The US dollar inched higher after October’s retail sales beat expectations. There has been a lack of interest in the single currency following its fall below the daily support at 1.1530.
The divergence between the 20 and 30-hour moving averages indicates an acceleration in the sell-off. The bears are targeting the demand zone around 1.1200 from last July.
The RSI’s oversold situation may prompt momentum traders to cover. Though a rebound is likely to be capped by 1.1370 and sellers would be eager to sell into strength.
GBPJPY attempts to rebound
The sterling recouped losses after Britain’s unemployment rate dropped to 4.3%. On the daily chart, the pair saw support near the 61.8% (152.60) Fibonacci retracement of the October rally.
A bullish RSI divergence was a sign that the bearish pressure was fading. A break above 153.60 could be an attempt to turn the mood around.
The initial surge may need more support after the RSI shot into the overbought area. Should the pound stay above 152.35-152.60, a rebound would lift it towards 155.20.
NAS 100 tests peak
The Nasdaq 100 bounces back supported by robust tech earnings.
The index showed exhaustion after a four-week-long bull run. A combination of an overbought RSI and its bearish divergence made traders cautious in buying into high valuations.
A break below the psychological level of 16000 has triggered a wave of profit-taking. A deeper retreat below 16020 would send the index to the previous peak at 15700 which coincides with the 30-day moving average.
On the upside, A rally above 16400 would resume the uptrend.
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Gold treads water as markets await a slew of central bank decisions in the coming days.
The recent break above the daily resistance at 1805 is a prerequisite for a bullish turnaround. However, the rally has met stiff selling pressure at the supply zone around 1813 which is at the origin of the September sell-off.
Along with a repeatedly overbought RSI, a combination of profit-taking and fresh selling may weigh on the precious metal in the short term. 1777 is the immediate support and its breach would send the price to 1760.
USDCAD pierces through supports
The Canadian dollar surged after the Bank of Canada ended its QE.
As the RSI from the daily chart showed an oversold situation, the greenback had attracted bargain hunters at its four-month low around 1.2300. However, it has given up all recent gains as it revisits the bottom.
1.2430 is now fresh resistance and the downtrend may resume. 1.2200 would be the next target as those who have been waiting for a catalyst join in. An oversold RSI has caused a temporary rebound which is likely to meet strong selling interest.
USOIL retraces after overextension
WTI crude tumbled after an unexpected surge in US inventories. Medium-term sentiment remains bullish, though an overbought RSI on the daily chart may prompt buyers to proceed with caution.
A fall below 82.50 and then 81.00 has exacerbated profit-takings as late buyers rushed for the exit. 79.50 is the next support.
A bearish breakout would extend the correction to 77.00 which was previously a resistance, making it an area of interest. An oversold RSI may trigger a rebound with 82.30 as a fresh resistance.
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The US dollar steadies over lower-than-expected initial jobless claims.
Sentiment remains upbeat, however, the pair is struggling to climb past the psychological level of 115.00, probably due to overextension. The RSI’s double top in the overbought area and bearish divergence suggests that the rally could be losing steam.
A breach below 113.90 would prompt weaker hands to exit, leading to a pullback towards 113.00. A rebound past the said resistance would send the price to March 2017’s high of 115.40.
XAGUSD to test critical ceiling
Silver stalls as the greenback reclaims some lost ground. The break above the round number of 24.00 indicates strong commitment from the buy-side.
The bulls are looking at the major resistance at 24.80 from the daily timeframe, as a breakout would end a five-month-long correction and pave the way for a bullish reversal.
However, an overbought RSI coupled with a bearish divergence suggests possible exhaustion in the run-up. 23.60 would be the first level to watch for if the price pulls lower in search of support.
SPX 500 tests all-time high
The S&P 500 flies high supported by better-than-expected third-quarter earnings. The index has reached the previous all-time high at 4550.
A breakout may trigger a runaway rally. Nonetheless, a repeatedly overbought RSI may cause a limited pullback as buyers take profit.
A drop below the immediate support at 4515 would pull the trigger. 4445 would be next as it coincides with the 38.2% Fibonacci retracement level of the October rally. The bulls are likely to buy the dips though after sentiment turns optimistic.
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The pound’s rally stalled after Britain’s core CPI dropped below 3% in September. The pair’s recovery has picked up the pace after a close above the daily resistance at 1.3730.
1.3900 is the main hurdle and a bullish breakout would resume the uptrend. However, the RSI’s triple top in the overbought area indicates an overextension. A pullback is necessary to let the bulls consolidate their gains.
The supply-turned-demand zone around 1.3710 is the first level to watch for. Its breach may trigger more profit-takings towards 1.3630.
USDCAD sell-off continues
The Canadian dollar rallied after solid inflation data in September. The US dollar has found little buying interest near July’s lows (1.2310).
A bullish RSI divergence out of the oversold area suggests a deceleration in the downward momentum. But buyers need confirmation of a reversal, and a break above1.2370 would be the first step to force sellers to cover.
Sentiment remains bearish unless the pair lifts offers around 1.2500. Failing that,the greenback could be vulnerable to a new round of sell-off towards 1.2250.
USOIL gains support
WTI crude bounced back after the EIA reported a surprise drop in US inventories.
A previous double top had indicated potential exhaustion as the price struggled to achieve a higher high. However, the price has found support at 81.00 as buyers were eager to stake in at a better price.
Overall sentiment remains upbeat and a close above at 83.80 may trigger an extended rally to 86.00. An overbought RSI may temporarily limit the momentum. But as long as the price is above the said support the directional bias stays bullish.
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The US dollar retreated after retail sales fell below 1% in September. The euro’s rally above 1.1570 has led some short interests to close their positions.
The pair is testing the key resistance at 1.1640, which coincides with the 20-day moving average and the first resistance on the daily chart. A bullish breakout could pave the way for recovery to 1.1750.
However, buyers could be hesitant to commit after an overbought RSI caused profit-taking. In case of a pullback, 1.1540 is fresh support to keep the current rebound relevant.
NZDUSD tests key resistance
The New Zealand dollar rallies as Q3 inflation beats estimates.
After a few days of sideways action, the indecision ended with a break above 0.7020, the origin of the last sell-off. In turn, this set the kiwi on a bullish course.
Sellers would scramble to get out after their failed attempts to push lower. An overbought RSI may cause a temporary pullback.
0.7040 is the immediate support, then 0.6980 is the second line of defense in case of a deeper correction. A close above 0.7110 would lift the pair towards the previous peak at 0.7170.
GER 40 heads towards the major hurdle
The Dax 40 bounces higher as the market bets on a prolonged low-interest environment.
The major floor at 14800 has seen strong buying interest as traders bought the dip. A bullish close above 15200 has put the short side under pressure. Then a rally above the 30-day moving average indicates further commitment from the buy-side.
The momentum could slow down momentarily as the RSI shows an overbought situation. 15300 would be the first support. A break above the daily resistance at 15700 may resume the uptrend.
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The US dollar initially tumbled after a minor drop in August’s core CPI. However, the pair can capitalize on strong buying interest from the trough near 0.9150.
A tentative break of August’s high at 0.9240 suggests that buyers are in control of price action. Though an overbought RSI has tempered the bullish drive, the latest pullback to 0.9180 can be an accumulation phase.
A rebound may lift bids to July’s high at 0.9275. A breach of that ceiling would attract momentum buying and resume the greenback’s rally.
XAUUSD bounces off demand zone
Gold surged thanks to a decline in Treasury yields. The precious metal had met stiff selling pressure at the triple top (1830) from the daily chart.
Short-term sentiment has turned positive after a week-long consolidation above the demand area of 1780. The break above 1803 would prompt the bears to cover their bets. An overbought RSI may trigger a temporary pullback.
A rebound would challenge the critical level of 1830 once again, where a bullish breakout may resume the five-week-long rally.
US 30 breaks support
The Dow Jones 30 retreated as last month’s US inflation remained above the Fed’s target. The index was bought out of the dip over the daily support at 34580.
The rebound turned out to be short-lived after a breakout invalidated this key floor. A bearish MA cross indicates that sentiment has become increasingly downbeat.
The psychological level (34000) from last July would be the next target. On the upside, 34950 is a fresh resistance where sellers would be eager to erase any rebound.
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Market Morning Briefing: Dollar Index Has Risen To Test 93
STOCKS
Dow has to sustain above 35000 to keep the chances alive of breaking above 35250. Else a fall is possible. DAX seems to lack strength to break above 15800 and can retain its 15200-15800 range for some more time. Nikkei can rise within its 27000-29500 range. Shanghai also looks positive to move up towards 3550-3600 in the near-term. Sensex and Nifty are consolidating at higher levels and continue to look bullish.
Dow (35101.85, −106.66, -0.30%) has come-off yesterday. It has to sustain above 35000 to keep alive the chances of breaking above 35250 and see a rise to 36000 that we have been expecting. A fall below 35000 can drag the Dow down to 34250-34000 and will keep the broader 33000-35250 range intact for some more time.
DAX (15745.41, −16.04, -0.10%) tested 15800 for the second consecutive day but did not break above it. A fall below 15600 will indicate that the 15200-15800 range is still intact and can drag DAX down towards 15400-15200 – the lower end of the range in the coming days. It will then delay the expected break above 15800 and the rise to 16000-16200 that we have been expecting.
Shanghai (3495.09, +0.46, +0.013%) has risen above 3480 and looks bullish in the near-term to test 3560-3580 and even 3600 on the upside. From a bigger picture, Shanghai will have to rise past 3600 to become bullish again. Else a pull-back to 3400-3300 again cannot be ruled out. Price action in the 3580-3600 region will need a close watch.
COMMODITIES
Commodities trade lower today with Copper, Gold and Silver still looking bearish for the near term while Dollar strengthens. Gold can remain bearish below 1750 while Silver can trade below 25 and Copper can test 4.20 (initial support) or even 4.10/00 (deeper support zone) before bouncing back to higher levels. Crude prices look bearish too towards 65 (Brent) and 60 (WTI).
Brent (69.02) and WTI (66.66) both trade lower today. We may expect a fall towards 65 on Brent and 60 on WTI if the fall continues in the near term. Immediate resistance are seen near 70-72.50/73 on Brent and 69/70 on WTI.
Gold (1735.10) has bounced well from yesterday’s low of 1677. Although the corrective rise is in place, we are bearish on Gold while below 1750/60. A strong Dollar in the near term can prevent any rise in Gold indicating bearishness for this week and possibly the next.
Silver (23.51) tested 22.35 breaking below 23, but has bounced well from there. If the bounce sustains, it can rise towards 24-25 can be possible. But if Dollar Index continues to strengthen, it is bearish for Silver for an eventual fall towards 21-20 in the medium term.
FOREX
Dollar Index looks strongly bullish but we would wait to watch if it faces any rejection from 93.30/40 region or move up straight towards 94.0-94.50 on the upside. Euro on the other hand has fallen below 1.1750 as it could not sustain the rise seen yesterday. A fall to 1.17-1.16 cannot be negated while the Dollar continues to trade strong. Aussie and Pound look bearish towards 0.73-0.7286 and 1.38-1.37 respectively. USDJPY can rise to 110.50/80 before falling off from there. USDCNY can rise to 6.49/50. Weakness in Chinese Yuan and Euro can drag Rupee lower today taking t beyond 74.40. USDINR offshore rate quotes 74.43 and could indicate a sharp gap up opening today on the onshore markets and eventually take it higher to 74.60/70.
Dollar Index (92.99) has risen to test 93 and could be headed towards initial resistance near 93.30/40 which if manages to break could be strongly bullish towards 94.0-94.50 in the next 1-2 weeks.
Euro (1.1732) rose to 1.1769 yesterday but could not sustain higher as it fell sharply to below 1.1750 and is heading towards 1.17 now. A break below 1.17 would drag Euro further down towards 1.16. View is strongly bearish for the near term.
EURJPY (129.45) has bounced a bit but we cannot negate a fall to support near 128.70 before bouncing back h=sharply from there. On the upside, 130.50 continue to hold as important resistance.
Dollar-Yen (110.30) trades higher and at immediate short term resistance. A break above 110.30 will eventually take the pair higher towards 110.50/80 on the upside before a reversal is seen. Immediate view is bullish while dollar Index heads higher.
Aussie (0.7319) looks weak and could fall towards 0.73-0.7286 initially.
Pound (1.3838) is bearish as it falls towards 1.37. Watch for any interim support near 1.3790-1.3800. Resistance below 1.40 is holding strongly.
USDCNY (6.4795) has dipped after a test of 6.4881 yesterday. We continue to look for a range of 6.45-6.49/50 within which a test of the upper end of the range looks more likely before a fall is seen in the medium term. Watch for a rise to 6.49/50 in the next few sessions.
USDINR (74.27) rose to test 74.2850 on the onshore markets yesterday in line with our expectations of a rise to 74.25/30 that looked like an immediate resistance yesterday. But the weakness in Euro and Chinese Yuan has been significant and can drag Rupee too beyond 74.30 today. USDINR can test 74.50/60/70 on the upside on a sharp upmove that looks most likely today. The offshore rate quotes at 74.43 just now indicating a possibly higher opening on the onshore markets today. Rupee weakness in on the cards for the next few sessions contrary to our expectation of 74.25/30 to hold (mentioned yesterday)
INTEREST RATES
The US Treasury yields sustain higher. Though there is an immediate resistance ahead, the chances of an extended rally breaking above the immediate resistances cannot be ruled out. The US Consumer Price Index (CPI) inflation data release tomorrow will need a close watch to see if it triggers an extended rally or not. The German yields are holding above their supports and can see a corrective rally in the coming days. The 5Yr GoI has come-off sharply and can test 5.7%-5.69% in line with our expectation and then can bounce-back.
The US 2Yr (0.22%), 5Yr (0.79%), 10Yr (1.31%) and the 30Yr (1.96%) Treasury yields remain higher. The 10Yr has immediate resistance at 1.35%. A break above it can see an extended corrective rise to 1.4%-1.45%. Similarly, the 30Yr can move up towards 2.1%-2.15% on a break above 2%. Thereafter the broader downtrend in the Treasury yields can resume with a fresh fall.
The German 2Yr (-0.76%), 5Yr (-0.73%), 10Yr (-0.46%) and 30Yr (-0.02%) yields remain stable after bouncing back sharply on Friday. We retain our view of seeing a corrective rally to -0.30%/-0.25% (10Yr ) and 0.10% (30Yr) in the coming weeks. Supports at -0.45%/-0.40% (10Yr) and -0.05% (30Yr) are holding well as of now.
The Indian 5Yr GoI (5.7290%) has come-off sharply in line with our expectation failing to break above 5.78% yesterday. Our view of seeing a test of 5.7%-5.69% on the downside remains intact. Thereafter a bounce-back move to 5.74% is possible
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GBP/USD Outlook: Cable Is On Track For Strong Weekly Gains, Bulls Pressure Key 1.40 Resistance Zone
Cable remains firm and holding near a five-week high on Friday, pressuring key barriers at 1.3990/1.4000 (Fibo 61.8% of 1.4249/1.3571/twisting daily cloud/psychological).
The pair advanced strongly this week and is on track for the biggest weekly gains since the last week of August 2020, lifted by the softer dollar after dovish Fed and improved sentiment on a fall in coronavirus cases in Britain.
Technical studies on the daily and weekly charts are in bullish setup and support the advance, however, strongly overbought daily stochastic warns that bulls may face headwinds from 1.40 resistance zone.
End of week profit-taking after about 1.5% weekly advance, could also contribute.
Corrective dips are expected to offer better buying opportunities and should be ideally contained at 1.3920/00 zone (100DMA/former lower high), with possible extended downticks to find ground above 1.3824 (Fibo 38.2% of 1.3571/1.3981 rally) to keep bulls in play.
Completion of reversal pattern on weekly chart signals that 1.4249/1.3571 corrective phase is likely over that gives boost bulls for push through 1..40 pivot.
During the GMT midnight hour to Friday, the EUR/USD approached the resistance of the weekly R3 simple pivot at 1.1897 and the 1.1900 mark. However, the rate reversed its direction on Friday morning and retraced down.
An extension of the decline could look for support in the weekly R2 simple pivot point at 1.1864 and the 55-hour simple moving average, which during the morning hours was located near the 1.1850 level. Below these levels, the 1.1850 mark and the 100-hour SMA could provide support.
On the other hand, a potential surge would have to test the recent Thursday high levels, the weekly R3 simple pivot point at 1.1897 and the 1.1900 mark. Above these levels, the 1.1950 level and the June high near 1.1980 could provide resistance.
USD/JPY Reaches Below 109.50
As the 55-hour simple moving average approached the USD/JPY from above, it pushed the USD/JPY down. At midnight to Friday, the rate had shortly reached below the 109.40 mark. Afterwards, the pair tested the resistance of the 109.60 mark and the weekly S1 simple pivot point at 109.58.
However, a decline of the rate could first find support in the mentioned 109.40 level. Afterwards, note the lower trend line of a channel down pattern near the 109.30 mark. Below the 109.30 level, the July low level near 109.07 might provide support.
GOLD Breaks 1,825.00 Resistance
On Thursday, the yellow metal’s price managed to pass the resistance of the zone that is located near the 1,825.00 mark. On Friday morning, the price confirmed the zone as support.
Meanwhile, the July high level zone has been marked on the chart. The zone provided resistance on Thursday and caused the most recent retracement back down.
If the price passes the resistance zone of the July high levels, eventually the metal could aim at the 1,850.00 mark. However, round price levels could slow down the surge.
However, a decline below the support zone near 1,825.00 could look for additional support in the 55, 100 and 200-hour simple moving averages at 1,815.00 and near 1,808.00.
GBPJPY Attempts To Overcome 40-Day SMA
GBPJPY is challenging the 40-day simple moving average (SMA) and the 153.40 resistance, following the bounce off the 148.45 support level. A successful jump above 153.40 could take the market towards the 40-month peak of 156.06 before meeting the 156.50 barrier, reached in January 2018. Moving higher, the 162.80 line, taken from the inside swing high in April 2016 may halt the bullish actions.
In case the price retreats below the 20-day SMA, immediate support could come from the 23.6% Fibonacci retracement level of the upward move from 133.00 to 156.06 at 150.60 before pausing the decline at 148.45. Underneath these obstacles, the 200-day SMA, which overlaps with the 38.2% Fibonacci of 147.25 could be in the spotlight.
In conclusion, GBPJPY is in a positive move in the near-term and in a declining tendency in the medium-term after the fall from 156.06.
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Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 