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Renewed Brexit fears took center stage this Monday

17th January 2017

EUR/USD

Renewed Brexit fears took center stage this Monday, with the dollar and safe-haven assets benefiting from news that the UK government will likely opt for a hard Brexit. According to a local newspaper, and  “sources familiar with the prime minister’s thinking,” the UK will have no choice but to leave the EU Single Market.  The EUR/USD pair fell down to 1.0578, but settled around 1.0600, as the absence of macroeconomic news in Europe and a holiday in the US kept investors clueless.  

Technically, the  pair has partially lost the strong upward potential seen last week, although further declines will depend on the capability of the pair to break below the 1.0565 level, an immediate Fibonacci support. In the 4 hours chart, the pair has broken below a still bullish 20 SMA, whilst the Momentum indicator lost directional strength after entering bearish territory, and the RSI indicator holds flat around 50, rather reflecting the limited volume than suggesting further slides. A recovery above 1.0650 will likely put the EUR back in the bullish track, while a break below the mentioned Fibonacci support will open doors for a decline towards the 1.0480/90 price zone. 

Support levels: 1.0565 1.0520 1.0485

Resistance levels: 1.0650 1.0710 1.0750 

USD/JPY

The USD/JPY pair fell to a fresh multi-month low of 113.61, as investors rushed into safe-haven assets following renewed speculation that the UK´s government will opt out for a hard Brexit. Stocks fell in Asia and Europe, although with the US on holidays, Yen's demand moderated in the US session, helping the pair to hold above the 114.00 figure, but not by much.  During the upcoming Asian session, Japan will release its latest Industrial Production data, although there are good chances that the market will remain in wait-and-see mode ahead of upcoming May's speech. Technically, the risk is towards the downside, as the pair settled well below the 114.50 level, the 23.6% retracement of its latest weekly advance. In the 4 hours chart, the price is also well below its 100 and 200 SMAs, with the shortest accelerating its decline above the largest,  whilst the RSI indicator consolidates near oversold territory, and the Momentum indicator advances within positive territory. Buyers on dips below 114.00 are still strong, yet if risk aversion persist, the pair will likely end up breaking below the level, and extend down to the 113.00/20 region, the next strong static support area. 

Support levels: 114.00 113.65 113.20

Resistance levels: 114.70 115.20 115.60

GBP/USD

The British Pound plunged against all of its major rivals, gapping down to multi-decade lows against the greenback, as the pair touched 1.1986 before recovering to settle around the 1.2060 region, still 100 pips below Friday's close. News making the rounds that UK's PM Theresa May will announce a full break with the EU, weighed on the Pound, as  the UK government is expected to prioritize immigration controls and free-trade deals with countries across the word, in detriment of being an active participant of the EU Single Market. The pair set an intraday high of 1.2084, but remained confined within a tight range for most of the US afternoon,  as investors wait for Mrs. May early Tuesday. From a technical point of view, the pair is biased lower, with scope to extend its decline beyond the daily low set at 1.1986, given that in the 4 hours chart, the price is well below a bearish 20 SMA, whilst technical indicators have recovered partially from oversold readings, but remain well below their mid-lines, with the RSI slowly turning south. Nevertheless, upcoming direction will depend on Theresa May's speech, and if she confirms the weekend headlines,  the decline could extend to fresh multi-decade lows below the 1.1900 threshold. 

Support levels: 1.2035 1.2000 1.1970

Resistance levels: 1.2085 1.2120 1.2165

AUD/USD

The AUD/USD pair closed the day in the red for the first time in over a week, not far from a daily low of 0.7457. Broad dollar's demand was behind the pair's decline,  although it was partially limited by a solid uptick in inflation, as measured by the Melbourne Institute. According to the report, inflation grew by 0.5% in December, up from 0.1% in the previous month, while the YoY reading came in at 1.8% from previous 1.5%. Australia has some minor reports scheduled for the upcoming session, which include new motor vehicles sales and home loans. Technically, the fact that the pair has bounced from the 0.7450, a major static support, suggests that the downward potential is limited and that the market is taking retracements as buying opportunities. In the 4 hours chart, the price is a handful of pips below a strongly bullish 20 SMA, whilst technical indicators turned flat, the Momentum around its 100 level and the RSI at 59, indicating that selling interest is limited. Anyway, the pair needs to advance now beyond 0.7524, December's monthly high, to confirm another leg higher that can extend up to the 0.7700 region during the following sessions. 

Support levels: 0.7450 0.7410 0.7370 

Resistance levels: 0.7495 0.7525 0.7560

Dow Jones

The US Martin Luther King's holiday kept Wall Street closed this Monday, with the DJIA latest registered close at 19,885.73, although the benchmark fell modestly in after-hours trading, amid persistent risk aversion, triggered not only by Brexit concerns, but also by latest Trump's comments about the US relationship with China. Trump will take the office this Friday, and investors will be eagerly waiting for his policies before daring pushing stocks too far away. From a technical point of view and according to the daily chart the Dow maintains a neutral stance, stuck around a horizontal 20 DMA and well above  bullish 100 and 200 SMAs, whilst the Momentum indicator holds around its 100 line  and the RSI heads modestly lower around 54. In the 4 hours chart, the technical outlook is neutral-to-bearish, with the index a few points below converging 20 and 100 SMAs, and technical indicators within neutral territory, diverging from each other, giving no clear clues on what's next. 

Support levels: 19,806 19,805 19,758    

Resistance levels: 19,895 19,952 19,998 

FTSE 100

The FTSE 100 record rally has finally come to an end, as the benchmark closed 10 points lower at 7,327.13, the first negative close in almost three weeks. Fears about a Brexit hit hard the banking sector, with Royal Bank of Scotland down by 2.80%, further weighed by Goldman Sachs decision to cut its rating  from "buy" to "neutral." Mining-related equities, on the other hand, led gainers, as following Friday's decline, base metals bounced. Rio Tinto was the best performer, up by 2.06%, followed by Anglo American that added 1.96%. The shallow decline has barely affected the ongoing bullish trend, as in the daily chart, the Footsie holds well above a bullish 20 SMA, whilst technical indicators have barely retreated from extreme readings, with the RSI still holding around 79. In the 4 hour chart, the technical picture is quite alike, with the RSI indicator barely retreating from overbought levels, the Momentum having turned lower within neutral territory, and the 20 SMA still heading north below the current level.  

Support levels: 7,286 7,241 7,178 

Resistance levels: 7,365 7,400 7,440

DAX

European equities started the week falling, with the German DAX down 74 points, to 11,554.71. Automakers followed the lead of their Asian counterparts, ending the day among the worst performers  alongside with banks.  Volkswagen led decliners, down by 2.34%, followed by Deutsche Bank that shed 1.91%. There were no macroeconomic releases in the region to drive stocks. From a technical point of view, and despite the intraday decline, the DAX remains within a consolidative stage, and the daily chart shows that the index found buyers around its 20 DMA that has been lately losing its upward strength. Possibilities of a bullish breakout are reducing, as the RSI indicator in the mentioned chart keeps pulling back from overbought territory, whilst the Momentum indicator remains flat around its 100 level. In the 4 hours chart, the index is a few points below a horizontal 20 SMA, whilst technical indicators turned modestly lower, but are still within neutral territory. A break below last week low of 11,490, is required to confirm a bearish continuation, but it will take an extension below the 11,400 mark to confirm a bearish breakout and further slides ahead.  

Support levels: 11,530 11,490 11,440

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

Nikkei

The Nikkei 225 fell 192 points or 1.0% to close the day at 19,095.24, its lowest settlement for this year, as yen's strength undermined export-oriented equities. All Asian major indexes closed in the red, as fresh concerns about Brexit  backed a run to safety at the beginning of the week. Within Japanese stocks, Automakers were among the worst performers, with Mitsubishi Motors down 2.5%,  Mazda Motor shedding 1.88% and Toyota down 0.80%. The index is poised to open the day around 19,052, falling in futures trading amid European stocks' decline. From a technical point of view, the daily chart presents an increasing bearish potential, as the index extended further below a bearish 20 DMA, whilst the RSI accelerate its slide, currently at 45. Shorter term, the 4 hours chart, shows that that the benchmark extended its decline below all of its moving averages, that the Momentum indicator retreats from the 100 level, and that the RSI heads south around 39, all of which supports a continued decline for this Tuesday. 

Support levels: 19,005 18,954 18,900

Resistance levels: 19,102 19,164 19,225

Gold

Spot gold posted an intraday high of $1,208.54 a troy ounce as risk aversion dominated the scene during the first half of the day, closing the day marginally higher at 1,202.80. Renewed Brexit fears fueled demand for the safe-haven commodity, although the advance was limited ahead of UK's Prime Minister May speech on Tuesday, and the US holiday that kept traders away from their desks this Monday. The daily chart shows that gold was unable to close the day above the 38.2% retracement of its latest daily decline at 1,204.50, while in the same chart, indicators are retreating from near overbought readings, somehow indicating that buying interest has begun to ease. Shorter term, and according to the 4 hours chart,  the price remains above a bullish 20 SMA, currently at 1,198.90, the immediate intraday support, while the RSI turned modestly lower within positive territory and the Momentum holds neutral around its 100 level, limiting chances of a steeper advance. 

Support levels: 1,198.90 1,193.80 1,182.50    

Resistance levels: 1,204.50 1,211.90 1,220.30

WTI Crude Oil

West Texas Intermediate crude oil futures traded as low as $52.11 a barrel this Monday, ending the day pretty much flat in the 52.60 region. A stronger dollar weighed on the commodity at the beginning of the day, but bounced back after Saudi Arabia's Energy Minister Khalid al-Falih said on Monday the country will adhere strictly to its output reduction commitment. Despite US output is expected to rise this year, investors are confident that OPEC's output cut will help balancing the oversupplied market. Still, and from a technical point of view, US oil seems to have found a comfort zone rather than indicate further gains ahead, as in the daily chart, the price remains unable to surpass a horizontal 20 DMA, currently around 53.10, whilst technical indicators maintain the neutral stance seen on previous updates. In the 4 hours chart, the price has bounced from a bullish 200 SMA and advanced above a modestly bullish 20 SMA, whilst the RSI indicator heads higher around 53, reaffirming the strength of buying interest around 52.00. 

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.