18-Nov-2020

1) EUR/USD: Ascending Channel Favours Bullish Traders Amid COVID-19 Vaccine Hopes
2) GBP/USD: Bulls Seem Non-Committed Despite Brexit Optimism
3) XAU/USD: Gold Bears Remain Hopeful Below 21-DMA Amid Covid Fears

1) EUR/USD: Ascending Channel Favours Bullish Traders Amid COVID-19 Vaccine Hopes

The EUR/USD pair shot to over one-week tops on Tuesday, albeit struggled to capitalize on the move and remained capped below the 1.1900 mark. Another promising development in late-stage vaccine trials for the highly contagious coronavirus disease dented the US dollar’s relative safe-haven status and was seen as one of the key factors driving the pair higher. The greenback was further pressured by softer US macro data and dovish comments by Fed Chair Jerome Powell.

In fact, the US monthly retail sales missed consensus estimates and recorded a modest growth of 0.3% in October. The core reading also fell short of market expectations and increased by 0.1% during the reported month. Meanwhile, Powell said that there was a long way to go to economic recovery and also about the significant downside risk in the near-term amid the resurgence of coronavirus infections in the United States.

However, concerns about the economic fallout from new COVID-19 restrictions in several US states, along with questions about the delivery and storage of a vaccine tempered optimism. This, in turn, kept a lid on any further gains for the major. Nevertheless, the pair ended with modest daily gains above mid-1.1800s and maintained its positive bias for the fifth consecutive day during the Asian session on Wednesday.

Moving ahead, market participants now look forward to the release of the final version of the Eurozone CPI print. Later during the early North American session, the US housing market data – Building Permits and Housing Starts – will influence the USD price dynamics and produce some meaningful trading opportunities. Apart from this, traders will also take cues from developments surrounding the coronavirus saga and the broader market risk sentiment.

From a technical perspective, the pair has been scaling higher along an upward sloping channel over the past one week or so. This, coupled with the fact that the pair is holding comfortably above 200-hour SMA, favors bullish traders. That said, any subsequent move up beyond the 1.1900 mark is more likely to confront stiff resistance near the top boundary of the trend-channel. The mentioned barrier is currently pegged near the 1.1915 region, which if cleared decisively will be seen as a fresh trigger for bullish traders. The pair might then aim to conquer the key 1.2000 psychological mark.

On the flip side, the trend-channel support, currently near the 1.1855 region, might continue to protect the immediate downside. A convincing breakthrough, leading to a subsequent weakness below the 1.1830 area (200-hour SMA) will negate any near-term positive bias. The downward trajectory might then drag the pair back below the 1.1800 mark, towards testing last week’s swing lows around the 1.1745 region.

2) GBP/USD: Bulls Seem Non-Committed Despite Brexit Optimism

A combination of factors assisted the GBP/USD pair to gain some strong positive traction on Tuesday and climb beyond mid-1.3200s. Another promising development in late-stage vaccine trials for the highly contagious coronavirus disease dented the US dollar’s relative safe-haven status and extended some initial support to the major. The greenback further pressured by weaker-than-expected US monthly retails sales figures, which came in to show a modest 0.3% growth in October. Meanwhile, the core reading also fell short of market expectations and increased by 0.1% during the reported month.

Adding to this, the Fed Chair Jerome Powell said that there was a long way to go to economic recovery and also warned about the significant downside risk amid the resurgence of coronavirus cases in the United States. This comes on the back of growing market concerns about the potential economic fallout from the imposition of new COVID-19 restrictions in several US states. This, along with the ongoing downfall in the US Treasury bond yields, kept the USD bulls on the defensive and remained supportive of the pair’s positive move amid hopes of a post-Brexit trade deal between the UK and the EU.

Reports indicated that Britain and the European Union could reach a Brexit divorce agreement by the beginning of next week. However, contradictory briefings suggest that talks could fail as negotiators are yet to find a compromise on key sticking points, including fisheries. This, in turn, held investors from placing aggressive bets and kept a lid on any runaway rally for the major. Nevertheless, the pair held on to its modest gains for the fourth consecutive session on Wednesday as investors now look forward to the US consumer inflation figures for some meaningful impetus.

Given that the Bank of England is ready to push interest rates into negative territory, Wednesday’s UK CPI figures, along with the incoming Brexit-related headlines will play a key role in driving the near-term sentiment surrounding the British pound. Later during the early North American session, the US housing market data – Building Permits and Housing Starts – will influence the USD price dynamics and produce some meaningful trading opportunities. Apart from this, traders will also take cues from developments surrounding the coronavirus saga and the broader market risk sentiment.

From a technical perspective, any subsequent positive move is likely to confront resistance near the 1.3300 round-figure mark. This is followed by a strong barrier marked by the top boundary of a short-term ascending trend-channel, around the 1.3340 region. A sustained breakthrough will be seen as a fresh trigger for bullish traders and pave the way for an extension of the positive momentum. The pair might then aim to surpass the 1.3400 mark and test September monthly swing highs resistance, around the 1.3480 region, en-route the 1.3500 psychological mark.

On the flip side, the 1.3200 mark now seems to protect the immediate downside. Dips below the said level might still be seen as a buying opportunity near the 1.3165-60 region. This, in turn, should help limit the downside near the 1.3115-1.3100 support zone. Failure to defend the mentioned support levels will negate any near-term positive bias and turn the pair vulnerable to accelerate the fall back towards the key 1.3000 level.

3) XAU/USD: Gold Bears Remain Hopeful Below 21-DMA Amid Covid Fears

Gold (XAU/USD) held well within Monday’s $1865-$1899 range on Tuesday, having faced rejection once again just below the $1900 level. The yellow metal continues to trade cautiously, as markets reassess the optimism over the encouraging vaccine results, in the wake of the rising coronavirus infections-led fresh restrictions in the Northern Hemisphere.  The covid-related developments continue to influence the sentiment around gold.

Meanwhile, expectations of additional US fiscal and monetary stimulus remain alive and kicking, especially after Federal Reserve Chair Jerome Powell said the US economy still has a “long way to go” before it fully recovers from the pandemic. Powell’s comments continue to exert downward pressure on the Treasury yields, putting a floor under the yieldless gold for the time being.

However, intensifying concerns over the global coronavirus resurgence could deepen the risk-off mood going forward and lift the haven demand for the US dollar. Therefore, the upside attempts in the bullion could likely remain elusive while traders keep a close eye on the vaccine updates.

The daily chart continues to warrant caution for the XAU bulls, painting a bearish picture in the near-term.

This is held true by the 14-day Relative Strength Index (RSI), which points south within the bearish region, currently at 45.87.

Also, it’s worth noting that the price trades below all the major short-term daily moving averages.

Only a daily closing above the 21-DMA at $1895 will negate the downside bias. The next relevant upside barrier is seen at $1903, which is the bearish 50-DMA. Further north, the 100-DMA at $1908 will be on the buyers’ radars.

Alternatively, Monday’s low of $1865 is the immediate cushion, below which the horizontal trendline support at $1851 is the last resort for the XAU bulls.