23-Nov-2020

1) EUR/USD: Stuck In A Familiar Range Below 1.1900 Mark Ahead Of Eurozone PMIS
2) GBP/USD: Bulls Seize Control Above 1.3310 Hurdle, UK/US PMIS Eyed
3) XAU/USD: Gold Bulls Insist But Not Out Of The Woods Yet

1) EUR/USD: Stuck In A Familiar Range Below 1.1900 Mark Ahead Of Eurozone PMIS

The EUR/USD pair gained some positive traction on Friday, albeit continued with its struggle to break above the 1.1890-1.1900 barrier. The early uptick was exclusively sponsored by a subdued US dollar price action, led by conflicting signals about the US COVID-19 relief package. Reports indicated that US Senate Republican and Democrat leaders have agreed to resume negotiations on coronavirus stimulus measures. The positive development, to a larger extent, was offset by the US Treasury Secretary Steven Mnuchin’s decision to end some of the pandemic relief for struggling businesses.

The greenback was further pressured by speculations for additional monetary easing by the Fed, amid growing concerns about the economic fallout from new COVID-19 restrictions in several US states. Hence, the key focus will be on this week’s release of the latest FOMC meeting minutes, which will be scrutinized for the possibility of such an action as soon as the December meeting. Meanwhile, a weaker trading sentiment around the equity markets drove some haven flows towards the USD and kept a lid on any meaningful upside for the major, rather prompted fresh selling at higher levels.

The pair retreated around 40 pips from daily swing highs and finally settled in the red, around mid-1.1800, erasing the previous day’s positive move. Despite the pullback, the pair remained well within a familiar trading range and managed to regain some positive traction on the first day of a new trading week. The optimism over the prospect of an early rollout of coronavirus vaccines undermined the greenback’s safe-haven status, which, in turn, was seen as a key factor behind the pair’s modest uptick during the Asian session.

Market participants now look forward to the release of the flash Eurozone PMI prints for November. The data will assist investors to gauge the true extent of economic damage caused by the second wave of coronavirus infections in the region. Later during the early North American session, the preliminary version of the US Manufacturing and Services PMI will influence the USD price dynamics. This, along with the broader market risk sentiment should produce some meaningful trading opportunities.

From a technical perspective, nothing seems to have changed much for the pair and any further positive move is more likely to remain capped near-monthly tops, around the 1.1920 region. Bulls might still wait for some follow-through buying above the mentioned hurdle before positioning for additional gains towards the key 1.2000 psychological mark. A subsequent move beyond YTD tops, around the 1.2010 region, should pave the way for an extension of the upward trajectory and push the pair towards the 1.2065-75 intermediate resistance en-route the 1.2100 round-figure mark.

On the flip side, the 1.1850 area now seems to have emerged as immediate strong support. This is followed by last week’s low, around the 1.1815 region, and the 1.1800 mark. Failure to defend the mentioned support levels might prompt some technical selling and turn the pair vulnerable to slide further towards the 1.1750-45 region. A convincing breakthrough will negate any near-term bullish bias and set the stage for a further near-term depreciating move, possibly towards testing the 1.1600 mark.

2) GBP/USD: Bulls Seize Control Above 1.3310 Hurdle, UK/US PMIS Eyed

The GBP/USD pair built on the previous day’s goodish bounce of around 80-85 pips from sub-1.3200 levels and gained some follow-through traction on Friday. The British pound got a minor lift following the release of better-than-expected UK retail sales figures, which came in to show a growth of 1.2% MoM in October as against consensus estimates pointing to a flat reading. Adding to this, the core retail sales (stripping the auto motor fuel sales) also bucked forecasts and increased 1.3% MoM.

Apart from this, a subdued US dollar price action – amid conflicting signals about the US COVID-19 relief package – remained supportive of the pair’s intraday uptick. Reports indicated that US Senate Republican and Democrat leaders have agreed to resume negotiations on coronavirus stimulus measures. The positive development, to a larger extent, was offset by the US Treasury Secretary Steven Mnuchin’s decision to end some of the pandemic relief lendings for struggling businesses under the CARES Act.

The greenback was further pressured by speculations for additional monetary easing by the Fed, amid growing concerns about the economic fallout from new COVID-19 restrictions in several US states. Hence, the key focus will be on this week’s release of the latest FOMC meeting minutes, which will be scrutinized for the possibility of any such action in the December meeting. That said, a modest pullback in the equity markets benefitted the USD’s safe-haven status and capped gains for the major.

Nevertheless, the pair managed to post gains for the third consecutive week and continued scaling higher through the Asian session on Monday. The momentum seemed rather unaffected by persistent Brexit-related uncertainties, especially after the suspension of in-person talks after a member of the EU team was tested positive for COVID-19 last Thursday. Adding to this, the EU negotiating team on Friday briefed envoys of the bloc’s 27 member states that Brexit talks remain unresolved on three sticking points – the so-called level playing field, fisheries, and state-aid rules.

Separately, British finance minister Rishi Sunak said there is genuine progress in Brexit talks with the European Union and hoped to secure an agreement. Sunak further added that it would be better to walk away from a bad trade deal than tie Britain’s hands in the future. However, the optimism over the prospect of an early rollout of coronavirus vaccines undermined the greenback’s safe-haven status. This, in turn, was seen as a key factor that extended some support to the major.

Market participants now look forward to the release of the flash version of the UK/US PMI prints. The reaction to the data is likely to be limited as investors might refrain from placing any aggressive bets, rather prefer to wait for fresh Brexit updates before positioning for the next leg of a directional move.

From a technical perspective, a sustained move beyond the 1.3310 horizontal resistance might have already set the stage for additional gains. However, any subsequent move up is more likely to confront a stiff resistance near the top boundary of a short-term ascending trend-channel. The mentioned barrier is pegged near the 1.3380 region, which if cleared decisively will be seen as a fresh trigger for bullish traders. The pair might then surpass the 1.3400 mark and aim towards testing September daily highs, around the 1.3480 region, en-route the key 1.3500 psychological mark.

On the flip side, the 1.3310-1.3300 resistance breakpoint now seems to protect the immediate downside and is followed by support near the 1.3260 region. Some follow-through weakness might prompt some technical selling and drag the pair back towards the 1.3200 mark. A convincing breakthrough in the mentioned support levels now seems to turn the pair vulnerable to accelerate the slide further to the 1.3160 region. The pair might eventually drop to test the next major support near the 1.3110-05 zone.

3) XAU/USD: Gold Bulls Insist But Not Out Of The Woods Yet

Despite a green day last Friday, Gold (XAU/USD) fell for the second straight week and held onto the critical $1850 support. Fresh calls for US fiscal stimulus kept the gold buyers alive, although the further upside remained elusive amid vaccine progress. US Treasury Secretary Steven Mnuchin on Friday hinted that the stimulus talks would continue just a day after halting Fed’s emergency lending program. The US dollar suffered alongside stocks, in the face of the Fed-Treasury clash, spiking COVID-19 cases, and fresh lockdowns in the US cities, which lifted the sentiment around gold.

Gold clings onto the recent recovery gains so far this Monday, benefiting from the persistent weak tone seen around the US dollar amid the vaccine optimism. Increased expectations over the rapid rollout of the covid vaccines on both sides of the Atlantic weigh on the safe-haven greenback. The UK is likely to give a green signal to Pfizer’s vaccine by the end of this week while a top US health official said that the vaccinations could start in three weeks. However, gold’s upside could be capped by the risk-on rally in the global stocks. On the macro front, the US Preliminary Markit Manufacturing and Services PMIs will be featured later in the NA session. Also, the global covid statistics and vaccine updates will be closely followed.

The hourly chart shows that gold remains capped below the horizontal 200-hourly moving averages (HMA) at $1877, which is tough not crack for the XAU bulls.

Meanwhile, the upward-sloping 21-HMA at $1871 offers immediate support, with the hourly Relative Strength Index (RSI) having turned flat while hovering above the midline.

Acceptance above the 200-HMA barrier is critical to reviving the recovery momentum from the powerful $1850 support area. The next upside target is aligned at $1900.

On the flip side, 50-HMA at $1867 is the relevant support, below which the October low of $1860 could be tested. Only a daily close below $1850 could call for a resumption of the correction from record highs of $2075.