Thread: Daily Market Outlook by HYCM

EUR/USD


Most major pairs held within relatively narrow ranges this Monday, with the EUR/USD pair unable to recover firmly above the 1.1000 level, but holding around it by the end of the US session. The greenback was weighed by a series of disappointing macroeconomic releases, as the New York Empire State manufacturing index printed 6.8 in October, against the 1.0 expected, or previous 1.99. Industrial production rose a seasonally adjusted 0.1% in September, matching expectations, after dropping 0.5% in August, although the capacity of utilization printed 75.4% less than the 75.6% expected. In Europe, the release of final September inflation readings passed unnoticed, as the figures matched expectations, with the YoY reading at 0.4%. The pair has posted a fresh over twomonth lows at the beginning of the day, down to 1.0963 early Asia, and maintains the negative tone, particularly in the short term, as the intraday advance seems merely corrective. Despite the data, and last week's comments from Yellen, odds of a US rate high remain roughly at 65% for December, and the market is not ready to give up on the greenback. Technically, the 4 hours chart shows that the 20 SMA has eased its bearish momentum above the current level, but still caps the upside a few pips above the current level, while the technical indicators have been in consolidative mode within negative territory. The immediate support is 1.0951, July's low, followed by 1.0910, the postBrexit low.


Support levels:1.0950 1.0910 1.0860


Resistance levels: 1.1025 1.1060 1.1100


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EUR/USD


The EUR/USD pair fell down to 1.0915, a stone's throw away from the post-Brexit low of 1.0910, after the ECB's economic policy meeting. The Central Bank left rates and its monthly QE purchases of €80bn unchanged, while President Mario Draghi emphasized that they will continue with extraordinary policy accommodation as long as needed, and reiterated that "there are no signs yet of a convincing upward trend in underlying inflation." During the Q&A session, the pair jumped to its highest for the week at 1.1038, as Draghi said that they didn't discuss a QE extension, but a few minutes later, he added that they didn't discuss tapering either, putting a halt to the early rally and resulting in the pair falling back. Draghi delayed any decision for December, when the Central Bank will have more data to make more accurate decisions.


Data coming from the US was generally positive, with seasonally adjusted initial claims up to 260K in the week ending October 15th, from a revised 247K. The 4-week moving average was 251,750, an increase of 2,250 from the previous week's revised average. The Philadelphia FED Manufacturing survey for October, print 9.7, below previous 12.8 but above market's expectations of 5.3, while existing home sales surprised to the upside in September, up by 3.2% to a seasonally adjusted annual rate of 5.47 million.


The pair bounced modestly from the mentioned low, but so far has been unable to recover above 1.0950, July's low and the immediate short term resistance, still looking quite vulnerable according to intraday technical readings and pointing to test the base of the wide long term range between 1.0840 and 1.1460. Seems unlikely the pair could break below the 1.0800/40 region without a major catalyst, but is possible that the region will be tested during the upcoming days. Technical readings in the 4 hours chart maintain the risk towards the downside, as the price was unable to settle above a still bearish 20 SMA, while technical indicators have barely bounced from oversold readings, without real strength.


Support levels: 1.0910 1.0870 1.0840


Resistance levels: 1.0950 1.1010 1.1055


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EUR/USD


The American dollar started the week moderately pressured against its major rivals, but changed course and recouped the ground lost early in the US session, following the release of a better-than-expected October preliminary manufacturing PMI. According to the report, US manufacturers recorded the strongest upturn in business conditions for 12 months, as the PMI rose from 51.5 to 53.2. Europe also seems to have started the fourth quarter in a strong fashion, as the EU composite PMI for October jumped from 52.6 to 53.7, the highest reading this year. In the EU, growth was boosted by a sharp advance in German figures, with only the French services PMI falling below expected, down to a 3-month low of 52.1. Still, the imbalance between Central Banks' economic policies, weighed mode, preventing the common currency from advancing.


The EUR/USD pair closed the day flat around 1.0880, having met selling interest on an advance up to the 1.0900 level, retaining the bearish tone seen on previous updates. Technically, the 4 hours chart shows that the price is well below a bearish 20 SMA, currently at 1.0910, the immediate resistance and the level to surpass to see the pair attempting an upward extension. In the same chart, the Momentum indicator heads higher within bearish territory, but the RSI indicator has turned back south around 33 after correcting extreme oversold readings, in line with further slides, particularly on a break below 1.0840, a strong static long term support.


Support levels: 1.0840 1.0800 1.0760


Resistance levels: 1.0910 1.0950 1.1010


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EUR/USD


After falling to a fresh multi-month low of 1.0850, the EUR/USD pair bounced back mid American session, although the recovery was one again contained by selling interest around the 1.0900 figure. The pair has been trading within a tight 50 pips range ever since the week started, and in spite of some interesting headlines released this Tuesday, the pair was unable to leave it. Firstly, Germany released its IFO survey which showed that business sentiment rose to the highest in over two years in October, as the index climbed to 110.5 from previous 109.5, indicating that the German economic recovery keeps gathering momentum. The common currency, however, was unable to attract buyers after the release.


As for the US, the S&P house price index showed that that home prices continued their rise across the country over the last 12 months up by 5.1% in August when compared to a year earlier. Consumer confidence in October, on the other hand, fell to 98.6 from a previously revised 103.5, although the report remarks that "sentiment is that the economy will continue to expand in the near-term, but at a moderate pace.” Also, ECB's Draghi spoke at the German Institute for Economic Research in Berlin, said that the central bank would certainly prefer not to have to keep interest rates "at such low levels for an excessively long time," acknowledging the cost of its ultra-loose monetary policy.


Overall, the dollar remains strong, particularly against its European rivals and the yen, despite the intraday setback triggered by the decline in consumer confidence. While the EUR/USD pair may correct higher from current levels, the bearish potential is still quite strong, with scope to break below the 1.0800 level and extend down to 1.0500/600. From a technical point of view and in the short term, the 4 hours chart shows that the price is standing a few pips above a bearish 20 SMA, while the RSI indicator bounced from oversold readings and the Momentum indicator entered positive territory with a sharp upward slope, supporting some short term gains on an extension beyond 1.0910, the immediate resistance.


Support levels: 1.0840 1.0800 1.0760
Resistance levels: 1.0910 1.0950 1.1010


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EUR/USD


The American dollar resumed its advance during the US session this Thursday, edging higher against all of its major rivals. The EUR/USD pair advanced intraday up to 1.0940, but ended the day below the 1.0900 level, not far from a daily low of 1.0882. The first series of US data was soft, with orders for capital goods declining by the most since February. Durable Goods Orders fell by 0.1% in September, against an advance of 0.1% expected, while the core reading, ex transportation, rose by 0.2% as expected. Jobless claims for the week ending October 21st were of 258K, slightly above expected, but holding near a multi-decade low. The dollar picked up momentum after the release of September Pending home sales that grew 1.5% when compared to August, and by 2.4% when compared to September 2015.


The US will release its first estimate of Q3 GDP on Friday, expected at 2.5% from previous quarter 1.4%, and the market will probably wait for the figure to decide whether or not to send the EUR/USD pair to fresh multi-month lows. Technically, the pair has pared gains once again a few pips below 1.0950, the 23.6% retracement of the latest bearish run between 1.1278 and 1.0850, the low set this week, preserving the dominant bearish trend. The 38.2% retracement of the same decline stands at 1.1010, and it will take a break above this last to consider an upward continuation. In the meantime, the 4 hours chart shows that the price is breaking below its 20 SMA, while technical indicators have turned sharply lower, with the RSI indicator already within bearish territory, all of which supports a new leg lower for this Friday.


Support levels: 1.0840 1.0800 1.0760


Resistance levels: 1.0910 1.0950 1.1010


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EUR/USD


The American dollar tread water against it major rivals by the end of last week, but suffered a setback after the FBI Director James Comey, announced on Friday that they would reopen probe into Hillary Clinton emails, on newly discovered material, "potentially pertinent" to the investigation. The bureau, however, has not yet gotten a search warrant to read them, according to news released over the weekend, and Comey has been strongly criticized for dropping such bombshell a few days ahead of the election's date, next November 8th. The EUR/USD pair jumped to its highest for the week, printing 1.0991, closing a handful of pips below the level.


Data coming from both economies was quite encouraging, with the European Commission’s economic sentiment indicator for the Eurozone up to 106.3 in October from 104.9 in September, whilst German headline inflation in October came in at 0.8% YoY, from 0.7% in September. In the US, growth rebounded in the third quarter, as the advanced annualized GDP printed 2.9%, beating expectations and well above previous 1.4%. The upcoming week will be fulfilled with fresh data and Central Banks announcements, with attention centered in the FOMC and the BOE, this last, the one with more chances to actually act.


As for the technical outlook, the EUR/USD pair seems to have found an interim bottom at the low set last week at 1.0850, the base of the long term range set between 1.0840 and 1.1460 early 2015. The daily chart, however, shows that the price stalled its recovery right below a sharply bearish 20 SMA, and while technical indicators have left oversold territory and head north, are still within negative territory. Furthermore, the price is below 1.1010, the 38.2% retracement of its latest daily fall, and the level to beat to confirm further recoveries. In the shorter term, and according to the 4 hours chart, technical indicators have lost upward strength in overbought territory, while the price was unable to advance beyond a bearish 100 SMA, although with the price near its highs, a downward correction is not yet confirmed. As long as the price remains above 1.0950, the risk will be towards the upside this Monday.


Support levels: 1.0950 1.0910 1.0850


Resistance levels: 1.1010 1.1045 1.1090


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EUR/USD


The EUR/USD pair surged to a fresh 3-week high of 1.1068, with the dollar trading broadly lower across the board after a US Presidential poll, carried by ABC News/The Washington Post, showed that Donald Trump is one point above Hillary Clinton in voters' intentions, pretty much attributed to last Friday's announcement from the FBI to investigate new emails from Clinton. Macroeconomic releases coming from the US were strong, with the October Markit manufacturing PMI up to 53.4 the highest reading for this year. The ISM manufacturing PMI for the same month, resulted at 51.9, beating expectations of an advance up to 51.7. The negative note came from construction spending, down by 0.4% in September.


Despite upbeat US data that supports the case for a December hike and the upcoming FED meeting this Wednesday, the greenback risks further declines during the upcoming Asian session, as the negative sentiment towards the American currency will likely persists. From a technical point, the 4 hours chart shows that technical indicators are in extreme overbought, despite the pair barely added 100 pips daily basis, amid previous intraday limited ranges, which means that further gains are still possible. The pair needs to extend beyond the mentioned daily high to be able to do so, as it’s the 50% retracement of its latest decline. Activity is expected to fade during the upcoming Asian session and ahead of the FOMC meeting, which will determinate whether this bearish run in the greenback is sustainable or not.


Support levels: 1.1050 1.1010 1.0950


Resistance levels: 1.1090 1.1120 1.1160


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Thursday 10 November 2016


EUR/USD


Against all odds, Donald Trump has been elected as the 45th President of the United States of America, and surprisingly, the greenback also won, at least against the common currency and the dollar bloc. The American dollar and Wall Street began shedding ground early Asian session, when the first exit polls showed that Mrs. Clinton was not doing as well as expected, and plummeted once Trump´s victory was confirmed early London. The movements were in line with the magnitude expected by investors, although what nobody saw coming was that US stocks would trim all of those intraday losses and rally to fresh multi-month highs.


There's still much uncertainty over both, the economic and political future of the US, not to mention how the FED will act from now on, which means that wild moves in a volatile environment are not yet over. However, there is a clear winner for this election, and it's the Republican Party that now controls not only the Presidency, but also the House of Representatives and the Senate, which means the party will have a clear path when it comes to implement new policies. The question is, would Trump and its co-party members agree? The other winners of the day were US yields, as the 10-year benchmark reached 2.01%, while the 30-year yield rose above 2.80% in the American afternoon.


The EUR/USD pair soared to 1.1299, its highest in two months, but closed the day barely above the 1.0900 level, with the common currency additionally weighed by the European Commission decision to cut the EU and the UK growth forecast. According to the official report, growth would slow to 1.7% this year from 2.0%t in 2015 and decelerate further to 1.5% in 2017 before picking up again to 1.7% in 2018. The wild intraday ride in the pair has left technical readings partially distorted, although the risk is towards the downside, considering that the pair is at fresh two-week lows, and that it failed to hold on to gains above its daily MAs. Shorter term, the 4 hours chart shows that the price settled below all of its moving averages, and that technical indicators maintain their bearish slopes near oversold readings. The immediate support comes at 1.0910, with a break below it exposing the October low of 1.0850, en route to 1.0800.


Support levels: 1.0910 1.0850 1.0800


Resistance levels: 1.0950 1.1010 1.1060


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EUR/USD


The EUR/USD pair closed the week at 1.0846 the lowest close since early March this year, as the American dollar outperformed all of its major rivals, except the British Pound, on the back of the result of US Presidential election, resulting in Donald Trump becoming the 45th president of the USA. The initial sell-off in the greenback, and worldwide stocks, was reverted on promises of policies aimed to boost growth, including tax cuts and huge infrastructure spending. Furthermore, markets are firmly believing that the FED will have to raise rates at a faster pace during 2017, to catch up with what are seen as inflationary measures. At this point, a December rate hike seems to be fully priced in, so whether the greenback will be able to extend its rally, or not, is up to the FED actually pulling the trigger, and supportive US macroeconomic data. During the upcoming days, attention will likely remain in Trump and any news on what to expect from his upcoming administration.


Technically, the pair stands at a major long term support, the 1.0800 region, as ever since April 2015, and with a few exceptions, strong buying interest has surged around the level, resulting generally in a recovery up to the top of the range that persists ever since, in the 1.1460 region. The ongoing turmoil and uncertainty, however, may result in another false downward breakout, with scope for the pair to test 1.0461, March 2015 low. For the upcoming days, and according to the daily chart, the risk is towards the downside, given that the price is developing far below all of its moving averages, whilst technical indicators present sharp bearish slopes within negative territory. For the shorter term, the 4 hours chart also supports a downward extension as the RSI indicator consolidates near oversold reading, while the price stands near its daily low, and below a sharply bearish 20 SMA, now around 1.0950, after it crossed below the 200 and 100 SMAs.


Support levels: 1.0800 1.0760 1.0720


Resistance levels: 1.0865 1.0910 1.0950


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Monday 21 November 2016


EUR/USD


The market kept buying the greenback for a second consecutive week, pushing the EUR/USD pair to a fresh year low of 1.0568 on Friday. Demand for dollar assets, triggered by Trump´s victory and hopes his growth policies will send inflation higher, sent the dollar index to its highest close since 2003, up 2.15% for the week at 101.32. FED's Chair, Janet Yellen, said this past week that a rate hike could take place "relatively soon," fueling dollar's rally, alongside with positive local data, including the CPI that rose in October by 0.5% from a year earlier, at the fastest rate of growth in two years, whilst weekly unemployment claims fell to 235K, the lowest reading since November 1973.


Still, the movement seems quite overstretched, as the EUR/USD pair has fallen for ten days in-a-row, as a December hike has been fully priced in. A corrective movement should not be dismissed, although is yet to be seen if that could be enough to revert the dominant bearish trend. Technically, the daily chart shows that indicators maintain the strong bearish strength, despite being in extreme oversold territory, suggesting the pair may extend its slide, down to 1.0505 first, December 2015 monthly low, and 1.0460 later, the lowest for 2015. In the 4 hours chart, a bearish 20 SMA has been steadily rejecting advances for the last two weeks, while technical indicators are consolidating within negative territory, supporting a downward extension on a break below 1.0560, the immediate support.


Support levels: 1.0560 1.0505 1.0460


Resistance levels: 1.0640 1.0690 1.0720


See more analysis at https://www.hycm.com/en