US indices rallied yesterday but traders focus was on the USD as the market trades this in a much more aggressive manner, pushing us to key and critical levels.  Gold has seen 1980 and the psychological 2000 is the market game now.

There has been some progress in Washington towards a bipartisan economic relief package. The republicans are looking to cut unemployment benefits by two-thirds, which may have helped Asian stock markets have an early rally, but they have since eased off their highs.  On the whole, anu bullish approaches are unlikely to be sustained, as the 2-day FOMC meeting starts today while key US corporate earnings and US Q2 advance GDP are also coming up.

The USD has staged a short covering bounce off a 25mth low, amidst pre-FOMC adjustments.  Price action last night where we saw a lot of volatility particularly around the EURUSD highs suggests things could be running out of steam we will watch how this unravels.  The PboC has set USDCNY at 6.9985 (From 7.0025).

USDJPY – the pair hit a low of 105.20 but subsequently bounced off this level as the greenback staged a small recovery.  We are pretty sure that the BoJ will be concerned about these movess as they are in no position to manage a strong JPY.  We are now analysing whether the USD may have found a short-term base and as already mentioned the recent volatility around the highs last night could indicate we have reached extremes for now. We still very much favour selling rallies therefore, a bounce would be very welcomed.  Support comes in at 105.25 followed by 105.00 whilst on the topside 106.00 followed by 106.30/35.  We are still watching the DXY and last night we closed below the 94.19 Fibonacci level and also below the 2018 double bottom at 93.71 which is very negative.  We are however, in silly summer months coupled with Covid19 effects and moves are easily over extended so we are expecting a pullback of some sorts back towards 94.17 and possibly higher towards 94.65 where we will be selling USD’s again.

EURUSD – the common currency hit a high of 1.1773 overnight as 1.1800 becomes a very big hurdle to overcome right now. The move higher was inspired by the move higher in metals particularly Gold. But out of nowhere Gold turned quite aggressively and as such pulled EURUSD down with it to a low of 1.1714 so far and the DXY bounced. Today we watch the support at 1.1706 which is the new speed-line yesterday it was at 1.1682.  A move below 1.1706 would mean we are also below the 1.1710 daily Fibonacci level and indicate a deeper correction is looming and would open way for 1.1660 and then 1.1630. On the topside as we have already mentioned is 1.1780 followed by 1.1800.

GBPUSD – cable traded up to 1.2905 overnight as Metals surged and the USD was sold, but we managed to stay inside the current up channel where incidentally the channel tops at 1.2909 and that is now the area we will be watching as a break would mean the gear is shifting to a steeper trend.  On the Brexit front Barnier believes Johnson wants a deal despite publicly talking up readiness for no-deal exit. Adds that he remains confident that balanced agreement is possible but might be less ambitious: ‘Low quality, low profile’ deal would need to include provisions on level playing field and fisheries.  Later today we get CBI data. The range for today will be 1.2809/1.2909.

FTSE 100 – hit our support target at 6100 in yesterday’s session wtih aviation stocks weighing down on the index as the UK added Spain back to its quarantine list, before tracking US indexes higher in early session today after Senate Republicans unveiled a $1T stimulus package to boost the economy. Bearish momentum remains in play as we print below our resistance level at 6160 as we look to retest previous session lows at 6100 support level.

DOW JONES – yet again, expectations that the central bank will remain supportive and a Republican stimulus proposal of $1 Trillion lifted equity indexes higher with a run-in technology stocks overshadowing the decline in banking stocks. The latest 4H bearish candle favours further decline, with an hourly close below 26600 to provide further confirmation as we look towards 26400 and 26200 support targets.

DAX 30 – bounced off our support level at 12800 on better than expected German IFO Business Climate Index data, only to find resistance at the 200 period SMA as we print below the 13000 level. The index tracked its peers higher as US stimulus proposals overshadowed Merkel’s concerns over rising Covid-19 cases. Mixed trading signals with 13000 key line in the sand to direct today’s session.

GOLD – gold hit an all-time high in early session today at 1981, and with it our targets at 1950-1960, as the Republican party rolled out their proposal for a $1 Trillion stimulus aid package amidst a weakening greenback and increasing geopolitical tensions.  All eyes on the Federal Reserve’s two-day meeting, with the yellow metal retreating on profit taking as we enter a short position looking for further pullback with 1920 as the closest support target.

USOIL – WTI Crude oil bounced off our support target at $40.50, ending yesterday’s session in the green as the greenback hovered around a two-year low on expectations that the Fed will remain accommodative. API weekly inventories to be released today, as we look for a bigger than expected build-up to weigh down on prices with 41 and 41.50 as next support targets.

 

Rony Nehme
Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

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