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The greenback consolidated gains this Friday, with the EUR/USD pair settling at its lowest in 14-years

19th December 2016

EUR/USD

The greenback consolidated gains this Friday, with the EUR/USD pair settling at its lowest in 14-years, at 1.0441, after trading as low as 1.0366, on a hawkish shift in FED's upcoming rate hikes pace.  Adding to EUR's bearish case, November inflation in the area, released last Friday, fell in the month by 0.1%, matching market's expectations, remaining unchanged yearly basis at 0.6%. In the US, FED's Lacker said that the Central Bank may have to raise rates more than three times next year, adding that policy makers may already be behind the inflation's curve. 

Some profit taking ahead of the weekend helped the pair to bounce alongside with a surprise slide in US housing starts that fell in November by 18.7% to a 1.09 million annualized rate after a 27.4%  increase to 1.34 million a month earlier. Building Permits fell by 4.7% in the same month, compared to a 2.9% advance in October. 

From a technical point of view,  the daily chart shows that the price plunged below a now sharply bearish 20 SMA, now around 1.0600, while technical indicators have bounced modestly from oversold readings, but hold near its recent lows. Shorter term, and according to the 4 hours chart, the risk is clearly towards the downside, as technical indicators have lost upward strength after a modest bounce from oversold readings, while a bearish 20 SMA accelerated its decline below the 100 and 200 SMAs, with the shortest now at 1.0510. Further slides below the mentioned multi-year low will open doors for a continued slide towards 1.0207, July 2002 monthly high. 

Support levels: 1.0400 1.0365 1.0320

Resistance levels: 1.0460 1.0500 1.0550

USD/JPY

The USD/JPY pair closed the week at 117.92 after posting a multi-month high of 118.66 post-FED, holding on to gains ahead of the BOJ. The Bank of Japan will have its monetary policy meeting this week, largely expected to maintain its QE and negative rates on hold, with a stronger dollar and therefore a weaker yen, giving the Japanese Central Bank some room to breathe. Still, dollar's rally has been correlated to increasing hopes of higher growth and inflation under Trump's administration, which resulted in US Treasury yields surging to fresh 2-year highs, with the 10-year benchmark up to 2.50%. In Japan, however, the 10-year bond yield remains close to zero, amid the new policy framework announced last September. If yields keep widening, the BOJ will have no option but to extend its easing program to keep the 10-year JGB near zero, maybe not this Tuesday, but during the first quarter of 2017. From a technical point of view, the daily chart shows that technical indicators are retreating from extreme overbought readings, although the RSI holds around 77, while the 100 SMA is crossing above the 200 SMA over 1000 pips below the current level. In the 4 hours chart, the price is clearly in a consolidative phase, while technical indicators have retreated from overbought levels, but lack bearish strength. The immediate support comes at 117.46, Friday's low, with scope to correct down to 116.60 without affecting the dominant bullish trend. Support levels: 117.45 117.00 116.60 Resistance levels: 118.20 118.65 119.10

GBP/USD

Enthusiasm over a softer Brexit was offset by dollar's strength and a neutral BoE, resulting in the GBP/USD pair closing in the red for a second consecutive week, at 1.2480. The pair however, was off its weekly low of 1.2376, and still well above the critical mid-term support at 1.2330. The BOE met last week, leaving rates and the app unchanged,  but also lowering its inflation forecast, reducing odds for a rate hike in the near future and prompting Pound's selling. The pair has now broken below a daily ascendant trend line that led price's action since late October, now around 1.2540, and failure to recover above it at the beginning of the week will increase the risk of a bearish breakout. In the daily chart, the price is also below a now directionless 20 SMA, while technical indicators have lost directional strength after entering bearish territory, suggesting limited selling interest around the Pound. In the 4 hours chart, technical indicators have recovered from oversold  levels, but lost upward strength well into negative territory, whilst the 20 SMA accelerated its slide and is crossing below the 200 EMA both around 1.2530, all of which supports a bearish continuation for this Monday. 

Support levels: 1.2445 1.2400 1.2370

Resistance levels: 1.2535 1.2580 1.2620

AUD/USD

The Australian dollar plummeted to a fresh 6-month low against the greenback, printing 0.7265 before settling a handful of pips below the 0.7300 mark. Sharp selling of the antipodean currency was exacerbated by a sharp slide in metal's prices, and not even better-than-expected Australian job's creating was enough to prevent the bearish breakout. The pair has now broken below the 50% retracement of its early yearly rally at 0.7330, and pullbacks towards the level will likely attract selling interest, maintaining the risk towards the downside. In the  daily hart, the RSI indicator maintains a sharp downward slope near oversold levels, while the Momentum indicator holds within negative territory, albeit with no clear directional strength. In the 4 hours chart, technical indicators consolidate within oversold readings, while the 20 SMA has accelerated its decline above the current level, all of which suggests that the pair may resume its slide after a period of consolidation. 

Support: levels: 0.7265 0.7230 0.7200

Resistance levels: 0.7330 0.7375 0.7410 

Dow Jones

US indexes closed modestly lower last Friday, with the Dow Jones Industrial Average down 8 points or 0.04%, to 19.843.41. The Nasdaq Composite lost 19 points, and closed at 5.437.16 while the S&P ended at 2,258.07, down by 0.18%. Wall Street, however, remains near fresh record highs, achieved post-US election, little affected by FED's rate hike. The Dow Jones Industrial Average advanced for a sixth consecutive week, and the daily chart shows that it has spent these last weeks mostly consolidating its gains, with technical indicators barely retreating from extreme overbought levels, and the 20 DMA still heading firmly higher well below the current level but also far above the 100 and 200 DMAs. In the 4 hours chart, is even clearer that the index has extended its consolidative phase for a second consecutive week, with the benchmark hovering around a modestly bullish 20 SMA, and technical indicators heading nowhere around their mid-lines. Analyst fear that the rally could be overdone, which added to some position adjustment and profit taking ahead of year-end, may result in the Dow correcting lower during the upcoming days. 

Support levels: 19,828 19,746 19,669    

Resistance levels: 19,912 19,964 20,010

FTSE 100

The FTSE 100 recovered the 7,000 threshold last Friday, adding 12 points or 0.18% to close the day at 7,011.64, its highest since last October. A weaker Pound helped the benchmark, with financial and energy-related equities among the best performers. Old Mutual topped winners' list with a 3.64% gain, while BP added 2.13% on oil's recovery. The mining sector closed mixed, with Randgold Resources adding 1.92%, but Antofagasta shedding 1.98% and Anglo American down by 1.86%. The index retains a positive tone in its daily chart, having advanced further above its 20 and 100 DMAs, both in the 6,850/60 region, while technical indicators present modest upward sloped within positive territory. In the 4 hours chart, however, the 20 SMA has lost upward strength and now stands horizontal around 6,960, providing an immediate dynamic support, while technical indicators retreated from near  overbought levels, slowly approaching their mid-lines. A break below the mentioned 20 SMA, could result in further declines during the upcoming sessions, particularly if the Pound recovers further against its major rivals. 

 Support levels: 6,960 6,926 6,881 

Resistance levels: 7,044 7,073 7,126

DAX

European equities posted some modest gains on Friday, with the German DAX adding 37 points or 0.33% to close at 11,404.01. Fresenius SE led gainers' list, up by 1.42%, whilst ThyssenKrupp was  the worst performer, shedding 1.35%. Financials closed mixed in Germany, with Commerzbank shedding some of its latest gains and settling 1.01% lower. This week, the sector will probably set the tone, as news over the weekend suggested that Banca Monte dei Paschi di Siena the Italian most troubled bank, will begin taking orders for shares, aiming to complete raising €5 billion before Christmas. If the news is confirmed and the bank actually rises its capital, financial equities will likely result in steep rallies ahead of winter holidays. Technically, the daily chart for the DAX presents a bullish stance, as technical indicators keep heading north despite being in overbought levels, whilst the 20 DMA advanced further, below the current level. In the 4 hours chart, technical indicators are recovering modestly after correcting lower, with the Momentum above its 100 level and the RSI around 70, supporting additional gains for the upcoming sessions. 

Support levels: 11,346 11,299 11,245

Resistance levels: 11,433 11,470 11,520

Nikkei

The Japanese Nikkei surged by 128 points last Friday to close at 19,401.15, a fresh 1-year high, recovering the ground lost after the US Federal Reserve's hawkish announcement. Taiyo Yuden was the best performer for a second consecutive day, up by 6.20%, followed by Sumco Corp. that added 4.74. Auto makers were also up, boosted by a weaker yen, with Mitsubishi up 3.2% and Mazda advancing 1.86%. The benchmark, however, retreated in after-hours trading, following the negative lead of Wall Street, now poised to open the week around 19,342. In the daily chart, the 20 DMA extended its advance below the current level but well above the 100 and 200 DMAs, whilst technical indicators retreated, with the RSI still at overbought levels, around 74. Given that the benchmark is well above its weekly low of 19,057, chances of a sharp downward move remain limited. In the 4 hours chart, the index hovers around a modestly bullish 20 SMA, while technical indicators are flat within positive territory, given not much clues on what's next in the short term. 

Support levels: 19,277 19,216 19,147

Resistance levels: 19,380 19,466 19,542

Gold

Spot gold extended its slide for a sixth consecutive week, down over 11% ever since the US election early November. Spot closed the week at 1,133.55, recovering some ground on Friday after printing 1,122.62 in the aftermath of FED's hawkish announcement. The commodity has fallen below the 61.8% retracement of this year rally, and could continue its slide to trim all of this 2016 gains, down towards 1,061.78. Still bearish, selling pace and intensity may ease as the price approaches to the mentioned low, but intraday recoveries will likely be seen as selling opportunities. In the daily chart,  the price recovered after nearing the base of the daily descendant channel that led price's action since mid November, but remains within the lower half  of the figure, while developing below a sharply bearish 20 DMA, all of which maintains the risk towards the downside. Furthermore, technical indicators have bounced modestly within oversold levels, but indicate no upward strength. Shorter term, the 4 hours chart, shows that an early advance was contained around a bearish 20 SMA, now at 1,142.00, while technical indicators have lost upward strength and turned modestly lower near oversold readings, in line with the longer term view. 

Support levels: 1,122.60 1,114.80 1,094.30    

Resistance levels: 1,142.00 1,151.20 1,164.05

WTI Crude Oil

Crude oil prices closed the week in the red, with West Texas Intermediate futures settling around $53.07, still above the upper band of its last months' range. The commodity bounced on Friday trimming half of its weekly gains, helped by a downward correction in the US currency, and news that Kuwait Saudi Arabia, and Abu Dhabi announced to their customers in Asia and Europe that they would slash oil supplies after OPEC’s decision to cut output. Prospects of lower production led Goldman Sachs to raise its WTI price forecast to $57.50 per barrel from $55 per barrel previously for the second quarter of 2017. The price held to its gains, despite the Baker Hughes weekly US oil rig count showed an increase of  12 to 510  working rigs, rising above 500 for the first time since January. In the daily chart, the price remains firmly above a bullish 20 DMA, now at  50.40, while the RSI indicator has resumed its advance within bullish territory after correcting overbought conditions, supporting further recoveries for the week ahead. In the 4 hours chart, the price has recovered above its 20 SMA, but technical indicators have pared their recoveries within neutral territory, suggesting a break above 53.50, the immediate resistance, is required to confirm a steeper advance. 

Support levels: 52.40 51.60 50.90    

Resistance levels: 53.50 54.20 54.95

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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.