Daily Market Lookup

• The dollar weakened in early European trade Friday, amid doubts about the pace with which the U.S. economy will rebound from the coronavirus-inspired slowdown. Dragging the greenback lower was the news Thursday that applications for U.S. unemployment benefits increased, defying consensus forecasts for a further decline, while the Philadelphia Fed reported a disappointing reading for its manufacturing index. This came a day after the Federal Reserve warned that the path to U.S. economic recovery from the Covid-19 outbreak remained highly uncertain, with the recovery in hiring starting to slow. The euro has been the biggest beneficiary of a recent decline in the dollar, but this tone could be tested with the release of eurozone manufacturing data later in the session. That said, “the EUR has much further to go when/if the market realizes that the tail risks in the EUR are much smaller now compared to 9-12 months ago,” Larsen said, adding that the USD could weaken by as much as 20-25% over the coming two years, aiming “for (at least) >1.25 levels in EUR/USD. Retail sales volumes rose by a much stronger than expected 3.6% from June and were 1.4% higher than in July 2019, the Office for National Statistics said, representing a sharp recovery from double-digit falls in April and May. The Chinese currency has responded favorably to the idea that the trade agreement between China and the U.S. could well stay intact despite a recent escalation of tensions, as Beijing confirmed the two countries plan to hold talks soon and White House economic advisor Lawrence Kudlow said he expected China to make major purchases of U.S. oil and other exports soon. The dollar was on the defensive against most currencies on Friday after a rise in U.S. jobless claims and a dip in Treasury yields dampened the appeal of holding the greenback. The euro, which has been the biggest beneficiary of a recent decline in the dollar, will come into focus later on Friday as traders brace for euro zone manufacturing data. A larger-than-expected rise in weekly U.S. jobless claims came just one day after Fed officials warned that a recovery in hiring is starting to slow, raising doubts about how quickly the world's largest economy will bounce back from the coronavirus. Concern about the U.S. economy, combined with an excess supply of dollars already in circulation due to the Fed's massive quantitative easing, are likely to weigh on the U.S. currency in coming weeks, analysts say. The number of Americans filing new claims for unemployment benefits unexpectedly rose back above the 1 million mark last week, data showed on Thursday in a setback for a U.S. job market that has been crippled by the coronavirus pandemic. Sentiment for the dollar and risk assets like equities had already taken a hit after dovish minutes from the Fed's most recent meeting, which were released on Wednesday. Currency moves could be subdued during Asian trading due to a lack of major economic data and concerns about friction between the United States and China. Traders in the euro are looking ahead to the release later Friday of manufacturing data for the euro zone and for Germany, Europe's largest economy. The growing consensus is the euro will continue to edge higher because European governments have taken decisive action on stimulus measures to support growth. In comparison, U.S. Republicans and Democrats are still at loggerheads over additional economic stimulus, which analysts said is another reason to favour the euro over the dollar.
• Oil was up on Friday morning in Asia, looking to end the week with a third straight week of gains boosted by producer efforts to cut output as concerns over the global economic recovery from COVID-19 increase. Following its joint ministerial monitoring committee meeting on Wednesday, OPEC+ continues to focus on member compliance to agreed cuts, with a particular focus on members who have not done so, who could face production cuts of 2.31 million barrels daily as compensation. An OPEC+ internal report said that oil demand is forecast to fall by 9.1 million barrels per day (bpd) in 2020, a 100,000 drop from its previous forecast. But the report warned that the demand drop could increase by 11.2 million bpd if a prolonged second wave of COVID-19 hits countries such as the U.S., China, India and Europe in the second part of the year. Some investors predicted that Brent futures could remain near the $45-mark but were pessimistic about a further climb in the short run. Meanwhile, Chinese buyers have reportedly chartered around 19 tankers for September to transport a record order of roughly 37 million barrels of U.S. oil to China. Should the order be placed as planned, it would smash May’s record of 35.2 million barrels, and would be an indication that China is ramping up purchases to meet its commitments under the phase one trade deal between the two countries.

Gold – XAU

Gold on Thursday made its intraday high of US$1955.25/oz and low of US$1924.48/oz. Gold up 0.924% at US$1924.54/oz.

Technicals in Focus:

In daily charts, prices are above 50DMA (1642) and breakage below will call for 1600. MACD is above zero line and histograms are also increasing trend and it will bring upward stance in the upcoming sessions. RSI is in neutral region and more upside is expected before it gets stretched. Stochastic Oscillator is in oversold territory and giving negative crossover to bearish stance for intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above; buy above 1924-1885 with risk below 1885, targeting 1940-1954-1971 and 1989-2010-2021. Sell below 1940-2010 keeping stop loss closing above 2010, targeting 1926-1900-1889 and 1881-1866.

Silver - XAG

Silver on Thursday made its intraday high of US$27.51/oz and low of US$26.59/oz settled up by 1.830% at US$27.15/oz.

Technicals in Focus:

On daily charts, silver is sustaining above 20DMA (21.60), breakage below will lead to 19.40. MACD is above zero line and histograms are increasing trend and it will bring bullish stance in the upcoming sessions. RSI is approaching overbought region, indicating buy signal for now. The Stochastic Oscillator is in neutral region and giving positive crossover to show upside move for the intraday trade.

Trading Strategy: Buy on Dips

Based on the charts and explanations above, buy above 27.10-22.50 targeting 28.20-29.00 and 29.80-30.50, stop breakage below 22.50. Sell below 28.00-30.00 with stop loss above 30.00; targeting 27.20-26.10-25.00 and 24.30-23.35.

Oil - WTI

Crude Oil on Thursday made an intra‐day high of US42.97/bbl, intraday low of US$41.65/bbl and settled down by 0.873% to close at US$42.68/bbl.

Technicals in Focus:

On daily charts, oil is sustaining below its 50DMA i.e. 40.00 which is a resistance level and breakage above will call for 44.00. MACD is below zero line and histograms are in increasing mode will bring bullish stance in the upcoming sessions. The Stochastic Oscillator is in overbought region and giving positive crossover for confirmation of bullish stance; while the RSI is in neutral region and more downside can be expected to reach the oversold region, which is highly probable.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy above 42.00-38.50 with risk daily closing below 36.65 and targeting 43.10-44.10-45.00 and 46.30. Sell in between 43.00-46.30 with stop loss at 46.30; targeting 42.00-41.00-40.60 and 39.50-38.50.

EUR/USD

EUR/USD on Thursday an intraday low of US$1.1801/EUR, high of US$1.1867/EUR and settled the day up by 0.199% to close at US$1.1859/EUR.

Technicals in Focus:

On daily charts, prices are sustaining below 100DMA (1.1031), which become immediate resistance level, break above will target 1.1090. MACD is below zero line but histograms are increasing mode which will bring bullish view. Stochastic is in oversold territory and giving negative crossovers to signal for bearish outlook for intraday. 14D RSI is currently in neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Buy

Buy above 1.1850-1.1540 with risk below 1.1540, targeting 1.1900-1.1950 and 1.2000-1.2100. Sell below 1.1900-1.2050 targeting 1.1850-1.1800-1.1720-1.1650 and 1.1500-1.1450-1.1400 with stop-loss at daily closing above 1.1950.

GBP/USD

GBP/USD on Thursday made an intra‐day low of US$1.3063/GBP, high of US$1.3223/GBP and settled the day up by 0.911% to close at US$1.3212/GBP.

Technicals in Focus:

On daily charts, prices are sustaining below 200DMA (1.2647) is become major resistance level. 14-D RSI is currently in neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in oversold territory and giving negative crossover to confirm bearish stance. MACD is above zero line but histograms are increasing lead to upward movement.

Trading Strategy: Neutral to Sell

Based on the charts and explanations above; sell below 1.3210-1.3450 with targets at 1.3150-1.3100-1.3050 and 1.3015-1.2950-1.2870 stop-loss should be 1.3450. Buy above 1.3100-1.2840 with targets 1.3210-1.3290 and 1.3350-1.3400 with stop loss closing below 1.2840.

USD/JPY

USD/JPY on Thursday made intra‐day low of JPY105.73/USD and made an intraday high of JPY106.21/USD and settled the day down by 0.276% at JPY105.78/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in overbought region and chances of downward are expected based on RSI. MACD is above zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given negative crossover to confirm bearish stance.

Trading Strategy: Neutral to Sell

Sell below 106.00-111.00 with risk above 111.00 targeting 105.50-104.90-104.50 and 103.90-103.10. Long positions above 105.50-103.00 with targets of 106.00-106.50-106.90 and 107.90-108.40-109.40 with stop below 105.00.