27-Nov-2020

1) EUR/USD: Bullish Extension To 1.2000/YTD Tops Still On The Cards
2) XAU/USD: Gold Technical Chart Warrants Caution For The XAU/USD Bulls
3) GBP/USD: Brexit Anxieties Cap Gains Near 1.3400 Mark, Ascending Channel Resistance

1) EUR/USD: Bullish Extension To 1.2000/YTD Tops Still On The Cards

The EUR/USD pair had good two-way price moves on Thursday and finally settled in the red, snapping two consecutive days of winning streak. The US dollar prolonged its recent downward trajectory led by the optimism over coronavirus vaccines and was further pressured by Wednesday’s rather unimpressive US macro data. The unexpected jump in the US Initial Weekly Jobless Claims added to market worries about the economic fallout from new COVID-19 restrictions and raised expectation for more fiscal stimulus from the incoming Biden administration. This, in turn, was seen as one of the key factors that pushed the pair to fresh two-month tops.

The pair, however, started losing momentum following the release of German GFK Consumer Confidence Index, which dropped from a revised -3.2 in the previous month to -6.7 for the month of December. The pair retreated over 55 pips from the daily swing high level of 1.1941, albeit lacked any strong follow-through. Given that the US markets were closed on the back of the Thanksgiving holiday, relatively thin liquidity conditions held investors from placing any aggressive bets. The pair showed some resilience below the 1.1900 mark, instead attracted some dip-buying and gained some follow-through traction during the Asian session on Friday.

Market participants now look ahead to the release of Eurozone Consumer Confidence data for November. This, along with a speech from the German Bundesbank President Jens Weidmann, will influence the shared currency. On the other hand, the USD will continue to be driven by the broader market risk sentiment, which might further assist traders to grab some meaningful opportunities on the last day of the week.

From a technical perspective, the formation of an indecisive candle on Thursday could be seen as the first sign of possible bullish exhaustion. That said, the emergence of some dip-buying on Thursday and the subsequent move up favors bullish traders. The positive outlook is further reinforced by bullish technical indicators on the daily chart, which are still far from being in the overbought territory. Hence, some follow-through strength towards the key 1.2000 psychological mark, en-route YTD tops near the 1.2010 region, looks a distinct possibility. Above the mentioned levels, the pair seems all set to extend the momentum and aim to reclaim the 1.2100 mark for the first time since April 2018.

On the flip side, weakness below the 1.1900 mark is likely to find some support near the 1.1880 region and any subsequent dip might now be seen as a buying opportunity. This, in turn, should help limit the downside near the 1.1855-50 region. A convincing breakthrough might prompt some technical selling and accelerate the fall towards the 1.1800 mark. The corrective slide could further get extended towards the 1.1750-45 support zone, which if broken decisively might negate any near-term bullish bias and turn the pair vulnerable to weaken further below the 1.1700 round-figure mark.

2) XAU/USD: Gold Technical Chart Warrants Caution For The XAU/USD Bulls

With the US markets closed, celebrating Thanksgiving Day on Thursday, gold (XAU/USD) prices remained at the mercy of the sentiment around the US dollar. The bright metal benefited from broad-based US dollar weakness led by the weak US jobs data, which raised concerns over the economic recovery. Meanwhile, renewed hopes of monetary and fiscal stimulus worldwide offered support to the gold bulls, as investors fretted about the mounting economic risks amid a continued global surge in coronavirus cases. However, the metal-faced rejection once again at $1818 levels on the back of the underlying optimism around the coronavirus vaccines.

In Friday’s trading so far, the risk-off mood dominates after AstraZeneca’s coronavirus vaccine, which showed 90% efficacy, came under intense scrutiny. The upside in the precious metal remains elusive despite the tepid market mood and broad US dollar’s weakness. Market conditions are likely to remain thin, as the US markets operate partially amid the Thanksgiving holiday mood, leaving gold bulls vulnerable.

Gold’s rejection at higher levels keeps the sellers hopeful this Friday.

The drop seen earlier this week followed by the consolidation has carved out a potential bear flag formation on the four-hour (4H) chart.

Closing below the rising trendline support at $1807 on the candle would confirm the pattern breakdown, triggering a break below the critical $1800 support.

The next relevant support is seen at the May 18 high of $1765. The Relative Strength Index (RSI) trends lower below the 50.0 level, allowing room for more declines.

To the upside, the bearish 21-simple moving average (SMA) on the said time frame at $1812 offers immediate resistance, above which the intermittent top at $1818 could be retested.

Further up, the 50-SMA and the long-held support now resistance at $1850 will be the level to beat for the bulls.

3) GBP/USD: Brexit Anxieties Cap Gains Near 1.3400 Mark, Ascending Channel Resistance

The GBP/USD pair struggled to capitalize on it intraday positive move on Thursday and once again started retreating from the vicinity of the 1.3400 mark. The early uptick to the highest level since early September ran out of steam after British Finance Minister Rishi Sunak said that the UK should not be stretching for a Brexit deal at any cost. This comes on the back of comments by the European Commission Ursula van der Leyden’s comments that the bloc was ready for the possibility of Britain leaving the EU without a new trade accord. With just five weeks left until the end of the transition period on December 31, both sides have been struggling to find a compromise on key sticking points – level playing field, fisheries, and state-aid rules. This, in turn, took its toll on the British pound and prompted some intraday selling around the major.

However, persistent US dollar selling bias extended some support, rather than assisted the pair to attract some dip-buying near the 1.3320 region. The optimism over coronavirus vaccines continued undermining the safe-haven USD, which was further pressured by Wednesday’s rather unimpressive US macro data. The unexpected jump in the US Initial Weekly Jobless Claims added to market worries about the economic fallout from new COVID-19 restrictions and raised expectations for more fiscal stimulus from the incoming Biden administration. This, along with holiday-thinned liquidity conditions, held investors from placing aggressive bets and helped limit the downside. The US markets were closed on Thursday in observance of Thanksgiving Day. Nevertheless, the pair recovered around 35 pips from daily lows and regained positive traction during the Asian session on Friday.

In the absence of any major market-moving economic releases, either from the UK or the US, the incoming Brexit-related headlines will continue to drive the British pound. Apart from this, the broader market risk sentiment will influence the USD price dynamics and further contribute to producing some meaningful trading opportunities on the last day of the week.

From a technical perspective, nothing seems to have changed much for the pair and traders are likely to wait for a sustained breakthrough a three-day-old trading range before placing fresh directional bets. Bulls might continue to face stiff resistance near the 1.3400 mark, representing the top boundary of a two-month-old ascending channel. A convincing breakthrough should now pave the way for a move towards September monthly swing highs, around the 1.3480 region, en-route the key 1.3500 psychological mark.

On the flip side, any pullback might continue to attract some dip-buying and remain limited near the 1.3300 mark. A subsequent fall has the potential to drag the pair further towards the 1.3260 horizontal support. Failure to defend the mentioned support levels might now turn the pair vulnerable to slide further towards the 1.3200 area. The corrective slide could further get extended to the 1.3160 region before the pair eventually drops to test the next major support near the 1.3110-05 zone.