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The EUR/USD pair was unable to find direction this Monday

31st January 2017

EUR/USD

The EUR/USD pair was unable to find direction this Monday, as despite setting a daily range of over 120 pips, it closed the day flat around 1.0690.  The pair posted a daily high of 1.0740 as the American dollar gapped lower across the board at the beginning of the day, undermined by latest US President Trump decision of banning immigrant from certain Muslim countries, which spurred risk aversion. The pair reversed course early London, plummeting to a daily low of 1.0619 after  ECB's Nowotny said that the bank could review its monetary policy stance in June, but that no decision is likely to be made about tapering.  

In the macroeconomic front, the EU released its Economic Sentiment indicator  for January that increased to 108.2 from previous 107.8, the best reading since 2011. Also, German's preliminary January inflation was estimated at  1.9% YoY, better than previous 1.7% but below the 2.0% forecast, still the highest reading since July 2013. In the US, consumer spending rose by the most in three months last December, advancing 0.5%, although incomes rose 0.3%, below than expected. Core PCE inflation, FED's favorite inflation reading, was upwardly revised to 1.7% in November from previous 1.6%, coming in flat in December at 1.7% that anyway is the highest in almost a year. 

From a technical point of view, the risk is now towards the downside, given that the pair broke below the daily ascendant trend line coming from this month low of 1.0340, and the late US session pullback was unable to advance beyond it. In the 4 hours chart, the pair presents a technical resistance around 1.0700/10, where the pair has the mentioned trend line, a Fibonacci retracement, and a bearish 20 SMA. A stronger one comes around 1.0770, the 100 DMA. Technical indicators, also in the 4 hours chart, the RSI indicator has bounced from oversold readings but lost upward strength around 47, whilst the Momentum indicator aims modestly higher around its mid-line, rather reflecting the latest recovery than indicating additional gains ahead. 

Support levels: 1.0650 1.0610 1.0565

Resistance levels: 1.0710 1.0740 1.0770

USD/JPY

The USD/JPY pair plunged sub 114.00 after flirting with the 115.00 level during the past Asian session, as risk aversion backed the safe-haven yen, following US President Trump decision to suspend the country's refugee program and banning immigration from certain Muslim countries. The pair fell despite some encouraging US data, as core PCE inflation surged to 1.7% for the first time in a year last November, according to the latest review, while Pending Home Sales grew by 1.6%  in December, after falling 2.5% in the previous month. The Bank of Japan will have its monetary policy meeting during the upcoming Asian session, and whilst changes in rates are not expected, investors will be closely watching for comments about the latest surprise increase in the latest bond-buying. If that is going to become a new normal, the JPY may plummet on a veiled extension of its QE.  For now, however, the Japanese currency maintains a strong upward potential and technical readings in the 4 hours chart support additional gains for this Tuesday, given that the price plunged below a bearish 100 DMA that now converges with a Fibonacci resistance at 114.50, whilst technical indicators head sharply lower within negative territory. The pair traded as low as 113.44 this Monday, and a break below it should lead to a retest of the 112.50/60 region, where the pair bottomed during the last two weeks. 

Support levels: 113.45 113.00 112.55 

Resistance levels: 114.00 114.50 114.95

GBP/USD

The Pound fell for a third consecutive day against the greenback, down to 1.2467 in the US afternoon to finally settle some 10 pips above such low. The macroeconomic calendar in the UK was empty this Monday, and will remain scarce until next Thursday, when the Bank of England will have its monetary policy meeting, which this time includes the quarterly inflation report. The Central Bank is largely expected to hold rates steady at record lows of 0.25%, despite rising inflation, amid uncertainty over upcoming Brexit. From a technical point of view and in the short term, the pair presents a clear bearish stance in its  4 hours chart, given that the price has accelerated its decline after breaking below the 23.6% retracement of its latest daily advance around 1.2510, whilst technical indicators in the same chart present sharp bearish slopes within negative territory. The 20 SMA in the mentioned chart turned lower far above the current level, supporting the bearish case. Below 1.2460, the decline can extend down to 1.2410, the 38.2% retracement of this January rally.  

Support levels:  1.2460 1.2410 1.2375

Resistance levels: 1.2490 1.2530 1.2580 

AUD/USD

The AUD/USD pair saw little action at the beginning of the week, confined to a tight 40 pips range this Monday with action limited at the beginning of the day amid several holidays in Asia. In fact, Chinese markets will be closed for most of the week due to the New Year holiday, which will likely keep activity around the Aussie restricted. During the upcoming session, Australia will release December private sector credit figures and NAB's business confidence indicators, not usually big market movers. Mute gold prices, also helped keep the pair range bound. From a technical point of view, the pair maintains the neutral stance seen on previous update according to the 4 hours chart, given that technical indicators keep hovering around their mid-lines whilst the price hovers around a horizontal 20 SMA. The pair needs to leave the 0.75/0.76 range set last week to be able to gain some directional traction either side of the board, with the scale lean towards the downside in the short term. 

Support levels: 0.7530 0.7490 0.7450 

Resistance levels: 0.7610 0.7645 0.7690

Dow Jones

Wall Street closed in the red, with the DJIA having one of its worst days since the US election. The benchmark closed 113 points lower at 19,971.13, having been over 200 points into the red early in the American session. The S&P lost 0.54% and closed the day at 2,280.90, while the Nasdaq Composite shed 47 points, to 5,613.71. Within the Dow, only 6 components closed in the green, whilst industrials were the worst performers, amid fading hopes about upcoming growth policies. Caterpillar topped loser's list down 2.29%, followed by Du Pont that shed 2.05%. The daily chart shows that the DJIA fell briefly below its 20 SMA, but settled above it, whilst technical indicators have turned lower within positive territory, still holding above their mid-lines. In the 4 hours chart, technical indicators have bounced from oversold readings, but hold well below their mid-lines, whilst the benchmark met some intraday buying interest around the 100 and 200 SMAs, both holding around 19,900. In this last time frame, the 20 SMA has turned sharply lower far above the current level, keeping the risk towards the downside. 

Support levels: 20,058 19,999 19,950    

Resistance levels: 20,106 20,150 20,200

FTSE 100

The FTSE 100 resumed its latest slide this Monday, shedding 66 points to settle at 7,118.48. The decline was led by Tesco, as news over the weekend suggested that the planned deal to buy food wholesaler Booker group, faces an investigation from competition regulators. The company was the worst performer, closing the day down 4.24%, followed by Rolls-Royce Holdings that shed 3.79%. DCC, an Industrial company, top gainers' list, up by 4.12%. The Footsie was unable to find release from a weaker Pound, barely recovering from an intraday low of 7,104, now the immediate support. Technical readings in the daily chart favor additional declines, as the benchmark is further below a flat 20 SMA, whilst technical indicators present strong bearish slopes within negative territory. In the 4 hours chart, the index is below its 20 and 100 SMAs, with the shortest heading south below the largest, and technical indicators having turned flat within bearish territory, after a limited bounce from oversold readings. 

Support levels: 7,104 7,057 7,011 

Resistance levels: 7,150 7,183 7,241 

DAX

European equities fell on Monday, with the German DAX down 1.12% or 132 points, to settle at 11,681.89. Trump’s executive order halting immigration from seven predominantly Muslim nations spurred concerns as the new US administration seems more focused on establishing protectionist measures than on boosting growth. Despite Wall Street's slump, the benchmark held around the mentioned close in after hours trading, helped by an uptick in local inflation. Financial and automakers´ shares remained under pressure, with only 3 components closing in the green this Monday. The worst performer was RWE AG, down 3.05%, followed by Volkswagen that shed 2.87%. From a technical point of view, the daily chart shows that technical indicators retreated within positive territory, whilst the benchmark is still holding above its 20 SMA, not enough to confirm a bearish extension for this Tuesday. In the 4 hours chart, the index is below a bullish 20 SMA, but above its 100 SMA, whilst technical indicators have entered negative territory with tepid bearish strength, in line with the longer term perspective. 

Support levels: 11,659 11,607 11,558 

Resistance levels: 11,757 11,798 11,854

Nikkei

Japanese equities fell on the back of risk aversion and a rising yen, with the Nikkei 225 settling down 98 points at 19,368.85, further easing after the close amid Wall Street's slump, and heading into Tuesday's opening around 19,100. Financial-related equities were weighed by soft growth figures released last Friday, while a rising yen affected export-oriented equities. Toshiba was the worst performer, down by 3.69%, as the company is set to face additional suits from three local banks amid the account-falsification scandal. Technically, the daily chart shows that the index extended its slide below a now modestly bearish 20 SMA, whilst technical indicators turned south around their mid-lines, maintaining their negative slopes within bearish territory and supporting some additional slides. In the 4 hours chart,  the benchmark is also biased lower according to technical readings, as technical indicators have partially lost their bearish momentum, but hold near oversold readings, whilst the index has fell below all of its moving averages. 

Support levels: 19,061 18,988 18,915

Resistance levels: 19,176 19,252 19,341 

Gold

Spot gold managed to add some ground this Monday, with spot closing the day around $1,193.60 a troy ounce, amid increasing risk aversion, although the advance in the commodity was quite limited considering the reaction of other financial assets to Trump's latest decision, somehow indicating decreasing upward potential for gold. The daily chart shows that an early advance up to 1,199.36 was contained by the 20 DMA, whilst the 100 DMA presents a sharp bearish slope above it, now around 1,210.50. In the same chart, technical indicators turned flat around their mid-lines, all of which maintains the risk towards the downside. In the 4 hours chart, the price remains trapped between the 100 SMA, capping the upside around the mentioned daily high, and above a directionless 20 SMA. Technical indicators in this last time frame have lost upward strength after entering positive territory, also suggesting limited buying interest. Overall, the risk remains towards the downside, with a break below the daily low of 1,188.24 required to confirm a new leg lower. 

Support levels: 1,188.24 1,181.20 1,173.15    

Resistance levels: 1,193.30 1,210.50 1,216.15

WTI Crude Oil

Crude oil prices fell for a second consecutive week, with West Texas Intermediate oil futures settling at $52.60 a barrel, on rising concerns about increasing US crude oil output. The weekly report by oilfield services provider Baker Hughes showed that the number of active oil rigs in the US was up by 15 to total 566 last week, 68 more than the same week of a year earlier. The news revived concerns of a worldwide glut, offsetting OPEC's output cut. The commodity gained some bearish potential in its daily chart, although further declines are yet to be confirmed with a clear break below 52.00. Nevertheless, its currently trading below a bearish 20 SMA, whilst technical indicators in the mentioned chart presents modest bearish slopes within neutral territory. In the shorter term, and according to the 4 hours chart, the price is currently below a congestion of moving average that fail to provide clear directional clues, whilst the Momentum indicator heads sharply lower below its 100 level and the RSI indicator hovers around 42, maintaining the risk towards the downside. 

Support levels: 52.00 51.60 51.10    

Resistance levels: 53.00 53.65 54.30 

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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.