JUL 28,2020

July 28, 2020

Daily Market Analysis

Market Focus

U.S. stocks rebounded today as investors disregarded increasing coronavirus cases and the tensions between the U.S. and China. In the meanwhile, as the unveil of having another batch of stimulus check in the U.S., investors betted on their hope on more stimulus to revive a battered domestic economy ahead. Nonetheless, as the fight against coronavirus continues, the Fed Chairman Jerome Powell signaled that the rate might be going to stay near zero for longer, resulting in a weaker dollar.

The European Union’s Brexit negotiator expressed confidence at the possibility of a new deal with the U.K. The two major stumbling blocks are the state aid, environmental standard, labors standards, and British fishing waters. The EU anticipates the deal to be done by October and ratified by the end of the year. If Brexit can be finalized soon, it will definitely be a good news for both sides.

After the U.S. ordered to close down the Chinese consulate in Houston, in retaliation China shutdown the U.S.’s consulate in Chengdu, China. This incident is one of the worst tensions between the U.S. and China since 1979. Amid the rising tensions between the world’s two biggest economies countries, investors start turning their risk sentiments into gold, pushing gold price to a next level.

Market Wrap

Main Pairs Movement

        XAU/USD surged to an all- time record at $1945.26 as of writing on Monday. Global investors concern about worsening US- China relations, forcing them to take refuge in the traditional safe- haven, gold. In the meanwhile, as the Fed continues to print the currency, such as the stimulus check, it will continue to hurt against the value of the dollar; the U.S. Dollar Index has fallen to 93.64 since 2019, which eventually provides a strong boost to the precious metal, gold.

Japanese Yen advances to its highest level since March as the rising tensions between the U.S. and China. USD/JPY falls 0.9% to 105.17 under the bearish pressure. The demand for the safe- haven, Yen is rising due to investors are looking for an alternative risk sentiment. USD/JPY can be expected to continuously fall after the U.S.’s stimulus check, putting a pressure on the greenback.

COVID-19 Data (EOD):

Technical Analysis:

EURUSD (H4)

EURUSD is trading at 1.1745 as of writing. The RSI indicator in the four- hour chart suggests that EURUSD is overbought at the level of 76%; however, despite of overbuying, it seems to have no signs of upward exhaustion according to a solid trend above the 20 SMA. The first support sits at 1.1595, followed by 1.1541. If the dollar continues to decline as the US- China tensions continue to escalate, it is not surprised to see EURUSD to climb above 1.1762.

Resistance: 1.1762

Support: 1.1438, 1.1541, 1.1595

XAUUSD (H4)

Gold continues to surge and breaks its all- time record at 1945.26 as of writing. Although the RSI indicator in the four- hour chart indicates that XAUUSD is in the condition of overbought at the level of 86%, it seems to have no signs of downward trends. Meanwhile in the Bollinger Bands indicator and the 20 SMA, gold is firmly trading above the mean and the 20 SMA, showing the signs of continuous uptrends. The first support sits at 1931.73, followed by 1915.23 and 1895.86. If investors’ risk sentiment deteriorates, it will cause a higher volatility in gold, which will likely continue to break its all- time record.

Resistance: 1946.79

Support: 1895.86, 1915.23, 1931.73

USDJPY (H4)

USDJPY continues to retain a bearish mode as the greenback is tanking. Although the RSI indicator in the four- hours chart indicates that USDJPY is oversold at the level of 19%, trading strongly below the Bollinger Bands and the 20 SMA reject USDJPY to rebound. The support level at 106.8 seems to be a strong pivot for the pair due to severally consolidated tests. It is likely to see the pair to break its first resistance level at 105.09 if the risk sentiment starts taking place.

Resistance: 105.09, 104.85

Support: 106.12, 106.80

Economic Data