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The EUR/USD pair extended its 7-week rally up to 1.0774 this Tuesday

25th January 2017

EUR/USD

The EUR/USD pair extended its 7-week rally up to 1.0774 this Tuesday, settling a handful of pips below this last by the end of the US session. Continued dollar's weakness was notable across the board, although the American currency managed to recover some ground against the JPY, amid a strong recovery in US stocks.

In the data front, European advanced January PMIs showed that the region started the year with a strong footing, with the EU Markit Composite PMI coming in slightly lower, at 54.3 from previous 54.4, amid a modest slowdown in the services sector, but still among the highest readings since 2011. The German Manufacturing PMI surged to 56.5 from previous 55.6, whilst the composite output was estimated at 54.7 for January. In the US, Existing Home sales rose at an annual pace of 5.49 million in December, seasonally adjusted, below previous 5.65M and the expected 5.52M, amid higher house prices. The Markit manufacturing PMI, on the other hand, improved at the quickest pace in nearly two years, posting 55.1 in January, up from 54.3 in December. The US services and composite PMIs will be release this Wednesday.

From a technical point of view, the pair maintains a bullish tone, despite the lack of upward momentum, still poised to test a major resistance area between 1.0800 and 1.0840. In the 4 hours chart, the 20 SMA has turned sharply higher below the current level, having surpassed by a few pips a key Fibonacci support at 1.0710, whilst technical indicators have lost their upward strength, but hold well above their mid-lines. The 100 DMA presents a sharp bearish slope around the mentioned daily high with a break above it required to confirm the bullish extension towards the mentioned price zone.

Support levels: 1.0700 1.0660 1.0610

Resistance levels: 1.0770 1.0800 1.0840

USD/JPY

The USD/JPY pair recovered from a fresh 8-week low of 112.52, fueled in the US afternoon by a strong recovery in US equities and Treasury yields. US yields recovered alongside with their European counterparts, with the 10-year note benchmark up to 2.46% from previous 2.40%. Also, helping the bounce was the better-than-expected US Flash Markit Manufacturing PMI as the index surged to its highest in almost two years in January, with a 55.1. Japan will release its December trade balance data this Wednesday, expected to show a large increase in exports, and almost double the surplus from previous month. Technically, the risk remains towards the downside, as despite the intraday recovery, the price remains well below the 23.6% retracement of the latest monthly rally around 114.60, whilst in the 4 hours chart, indicators are recovering ground, but within negative territory, whilst the 100 SMA maintains a sharp bearish slope well above the current level. Despite a double bottom seems to be developing,  is too early to confirm that the bearish momentum has reversed, as the necking of the figure stands around 115.60, almost 200 pips from the current level.

Support levels: 113.20 112.90 112.55

Resistance levels: 113.80 114.20 114.60

GBP/USD

The GBP/USD pair regained the 1.2500 level, and closed the day around 1.2520, its highest close since mid December, temporarily affected early London by the UK's Supreme Court ruling on the Parliament's intervention on Brexit. As expected, the Court indicated that the government will need parliamentary approval to trigger the art. 50 of the Lisbon treaty. The pair initially fell to 1.2418 with the release, but slowly recovered ground amid persistent dollar's weakness, and speculating interest re-building their longs after some profit taking. The pair seems now poised to extend its advance, although an extension beyond 1.2550 is required to confirm so, with scope then to retest December highs in the 1.2770 region. In the 4 hours chart, the price recovered quickly from a sharply bullish 20 SMA, whilst technical indicators are retreating modestly from near overbought levels, rather reflecting the ongoing limited volume than suggesting an upcoming downward move.

Support levels:  1.2480 1.2450 1.2415

Resistance levels: 1.2550 1.2590 1.2635

AUD/USD

The Aussie kept rallying against the greenback, with the AUD/USD pair reaching a fresh two-month high of 0.7608, in where the pair lost upward momentum, and pulled back to the 0.7550 region. There was not certain catalyst beyond the advance, as there were no relevant macroeconomic releases in the past Asian session. Mid Tuesday, however, the Austrian  Conference Board Leading Economic Index increased 0.5% in November 2016 to 105.3, helping the pair in recovering ground. Early Wednesday, the country will release its Q4 inflation figures, expected little changed from the third quarter figures. Any kind of deviation will likely affect the pair sharply, with an uptick in figures favoring another leg higher towards the 0.7700 region. Technical indicators in the 4 hours chart have lost upward strength within positive territory, but the price holds above a bullish 20 SMA, indicating that further gains are likely, moreover if short term buying interest continues to defend the 0.7550 level.

Support levels: 0.7550 0.7500 0.7450

Resistance levels: 0.7610 0.7645 0.7690

Dow Jones

Wall Street closed with sharp gains, with the DJIA reaching a fresh 2-week high before retreating modestly, closing the day at 19,912.99, up by 113 points. The Nasdaq Composite  advanced to record territory, adding 48 points to settle at 5,600.96, whilst the S&P rallied to an all-time high, ending the day at 2,280.07, up by 0.66% or 14 points. Strong earnings reports, alongside with a sharp recovery in mining and energy-related equities, backed the recovery. Within the DJIA, Du Pont was the best performer, up by 4.74% after its results topped estimates and the company said it would delay its expected closing of a merger with Dow Chemical Co. Hopes that the Dow will reach the 20,000 are back to the table, and the daily chart supports such move, as the index has recovered above its 20 SMA, whilst the RSI indicator turned higher, now around 59, supporting a bullish extension for this Wednesday. In the mentioned chart, the Momentum indicator lags, flat around its 100 level, but given the sharp intraday advance, the lack of strength of the indicator is not enough to prevent the index from advancing further. Shorter term, and according to the 4 hours chart, the risk is also towards the upside, as the benchmark has broken far above all of its moving averages, the Momentum indicator keeps advancing well above its 100 level, and the RSI indicator hovers around 65. The daily high has been set at 19,949, now the immediate resistance and the level to surpass to confirm further gains.

Support levels: 19,885 19,842 19,795    

Resistance levels: 19,949 20,010 20,060

FTSE 100

The FTSE 100 closed the day flat at 7,150.34, as a recovery in mining related equities offset a stronger Pound. Antofagasta added 8.14%, topping winners' list, followed by Anglo American, which added 7.48% and Fresnillo that closed 5.71% higher. On the negative side, BT Group plunged 21.74%, after warning of the effects of a major accounting scandal in Italy that could write down the value of its Italian business by £530 million. The index advanced modestly in futures trading, following the positive tone of US equities, but remains below its 20 DMA in its daily chart. In the same time frame, indicators have turned flat within neutral territory, paring their previous declines. Shorter term, the 4 hours chart shows that the index is below a sharply bearish 20 SMA, whilst technical indicators have lost upward strength within neutral territory, limiting chances of a steeper recovery for this Wednesday.

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

Resistance levels: 7,199 7,241 7,288 

DAX

European equities closed modestly higher, with the German DAX adding 49 points or 0.43%, to settle at 11,594.94, with most sectors recovering some ground in the region. Robust data coming from the region underpinned the index as preliminary January PMIs readings showed that the local economy continued to expand at a robust pace early 2017. Deutsche Bank was the best performer, up by 3.91%, whilst Daimler added 1.82% and Commerzbank 1.19%. Vonovia topped losers' list, down by 1.13%. The index advanced further in after-hours trading, and the daily chart shows that the index advanced above a still directionless 20 DMA, while the Momentum indicator remains flat around its 100 level, and the RSI turned modestly higher around 62, still below previous highs. In the 4 hours chart, the pair retains the neutral stance seen on previous updates, although the downside seems limited, given that the index is above its 20 and 100 SMAs,  both horizontal, whilst technical indicators head nowhere within neutral territory.

Support levels: 11,554 11,490 11,440

Resistance levels: 11,629 11,694 11,740

Nikkei

The Nikkei 225 fell as the yen strengthened, closing the day 102 points lower at 18,787.99. Nevertheless, the benchmark recovered sharply in after hours trading, tracking Wall Street's gains, poised to open this Wednesday around 19,070. Within the Nikkei, banks weighed, following the lead of their overseas counterparts from Monday although Kansai Electric Power was the worst performer, down by 4.94%. The strong reversal has erased all of the index's weekly losses, although the daily chart shows that it has not yet recovered its bullish momentum, given that it still stands below its 20 SMA, whilst technical indicators have bounced, but remain within negative territory. In the 4 hours chart, the benchmark is above a horizontal 20 SMA, but still below the 100 and 200 SMAs, both in the 19,200 region, while the Momentum indicator remains within negative territory, and the RSI indicator heads modestly higher around 55, in line with the longer term perspective.

Support levels: 18,992 18,930 18,855

Resistance levels: 19,095 19,145 19,200    

Gold

Gold prices retreated in the US afternoon, as demand for stocks re-surged, pushing investors away from the safe-haven asset. Spot closed the day at $1,208.46 a troy ounce, retreating from a fresh 2017 high achieved early Asia at 1,220.02.  Also, weighing on the commodity was the absence of physical demand in Asia, with prices edging lower in India, one of world's largest consumer of gold. Technically, the daily chart shows that the price retreated from a bearish 100 DMA, but holds above a sharply bullish 20 DMA and the 38.2% retracement of its latest monthly slide, this last around 1,204.50. Indicators in the mentioned chart have lost upward strength and keep retreating from overbought levels, supporting additional declines on a break below the mentioned support. In the 4 hours chart,  the price is currently breaking below its 20 SMA, whilst technical indicators also head lower, with the RSI  already within bearish territory, supporting the longer term perspective.

Support levels: 1,204.50 1,195.80 1,182.90    

Resistance levels: 1,214.60 1,220.10 1,229.90

WTI Crude Oil

West Texas Intermediate crude oil futures recovered some of the ground lost this Monday, closing the day at $53.15 a barrel, still holding within familiar ranges, as there were no fresh news about the oil market. Ahead of the release of US weekly inventories reports, the commodity presents a neutral stance with the scale slightly lean towards the downside, as in the daily chart, the price is still stuck around a modestly bearish 20 DMA, whilst technical indicators hold around their mid-lines, lacking certain directional strength. In the shorter term, the price has settled above its moving averages, all together in a 10 cents range around 52.90, a clear indication of the absence of definitions, while technical indicators head nowhere around their mid-lines. WTI will likely remain within the 50/55 range during the upcoming weeks, until a clearer picture of OPEC's output cut, and US production surges.

Support levels: 52.10 51.50 50.90    

Resistance levels: 53.65 54.30 55.00

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