18-Nov-2020

1) GBP/USD: Bulls Remain At the Mercy of Incoming Brexit-Related Headlines
2) EUR/USD: Once Again Fails Ahead Of 1.1900, 200-Hour SMA Holds the Key for Bulls
3) XAU/USD: Gold Bears to Dominate Along With Coronavirus Fears

1) GBP/USD: Bulls Remain At the Mercy of Incoming Brexit-Related Headlines

The GBP/USD pair gained some follow-through traction on Wednesday and shot to fresh one-week tops, albeit struggled to find acceptance above the 1.3300 round-figure mark. The British pound was supported by hopes that Britain and the European Union could reach a Brexit divorce agreement by the beginning of next week and slightly better-than-expected UK consumer inflation figures. This, along with a softer tone surrounding the US dollar, provided an additional boost to the major.

Despite optimism over a potential vaccine for the highly contagious coronavirus disease, investors remain concerned about the economic fallout from the imposition of new restrictions in several US states. This, in turn, fueled expectations of further monetary stimulus from the Fed, which kept the USD bulls on the defensive through the first half of the trading action on Wednesday. The pair, however, struggled to capitalize on the move and was rejected just ahead of monthly tops.

The lack of progress on key sticking points, including fishing rights and state aid rules, held the GBP bulls from placing aggressive bets. Apart from this, a cautious mood around equity markets drove some haven flows towards the greenback and further collaborated towards capping gains for the major, instead prompted fresh selling at higher levels. The pair finally settled around 40-45 pips off daily swing highs and extended the pullback through the Asian session on Thursday.

Reports that European Union leaders will demand the European Commission to publish no-deal plans. This, in turn, took its toll on the sterling and dragged the pair back closer to the 1.3200 mark. However, the downside is likely to remain limited, at least for the time being, in the absence of official confirmation. It is worth reporting that  EU negotiators are reportedly due to update envoys of the bloc’s 27 member states on the latest in trade talks with Britain at 0700 GMT on Friday.

This makes it prudent to wait for a strong follow-through selling before confirming that the recent positive move might have already run out of the steam and positioning for any further depreciating move. There isn’t any major market-moving economic data due for release from the UK on Thursday and hence, the incoming Brexit headlines will play a key role in driving the sentiment surrounding the pound. The US economic docket features the releases of Philly Fed Manufacturing Index and Initial Weekly Jobless Claims, which might influence the USD price dynamics and produce some trading opportunities.

From a technical perspective, the formation of an ascending trend-channel on short-term charts points to a well-established bullish trend and supports prospects for the emergence of some dip-buying. That said, sustained weakness below the 1.3200 level might prompt some technical selling. The pair might then accelerate the fall towards the 1.3165-60 intermediate support before eventually dropping to the 1.3100 neighbourhood.

On the flip side, the 1.3275 level now seems to act as immediate resistance and is closely followed by the 1.3300 mark. Some follow-through buying, leading to a subsequent move beyond the 1.3315 region has the potential to push the pair further towards challenging the trend-channel resistance, currently around the 1.3345 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.

2) EUR/USD: Once Again Fails Ahead Of 1.1900, 200-Hour SMA Holds the Key for Bulls

The EUR/USD pair once again failed ahead of the 1.1900 mark and witnessed a modest intraday pullback on Wednesday. The latest optimism over a potential vaccine for the highly contagious coronavirus disease was overshadowed by concerns about the economic fallout from the imposition of new restrictions in several US states. This, in turn, fueled expectations of further monetary stimulus from the Fed, which kept the US dollar bulls on the defensive through the first half of the trading action on Wednesday and extended some support to the major.

On the economic data front, the Eurozone CPI was finalized at -0.3% YoY in October, while core CPI came in at 0.2% YoY. The readings matched flash estimates and were unchanged as compared to September’s final print. From the US, mixed housing market data – Building Permits and Housing Starts – also did little to provide any meaningful impetus. That said, a cautious mood around the equity markets drove some haven flows towards the greenback and capped the upside for the major, rather prompted some selling at higher levels.

The pair retreated around 40 pips from daily swing highs and settled near the lower end of its daily trading range, snapping four consecutive days of winning streak. The pullback extended through the Asian session on Thursday, though a steep decline in the US Treasury bond yields undermined the USD and helped limit any deeper losses. The pair was last seen trading just below mid-1.1800s as market participants now look forward to the ECB President Christine Lagarde’s speech for a fresh impetus.

Apart from this, traders will also take cues from Thursday’s releases of the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims from the US. The data, along with developments surrounding the coronavirus saga and the broader market risk sentiment, will influence the USD price dynamics and produce some trading opportunities.

From a technical perspective, the overnight pullback dragged the pair below a one-week-old ascending trend-line support. However, subsequent weakness, so far, remained limited near 200-hour SMA support. This makes it prudent to wait for some follow-through selling below the 1.1835-30 region before positioning for any further depreciating move. The pair might then turn vulnerable to break below the 1.1800 mark and accelerate the fall towards last week’s swing lows around the 1.1745 region.

On the flip side, the mentioned trend-line support breakpoint, currently near the 1.1875-80 region, now seems to act as immediate resistance. A sustained move beyond, leading to a followthrough strength above the 1.1900 mark and monthly swing highs near the 1.1920 area will be seen as a fresh trigger for bullish traders. The momentum should then assist the pair to aim back towards conquering the key 1.2000 psychological mark.

3) XAU/USD: Gold Bears to Dominate Along With Coronavirus Fears

Gold (XAU/USD) once again witnessed a good two-way price action on Wednesday but remained trapped in the $20 range, well below $1900. During the first half of the day, the yellow metal fell as low as $1864 after Pfizer and BioNtech came out with reports that the covid vaccine has shown 95% efficacy in its third phase final trial. However, the excitement was soon doused by the fresh coronavirus statistics from the US, revealing that the new infections and hospitalizations continue to surge. Amid the covid growth, new shutdowns and restrictive measures were announced in the US cities. Wall Street indices turned south and lifted the haven demand for the greenback, which kept the bearish pressure intact on the gold. However, the fall in the US Treasury yields, in the face of the economic growth concerns, offered temporary reprieve to the gold bulls before the price slipped back below $1870 into the closing.

Looking ahead, gold remains exposed to downside risks, as the risk-aversion on the global markets could deepen and revive the dollar’s recovery momentum, as investors take note of the new shutdowns worldwide and its likely impact on the global economic recovery. Also, the vaccine optimism seemingly faded, as its dissemination is seen unlikely before Spring 2021. The US docket highlights the Philly Fed Manufacturing Index, although the covid data will likely hog the limelight.

As observed in the hourly chart, gold has confirmed a rising channel breakdown on the hourly chart and looks to extend the downside, as the price trades below all the major hourly moving averages (HMA).

The hourly Relative Strength Index (RSI) holds in the bearish region but above the oversold territory, suggesting that there is more room to the downside.

Therefore, a test of the measured target $1822 cannot be ruled out in the coming days should the bulls fail to defend the crucial $1850/49 support area. That level is the confluence of the September month low and November 9 low.

On the flip side, recapturing the $1873 barrier, the intersection of the bearish 21-HMA and the pattern support now resistance, is critical for the recovery to gain traction.

Further up, strong resistance awaits at $1884, which is the convergence of the 100 and 200-HMAs.