EUR/USD
Late Wednesday, US President Donald Trump speaking before the Congress and a couple of FED speakers in separated events, gave the greenback and equities a boost, sending Wall Street to record highs. The EUR/USD pair plunged to 1.0513, but the dollar’s buying euphoria eased in the US afternoon, with the pair recovering up to the 1.0560 region, where it stands by the end of the day. Demand for USD-linked assets was triggered by a conciliatory tone of the new US president when addressing to policy makers, pretty much reiterating his campaign pledged, without getting into much details. What actually backed the rally was a confirmation that tax cuts will reach also corporations, and not only the mid-class, and a $1 trillion plan for infrastructure investment.
In the data front, EU final Markit manufacturing PMIs for February, confirmed the growth path the area got into last December as the index came at 55.4, up from 55.2 in January, its highest in almost six years, although below market’s expectations of 55.5. In Germany, growth reached its highest level since May 2011, with the PMI up to 56.5 from January’s 56.4, while inflation jumped above 2.0% in the country, for the first time since August 2012. German headline came in at 2.2% YoY in February versus 1.9% YoY in January. Finally in the US, Core PCE inflation surged to 1.9% in January, from previous 1.6%.
From a technical point of view, the EUR/USD pair presents a moderate bearish risk in the short term, given that in the 4 hours chart, the price settled below all of its moving averages, with the 20 SMA just a few pips above the current level, and technical indicators recovering some ground within bearish territory. The lower low for the week also favors additional declines as long as the prices remains below the 1.0600 level, and with a break below 1.0520 required to confirm further declines.
Support levels: 1.0590 1.0565 1.0520
Resistance levels: 1.0635 1.0660 1.0710
USD/JPY
The USD/JPY pair advanced up to 114.04, its highest since mid February after trading as low as 111.68 on Tuesday, on renewed optimism the new US administration will boost growth and inflation, and following comments from several US FED officers, which lifted odds for a March rate hike up to 80%. In separated events, San Francisco Williams and New York Dudley signaled that a rate hike is on the table, on accelerating inflation and employment at its best level in years. The rally triggered by US President Trump in stocks fueled the advance of the pair, although the upward momentum eased in the US afternoon, with the USD/JPY pair now trading around 113.50. News coming from Japan were encouraging, as the Nikkei Manufacturing PMI continued to expand in February to 53.3 from January’s 52.7, marking the highest reading since March 2014. Also, supporting the rally in the pair was a sharp comeback in US Treasury yields that are still the main motor for the JPY. If yields retreat from their recent highs, the pair will likely follow-through. Technical readings in the 4 hours chart indicate that the pair may correct lower, as indicators are retreating strongly from overbought levels, but the price has recovered above its 100 and 200 SMAs, with the largest at 113.30, and offering an immediate support. The risk will turn towards the downside in the short term, on a break below 113.00.
Support levels: 113.00 112.50 111.95
Resistance levels: 114.00 114.40 114.85
GBP/USD
The GBP/USD pair fell to its lowest in six weeks, printing 1.2280 early US session, as a soft UK Markit manufacturing PMI pushed the pair below February’s low, triggering stops and fueling the slide, later backed by US FED’s favorite measure of consumer prices, the PCE price index that climbed to 1.9% from a year earlier, not far from the 2% percent target that was last met in April 2012. The UK manufacturing sector index in February printed 54.6, its lowest in three months. The Pound came under pressure earlier this week on speculation that Scotland will try to leave the UK after the kingdom opted for a hard Brexit. Now trading around 1.2300, technical readings maintain the risk towards the downside after the bearish breakout of February’s range. In the 4 hours chart, the 20 SMA has accelerated its slide, currently around 1.2410, while technical indicators have lost downward momentum, but remain well into negative territory. The pair has its next relevant support at 1.2260, the 61.8% retracement of the January rally, with little in the way below it, until 1.2100.
Support levels: 1.2260 1.2225 1.2170
Resistance levels: 1.2345 1.2390 1.2440
GOLD
Gold fell to $1,236.83 a troy ounce intraday, as increased chances of a FED March hike weighed on the commodity. The metal bounced, however, as dollar’s demand eased mid American afternoon, ending the day around 1,246.90, pretty much flat. Despite spot set a lower low and a lower high daily basis, the dominant bullish trend has been barely affected, white surprising considering odds for a March hike rose to around 80%. That said, it will take the slightest dovish comment from any FED officer to see the commodity recovering its shine. From a technical point the daily chart shows that the price bounced strongly after testing its 20 DMA, while the Momentum indicator resumed its advance within positive territory, and the RSI indicator also turned south after correcting overbought conditions. In the 4 hours chart, the price bounced from a bullish 100 SMA, although a bearish 20 SMA caps the upside whilst technical indicators have recovered within negative territory, maintaining their upward slopes, but still not enough to confirm further gains. A recovery above 1,255.25, the 61.8% retracement of the post-US election decline, however, will likely see the metal testing its recent highs around 1,263.80.
Support levels: 1,238.90 1,230.00 1,222.10
Resistance levels: 1,255.25 1,263.80 1.273.20
WTI CRUDE
Crude oil prices ended the day marginally lower, with West Texas Intermediate futures closing at $53.79 a barrel, weighed by news that US stockpiles inched higher for an eighth consecutive week, although the decline was limited, as the build was smaller-than-expected. According to the EIA, the country added 1.501M barrels last week, against expectations of 3.079M. Commercial stockpiles stand at 520.2 million barrels, exceeding the seasonal maximum. WTI has continued to make no progress from the technical point of view, stable above a horizontal 20 DMA in the daily chart and with technical indicators hovering around their mid-lines, lacking directional strength. In the 4 hours chart, the price has settled below a modestly bearish 20 SMA, but above a flat 100 SMA, whilst technical indicators lack directional strength slightly below their mid-lines. The commodity will likely continue in its 50/55 range, with increasing bearish odds coming from the macroeconomic background.
Support levels: 53.40 53.00 52.50
Resistance levels: 54.75 55.30 56.00
DJIA
After closing in the red on Tuesday, US equities rallied to all-time highs late Tuesday, as the "Trump-trade" came back to life following US president speech before the Congress. The DJIA traded as high as 21,016 ahead of Wednesday’s opening, ending the day at 21.115.42, up by 303 points or 1.46%. The index set a record high intraday of 21,168. The Nasdaq Composite and the S&P also closed at record levels, with the first up 1.35%, to 5,904.03, and the second adding 1.37%, to 2,395.95. Financials were among the best performers worldwide, and within the Dow, JPMorgan Chase led gainers, up 3.47%, followed by American Express that closed 2.39% higher. Wall-Mart changed course and was the worst performer, ending the day 0.72% lower. Technical readings in the daily chart have accelerated their advances within extreme overbought levels, with the RSI indicator currently at 88, yet a downward corrective move remains unlikely for now, as market sentiment favors additional advances. In the shorter term, and according to the 4 hours chart, technical indicators retreated within overbought levels, but the benchmark is far above its moving averages, maintaining the upside favored.
Support levels: 20,779 20,724 20,668
Resistance levels: 20,855 20,900 20.940
FTSE 100
The Footsie rallied pass February high, and ended at record highs, as equities’ traders worldwide cheered Trump’s words late Tuesday. A weaker Pound added to the FTSE 100 advance that managed to close at 7,382.90, up daily basis by 121 points or 1.64%. Persimmon led advancers, adding 5.91% while Ashtead Group followed, ending the day 5.74%. Mining-related equities, however, closed in the red as gold fell sharply intraday, with Randgold Resources shedding 2.69% and Fresnillo 0.87%. The daily chart shows that the upward potential increased, as technical indicators turned higher after several days of consolidating within positive territory, and extended far above all of its moving averages. In the 4 hours chart, technical indicators pulled back modestly within overbought territory, but the index is also above all of its moving averages, with the 20 SMA gaining upward strength, all of which supports additional advances on a break above 7,397, the intraday high.
Support levels: 7,238 7,195 7,160
Resistance levels: 7,285 7,315 7,342
DAX
The German DAX surged by whopping 237 points or 1.97%, to close the day at 12,067.19, level last seen in April 2015. Strong local data supported the rally, as German’s inflation is expected to be at 2.2% in February according to preliminary estimates, whilst the German manufacturing PMI reached its highest level since May 2011 in February according to Markit, up 56.8 from 56.4 in January. All components closed in the green, with banks leading the way higher, as Deutsche Bank added 5.31%, while Commerzbank gained 4.13%. The daily chart for the benchmark shows that it stands some 20 points above the mentioned close, having extended well above a bullish 20 DMA after failing to break below it, whilst the RSI indicator heads sharply higher around 68, and the Momentum indicator also turned higher, all of which supports some further gains ahead. In the 4 hours chart, technical indicators have partially lost upward momentum, but remain in overbought territory, whilst the index is also developing far above all of its moving averages, supporting the longer term perspective.
Support levels: 12,031 11,982 11,938
Resistance levels: 12,100 12,148 12,183
