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The greenback had probably its worst day since US elections

18th January 2017

EUR/USD

The greenback had probably its worst day since US elections,  edging sharply lower against all of its major rivals, for different, but valid reasons. The currency was hit at the beginning of the day by comments coming from upcoming US president, who warned that  the greenback is  “too strong” for US companies to compete with their Chinese counterparts. Also, UK's PM May speech sent the Pound skyrocketing towards 1.2400, as despite confirming a "hard-Brexit," her conciliatory wording helped to ease near-term concerns over a hard-Brexit, but indeed it will be a bumpy road ahead. 

Macroeconomic releases backed the common currency, as German's January ZEW survey, continued to improve, although by less than expected, with the index up to 16.6 from previous 13.8. For the whole region, sentiment also improved, with the survey reaching 23.2, above previous 18.1, but below the 24.2 expected. In the US, on the other hand, the New York Manufacturing index for January came in at 6.5, down from previous 9.0 and the expected 8.5.

The EUR/USD settled around the 1.0700 level, and traded as high as 1.0718 at the beginning of the day, with intraday pullbacks towards 1.0650 attracting buying interest. This Tuesday's advance provided  further evidence that the pair has found an interim bottom at 1.0340, and that the upward movement may extend during the upcoming days, towards the critical 1.0800/40 region, which was a strong base  during 2015 and 2016. In the 4 hours chart, technical indicators have resumed their advances within positive territory after a modest downward correction, with intraday buying interest now aligned around 1.0650. In the mentioned chart, the price has extended above a bullish 20 SMA, but an extension beyond 1.0720 is now required to confirm a new leg higher. 

Support levels: 1.0565 1.0520 1.0485

Resistance levels: 1.0650 1.0710 1.0750 

USD/JPY

The Japanese yen appreciated strongly against its American rival, as investors rushed to dump the American currency after upcoming US president said it was "too strong." Worldwide stocks closing in the red, and the 10-year Treasury yield falling down to 2.307% earlier Tuesday, the lowest intraday level since Nov. 29, supported the case for a bearish USD/JPY. The pair traded as low as 112.67 before recovering moderately, but poor US data, as the NY Empire State Manufacturing index fell to 6.5 in January from previous 9.0, indicating that business activity in the region grew at a slower rate during the month. Trading at over one-month lows, the pair is technically poised to extend its side, after breaking the key 114.00 figure. In the 4 hours chart, the Momentum indicator maintains a strong bearish slope within negative territory, while the RSI indicator stands at 27, maintaining the risk towards the downside, moreover, the 100 SMA has turned strongly lower above the current level. 

Support levels: 112.65 112.20 111.80

Resistance levels: 113.35 113.70 114.00

GBP/USD

The British Pound soared against the greenback, rising up to 1.2414 and holding nearby at the end of the day, after UK's Prime Minister May finally unveiled the government's Brexit strategy. She confirmed the UK will have to leave the EU Single Market, but also that the UK will look for a new "comprehensive free trade agreement," giving it "the greatest possible access" to the Union's  market. She added that the  UK will no longer contribute "huge sums" to the EU after the Brexit, but added that in some stances, it may have to make an  "appropriate contribution" to be part of European schemes" adding that she expects EU negotiations to be "economically rational," pretty much, rolling the ball into the EU's side of the field. From a technical point of view and in the short term, the 4 hours chart shows that technical indicators have reached extreme overbought territory where they stand, easing their  upward strength. In the same chart, the price is well above its 20 SMA and 200 EMA, this last around 1.2320. This year high has been set at 1.2432, with an extension above it favoring a test of the 1.2500 region. 

Support levels:  1.2360 1.2325 1.2280 

Resistance levels: 1.2435 1.2490 1.2530

AUD/USD

The AUD/USD pair surged up to 0.7562 on broad dollar's weakness, with the Aussie aided by a rally in base metals, with gold settling above the key 1,200 threshold for the first time since late November. During the upcoming Asian session, Australia will release its Westpac Consumer confidence data for January, although the main event of the week will be monthly employment figures next Thursday. In the meantime, the pair retains its bullish strength, moreover after breaking above December's monthly high of 0.7525, now the immediate intraday support. The RBA may get nervous it the pair surpasses the 0.7700 level, but speculative demand will probably persists. From a technical point of view the 4 hours chart shows that the price is firm above a bullish 20 SMA, while technical indicators have lost upward strength, and are currently consolidating alongside with price, far from indicating an upcoming retracement. 

Support levels: 0.7525 0.7490 0.7450 

Resistance levels: 0.7565 0.7600 0.7640

Dow Jones

US stocks closed lower following the lead of their overseas partners, further weighed by latest Trump's comments that undermined the banking sector, the one that rallied the most since the US elections. The Dow Jones Industrial Average closed 59 points lower at 19,826.77, whilst the Nasdaq Composite lost 0.63% or 35 points, to 5,538.73. The S&P shed 0.30%, to 2,267.88. Within the Dow, JP Morgan was the worst performer, down by 3.82%, followed by Goldman Sachs that closed 3.46% lower. In the daily chart, Dow's decline does not look significant, but the confidence-based bullish run from late 2016 seems to have come to an end, as day after day, Trump´s comments disappoint investors. The daily chart for the index shows that it held below a still flat 20 DMA, while the Momentum indicator continues to lack directional strength, flat around its 100 level. The RSI indicator however, has accelerated its decline, but stands at 52, not enough to confirm a bearish breakout. Shorter term, the 4 hours chart shows that an early advance was contained by the 20 and 100 SMAs, but also that the index held above a bullish 200 SMA, whilst technical indicators turned higher within negative territory, indicating limited selling interest at this stage. 

Support levels: 19,773 19,715 19,658    

Resistance levels: 19,846 19,895 19,952 

FTSE 100

The Footsie fell for the most since last June this Tuesday, after PM Theresa May confirmed the hard Brexit. The index shed 106 points or 1.46% and settled at 7,220.38, weighed by an almost 3% intraday advance in the GBP/USD pair, following the statement. Only 21 members closed with gains, with Rolls Royce topping winners' list, up by 4.99%. Mining-related equities closed in the red despite metals gained, but because of it, intraday slides were limited. The daily chart shows that technical indicators retreated sharply from extreme overbought readings, now heading south within positive territory, whilst the 20 SMA continues heading higher below the current level, now at 7,167, the level to break to confirm a steeper decline in the days to come. In the 4 hours chart, the index broke below a now flat 20 SMA, whilst technical indicators have turned flat within bearish territory, as a consequence of limited volumes at this time of the day, but far from suggesting bearish exhaustion. 

Support levels: 7,167 7,120 7,059 

Resistance levels: 7,244 7,293 7,354

DAX

European equities opened sharply lower, plummeting as risk aversion escalated during the Asian session, sending the German DAX to a fresh 2-weeek low of 11,452. Stocks in the region, however, trimmed most of their daily losses ahead of the close and following UK's PM constructive comments about Brexit, with the German benchmark ending the day 14 points lower at 11,540.00. Helping the index recovering was the ZEW survey, which showed that business confidence improved in January, up to 16.6 from previous 13.8, the highest reading in seven months. Holding around the mentioned close, the index has quickly re-entered its recent range, and the fact that held above the 11,400 level, maintains the risk of a bearish breakout limited. Nevertheless, technical readings in the daily chart lean the scale towards the downside, as the RSI indicator continues retreating from overbought readings, now heading south around 60, whilst the Momentum hovers around neutral territory and the index battles with a horizontal 20 SMA. In the shorter term, indicators hold directionless below their mid-lines, whilst selling interest surged around an also  horizontal 20 SMA, in line with the longer term perspective. 

Support levels: 11,490 11,440 11,400

Resistance levels: 11,608 11,657 11,694 

Nikkei

The Nikkei 225 fell to its lowest in six weeks, as the yen tumbled, closing the day at 18,813.53, down by 277 points or 1.48%. Export-oriented equities suffered the most, with the automakers sector further affected by Honda reporting the rupture of a passenger-side air bag of one of its Fit compact multi-purpose vehicles. Real estate Daiwa House Industry was the worst performer, down by 3.82%, while Yamaha Motor shed 282% and Honda Motor closed the day 2.62% lower. The index fell further in after-hours trading, barely holding above 18,700 level ahead of the Asian opening. The bearish tone suggested on previous updates have been confirmed according to technical readings in the daily chart, as the index has accelerated further below a bearish 20 SMA, whilst indicators present strong bearish slopes within negative territory. In the 4 hours chart, the 20 SMA maintains a sharp bearish slope above the current level, after crossing below the 100 and 200 SMAs, a clear sign of a bearish continuation, whilst technical indicators have settled near oversold readings, with no aims of changing bias, also in line with further slides. 

Support levels: 18,668 18,598 18,540

Resistance levels: 18,770 18,846 18,900

Gold

Gold rally extended to fresh multi-week high of $1,218.77 a troy ounce and settle a few cents above the 1,215.00 level, with most of the intraday gains achieved before UK's May speech on Brexit. The bright metal was backed by Trump's comments about the dollar being too strong to be competitive, and held on to gains, despite easing risk aversion in the short term. Worldwide political woes, however, will likely keep gold on demand during the upcoming month, and technical readings support so, after spot surpassed a critical resistance, now support, the 38.2% retracement of the post-US election decline around 1,204.50. Technical indicators in the daily chart have extended their advances, with the RSI indicator now entering overbought territory and the Momentum heading sharply higher at fresh multi-month highs. The same chart shows that the 100 DMA stands at 1,223.60, the next major resistance to surpass. In the 4 hours chart, technical indicators resumed their advances after a modest downward correction and stand above previous daily highs, whilst the 20 SMA extended its advance below the current level, supporting some further gains as long as the price holds above the 1,200 region. 

Support levels: 1,208.60 1,198.90 1,193.80    

Resistance levels: 1,223.60 1,233.00 1,242.50

WTI Crude Oil

Crude oil prices advanced at the beginning of the day amid broad dollar's weakness, but trimmed all of its daily gains, with  West Texas Intermediate futures settling around its daily opening around $54.45 a barrel.  Supporting the early rally were news coming from Saudi Arabia, as Saudi's energy minister said that the market would rebalance itself by the end of the first half of the year, adding that the need of an extension of the output cut deal beyond June would be unlikely. Still, concerns about the US and Russia boosting their production all through this 2017 weighed. Daily basis, the upward potential remains well limited, as the price was rejected by a bearish 20 SMA, whilst technical indicators in the same chart present a neutral to-bearish stance, slowly turning lower around their mid-lines. In the 4 hours chart, technical indicators are neutral, stuck around their mid-lines, whilst the price is barely holding above its 200 SMA, but having failed to surpass the 100 SMA earlier in the day, indicating an increasing bearish momentum.  

Support levels: 52.00 51.40 50.70    

Resistance levels: 53.10 53.80 54.55 

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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.