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The EUR/USD pair held within its latest range, closing the day around the 1.0730 level

26th January 2017

EUR/USD

The EUR/USD pair held within its latest range, closing the day around the 1.0730 level, unable to define a new trend after its latest advance towards 1.0770. Markets were dominated by risk appetite, with high-yielding stocks rallying to record highs and safe-haven gold plummeting below the 1,200 threshold, although little action within the FX board.

Data coming from Germany showed the first signs of concerns among local business, as the IFO Survey index, the most relevant leading indicator for the economy, fell  to 109.8 in January, from 111.0 in December, with a notable decline in the expectations component to 103.2, from 105.6. In the US, house prices rose in November, up 0.5% on a seasonally adjusted basis from the previous month´s 0.3%, whilst mortgage approvals rose last week to their highest since last June, up by 4% from a week earlier.

The EUR/USD pair is technically neutral according to the 4 hours chart, with the 20 and 100 SMAs maintain their bullish slopes below the current  level, and technical indicators remain flat around their mid-lines. The absence of follow-through are somehow discouraging for bulls, moreover after the pair was rejected from a strongly bearish 100 DMA around the mentioned 1.0770 region, but given that speculative interest is not ready to buy the greenback, which means that the pair will likely remain range bound until the appearance of the next macroeconomic catalyst. A downward acceleration below 1.0710, will increase the risk of a bearish extension towards the 1.0600/20 region, but it will take a break below 1.0565, quite unlikely at this point,  to see the dollar turning actually bullish.

Support levels: 1.0710 1.0660 1.0610

Resistance levels: 1.0770 1.0800 1.0840

USD/JPY

The USD/JPY pair closed the day pretty much flat around 113.80, after trading as low as 113.03 during the previous Asian session. The Japanese yen weakened against most of its major rivals, weighed by a sudden recovery in risk sentiment, which sent US equities to record all-time highs. US Treasury yields extended their recoveries, with the 10-year benchmark back to 2.52% from yesterday's 2.47%, its highest for this 2017, further affecting the yen. The fact that the USD/JPY pair refused to recover further, indicates how weak is the greenback these days. From a technical point of view, the risk remains towards the downside, as in the 4 hours chart, the 100 SMA extended its decline far above the current level, whilst technical indicators have lost upward strength within neutral territory at the beginning of the day, spending the rest of it consolidating around it. The pair has met short term selling interest on approaches to the 114.00 level, but it will take a break above 114.50, a Fibonacci resistance, for the pair to shrug off the negative stance.

Support levels: 113.20 112.80 112.45

Resistance levels: 114.00 114.50 114.90

GBP/USD

The GBP/USD pair rallied to its highest since mid-December, printing 1.2627 intraday before settling around 1.2605 by the end of the American session. The Pound extended its Brexit's news-triggered rally, as following a conciliatory speech from PM May, the Supreme Court's verdict from this Tuesday indicating the need of parliamentary involvement, point for a softer Brexit to come. The UK released a minor figure this Thursday, the quarterly CBI Industrial Trends Survey which showed that local manufacturers are more optimistic at the beginning of the year, up to 5  in January from previous 0 and the expected 2.  More relevant, the UK will release its Q4 preliminary GDP figures this Thursday, expected to show that the economy grew by 0.4% in the three months to December, following a 0.6% advance in the third quarter. A reading of 0.2% or lower will probably put the Pound under selling pressure, but there are good chances that buying resumes at better levels. The technical picture for this Thursday is bullish, given that in the 4 hours chart, the price advanced well above a strongly bullish 20 SMA, whilst technical indicators hold near overbought territory, with limited upward strength at this time of the day. Further gains could see the pair extending up to the 1.2770 region, December high.

Support levels:  1.2575 1.2530 1.2490

Resistance levels: 1.2635 1.2680 1.2730

AUD/USD

The AUD/USD pair plummeted to a fresh weekly low of 0.7514 at the beginning of the day, weighed by disappointing inflation, confirmed soft in the last quarter of 2016. According to the official release, inflation grew by 0.5% in the mentioned period, whilst yearly basis price growth was of 1.5%. That figures stand for the lowest annual inflation rate in 19 years. The disappointment was limited as the numbers are in line with the RBA's forecast, not enough to turn on the alarms of an upcoming rate cut. Australian market's will remain closed on a local holiday this Thursday, leaving the macroeconomic calendar empty and the currency vulnerable to the performance of commodities and stocks. There are some technical signs of upward exhaustion, as in the 4 hours chart, the price settled above its 20 SMA for the first time since early January, whilst technical indicators in the mentioned time frame hold flat within negative territory, unable to regain positive ground. Dollar's weakness however, is keeping the downside limited, with a break below 0.7490 now required to confirm another leg lower.

Support levels: 0.7530 0.7490 0.7450

Resistance levels: 0.7610 0.7645 0.7690

Dow Jones

Not only the DJIA reached the 20,000 level for the first time ever in pre-opening trading, but it also rallied up to 20,081 before settling at 20,068.51, up by 155 points. The Nasdaq Composite advanced 55 points and settled at 5,656.34, while the S&P jumped 18 points and ended at 2,298.37, also at record levels. Stocks rallied on the back of strong earnings reports coming from the banking sector, and renewed hopes of large US growth policies, after Trump announced the construction of new pipelines and the wall between the country and Mexico after just three days in the office. Within the Dow, Boeing was the best performer, up by 4.50% after reporting much better-than-expected gains in the last quarter of 2016. The technical picture supports a continued advance in the Dow, given that in the daily chart, technical indicators have turned sharply higher, extending into positive territory, whilst the benchmark finally moved away from its 20 SMA, currently at 19,878. Shorter term, and according to the 4 hours chart, further gains are also likely, as technical indicators keep heading north, despite being in extreme overbought territory, whilst the 20 SMA advanced strongly, and is currently crossing above the 100 and 200 SMAs, these last converging around 19,870,  reflecting the strong upward momentum around the benchmark.

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

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

FTSE 100

The FTSE 100 added just 14 points to close the day at 7,164.43, with gains limited by a stronger Pound and oil prices on the defensive. Banks were among the best performers whilst mining-related equities suffered from a sharp reversal in gold's price. Royal Bank of Scotland surged 5.37%, whilst Standard Chartered gained 5.23%. Antofagasta was an exception, adding 8.61%, after reporting copper production in 2015 was 13% higher than a year earlier, while Randgold Resources shed 2.64%.  From a technical perspective, the risk remains towards the downside, as in the daily chart, technical indicators maintain modest bearish slopes within neutral territory, while an early advance was contained by selling interest around the 20 DMA. In the 4 hours chart, the 20 SMA heads strongly lower above the current level, converging with the 100 SMA in the 7,170/80 region and providing an immediate dynamic resistance, whilst technical indicators lack directional strength, but hold within bearish territory.

Support levels: 7,130 7,085 7,025

Resistance levels: 7,180 7,241 7,288 

DAX

European indexes opened sharply higher and reached fresh multi-month highs, propelled by the banking sector, following news that Banco Santander, a Spanish lender, reported a rise in profit during the fourth quarter, on higher fees and stronger-than-expected lending income. The German DAX closed the day at 11,806.05, up 1.82% or 211 points, its highest close since April 2015. Leading gainers was  Deutsche Bank which added 4.85% and Commerzbank up by 3.09%. The daily chart supports additional gains for this Thursday, as the index rallied well above its 20 SMA whilst technical indicators turned sharply higher within positive territory, with the Momentum indicator finally showing some signs of life. In the 4 hours chart, technical indicators have lost upward strength, but the RSI holds anyway within overbought territory, rather reflecting the limited volumes at this time of the day than suggesting an upcoming downward correction.

Support levels: 11,757 11,694 11,632

Resistance levels: 11,840 11,895 11,960

Nikkei

The Nikkei 225 edged sharply higher this Wednesday, adding 273 points or 1.43% to end the day at 19,057.50, underpinned by an improvement in risk sentiment, after Wall Street rallied on Monday. For once, Japanese shares ignored a mildly stronger yen. Materials-related equities gained the most, boosted by renewed hopes  US president will take growth measures, and within the Nikkei, Tokuyama was the best performer up by 9.11%. The index rallied further in futures trades, tracking US equities' gains, and is poised to open around 19,270. Daily basis, the index is a few points above its 20 DMA for the first time in over a week, whilst technical indicators have kept advanced now aiming to extend into positive territory. In the 4 hours chart, the index has rallied beyond all of its moving averages that anyway continue to lack directional strength, whilst technical indicators are partially losing their bullish strength near overbought territory, but with no aims of changing bias, supporting further gains ahead.

Support levels: 19,220 19,153 19,085

Resistance levels: 19,293 19,373 19,432    

Gold

Spot gold plunged to $1,193.21 its lowest in two weeks, and closed the day around $1,198.30 a troy ounce, weighed by renewed demand of high-yielding assets. The Trump trade seems to have came back this Wednesday, with US indexes soaring to record highs. The daily chart shows that the bright metal is at risk of falling further, as the price was rejected from a strongly bearish 100 DMA, and technical indicators extended their retreats from oversold territory, heading south within positive territory. In the same chart, the price bounced modestly from a bullish 20 DMA around the mentioned daily low. Shorter term, and according to the 4 hours chart, the metal is biased lower, as the price extended well below its 20 SMA and  a major Fibonacci resistance, whilst technical indicators halted their declines, but stand near oversold territory, with no aims of changing course. In this last chart, the price met short term buyers around a bullish 100 SMA, with a break below the mentioned daily low opening doors for a steeper decline towards 1,173.15, the 23.6% retracement of the latest monthly decline.  

Support levels: 1,198.30 1,187.80 1,173.15    

Resistance levels: 1,204.50 1,214.60 1,220.10 

WTI Crude Oil

Crude oil prices continued to tread water this Wednesday, with West Texas Intermediate crude oil futures closing the day lower around $52.65 a troy ounce. The commodity fell intraday down to $52.55 a barrel following US inventories data, much worse than expected. The API reported earlier this week that  inventories rose by 2.9 million barrels to mark the largest build in three weeks, whilst the EIA report issued this Wednesday showed that US crude stockpiles rose by 2.84 million, slightly above the 2.815 million expected. Gasoline stockpiles, however, rose by 6.8 million barrels, far beyond the 498K gain expected, whilst distillate stockpiles saw an increase of 76K barrels against a 1 million barrels decline expected. In the daily chart, the price remains stuck around a modestly bearish 20 DMA, whilst technical indicators are hovering around their mid-lines with no certain directional strength, reflecting the ongoing range. In the short term, the 4 hours chart shows that the price is breaking below its moving averages, all together and directionless, whilst technical indicators turned modestly lower, but remain within neutral territory, with the downward momentum limited, but the risk anyway towards the downside.

Support levels: 52.55 52.00 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.