.21%. The daily chart shows that the index remains well above a flat 20 SMA, whilst technical indicators have lost upward momentum and turned modestly lower within positive territory, not enough to confirm further slides. In the 4 hours chart, the index maintains a positive technical stance, given that technical indicators have resumed their advances after a modest downward correction from near overbought readings, whilst it remains well above a bullish 20 SMA. 

Support levels: 20,010 19,945 19,896    

Resistance levels: 20,090 20,141 20,200

FTSE 100

The FTSE 100 closed the day at 7,172.15, down 16 points or 0.22%, weighed by the negative mood among local traders, although a sharp advance in Randgold Resources, after the company reported a 76% advance in its Q4 net profit, kept losses subdued. The company was the best performer, closing the day 4.15% higher, followed by Mediclinic International, up by 1.97%. The worst performer was Tesco, down 2.15%. The daily chart shows that an early advance was contained by the 20 DMA, while technical indicators diverge from each other within neutral territory, lacking clear directional clues. In the 4 hours chart, the index remains between its 20 and 100 SMAs, with the largest acting as immediate resistance at 7,205. In this last time frame, technical indicators have bounced from near their mid-lines and maintain upward slopes, indicating a limited bearish potential in the short term, and favoring a modest recovery, to be confirmed with a break above the mentioned resistance. 

Support levels: 7,163 7,128 7,091 

Resistance levels: 7,205 7,258 7,312

DAX

The German DAX fell to its lowest since mid January, down 1.22% or 139 points to settle at 11,509.84, as the positive sentiment seen during the Asian session reverted, resulting in a strong slide in banking-related equities. Automakers also fell sharply, amid a decline in oil prices. Within the DAX, all components closed in the red, with Commerzbank being the worst performer, down 2.61%, followed by Adidas that closed 2.39% lower and Volkswagen that shed 2.38%. Ahead of the Asian opening the index stands around the mentioned close, having finally extended below a horizontal 20 SMA, whilst the Momentum indicator maintains a neutral stance, hovering around the 100 level, and the RSI indicator accelerates its decline, now heading south around 45, this last favoring a steeper decline, particularly on a break below 11,425, January 17th low. In the 4 hours chart, the upside was contained by a bearish 20 SMA that now converges with the 100 SMA at 11,628, whilst technical indicators maintain strong bearish slopes within negative territory, also indicating further slides ahead. 

Support levels: 11,479 11,425 11,366 

Resistance levels: 11,570 11,628 11,680

Nikkei

Japanese stocks managed to advance at the beginning of the day, with the Nikkei settling at 18,976.71, up 58 points, underpinned by a rally in banking-related equities, boosted by hopes that President Trump will reverse some regulations for the sector. Yahoo Japan was the best performer, up 14.75%, despite a drop in its operating profits, as investors focused in e-commerce results, as profit  from online advertising expanded 12%, while profit from e-commerce effectively grew about 30%. A strong JPY, however, kept the rally contained whilst the benchmark plunged in after-hours trading, as the USD/JPY pair fell below the ¥112.00 threshold. The daily chart shows that the benchmark stands at the lower end of its latest range, having been rejected from a bearish 20 DMA and with technical indicators gaining bearish momentum within negative territory, favoring additional declines. In the 4 hours chart, the index is currently developing below all of its moving averages, whilst technical indicators remain within  negative territory, but with limited directional strength, in line with the longer term outlook. 

Support levels: 18,793 18,723 18,650

Resistance levels: 18,920 18,984 19,025    

Gold

Spot gold rose to its highest since mid November, ending the day a few cents below a daily high of $,1232.95 a troy ounce. The commodity has benefited from an easing dollar ever since the year started, now accelerating its advance after the latest FOMC meeting's minutes suggest that a rate hike in the US won't come anytime soon. Weaker-than-expected wage growth in the US according to the NFP report released on Friday, support the safe-haven metal, further underpinned by increasing risk aversion. The metal has now trimmed half of its post-US elections losses, as the price stands around the 50% retracement of the November/December decline. In the daily chart, the 20 DMA accelerated higher and is currently aiming to cross above the 100 DMA, whilst technical indicators head north within positive territory, supporting some further gains for this Tuesday. In the 4 hours chart, technical indicators also present a strong upward momentum, with the RSI entering overbought territory, and the price well above bullish moving averages, in line with the longer term view. 

Support levels: 1,230.00 1,221.65 1,215.00    

Resistance levels: 1,237.30 1,245.20 1,255.05

WTI Crude Oil

West Texas Intermediate crude oil futures fell sharply this Monday, down to 52.90 to settle at $53.06 a barrel by the end of the US session. Speculation about an increase in US oil output continues to curb optimism over OPEC output cut, after last week´s  Baker Hughes and EIA reports, showing a large increase in stockpiles and in the number of oil drilling rigs. Technically, WTI remains in a consolidative phase, having retreated from the upper end of its range tested late last week. In the daily chart, technical readings maintain a neutral stance, as the price is currently struggling with a horizontal 20 SMA, whist technical indicators have turned lower around their mid-lines, with limited bearish strength. In the shorter term, and according to the 4 hours chart, the price is currently pressuring its 100 and 200 SMAs, both around 53.10, without confirming a break lower, whilst the RSI indicator maintains its bearish slope around 40, supporting additional declines towards the 52.00 region. 

Support levels: 52.65 52.00 51.60

Resistance levels: 53.55 54.30 55.10 

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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.