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iFOREX Daily Analysis : October 20,2017

Published 10/20/2017, 05:00 AM
Updated 09/16/2019, 09:25 AM

The dollar posted a sharp drop on Thursday, following a drop in bond yields after a report showed that Federal Reserve Governor Jerome Powell is the first candidate to replace Janet Yellen as next Fed Chairman.

Powell is widely viewed as the least hawkish candidate compared to others in the shortlist to succeed the Federal Reserve president in February.

The dollar found some support in the Philadelphia manufacturing index which rose to 27.9 this month, from 23.8 in September, beating economists forecast of a reading of 22.

In addition, initial jobless claims decreased by 22,000 to a seasonally adjusted 222,000 for the week ended Oct. 13, beating forecasts of a 4,000 decrease.

The focus is shifted on the euro due to the ongoing political unrest in Spain and the pound as the
British Prime Minister Theresa May got into talks with EU leaders to discuss the terms of country's exit from the European Union

In the commodities markets, crude oil prices fell as data showing a sharp rise in gasoline and diesel supplies continue to weigh on market sentiment while gold recovered after three days of losses, following the weakness in the dollar and benefitting from political instability in Spain.

In cryptocurrency news, bitcoin recovered from a drop posted on Wednesday as the market quickly overcame fears of increased regulation while Etherium continued to add to losses.

For Friday, the UK is to release data on public sector borrowing and Canada is to report on retail sales and inflation while later in the day, U.S. data on existing home sales will be in the spotlight.

EUR/USD

The euro gained against the dollar on Thursday, on reports that the front runner to become the next head of the Federal Reserve is Jerome Powell, someone who is more likely to follow in on Yellen’s footsteps in terms of monetary easing policies.

The ongoing political unrest and positive manufacturing and employment data from Spain continue to add pressure on the euro with market participants now shifting their focus towards today’s data on U.S. existing home sales.

EUR/USD


Pivot: 1.184
Support: 1.18 1.178 1.176
Resistance: 1.184 1.186 1.1885

Scenario 1: short positions below 1.1840 with targets at 1.1800 & 1.1780 in extension.
Scenario 2: above 1.1840 look for further upside with 1.1860 & 1.1885 as targets.
Comment: the RSI is bearish and calls for further downside.

Gold

Gold recovered on the Thursday on the back of political uncertainty in Spain which seems to weigh on risk sentiment while ongoing dollar weakness provides additional support in the precious metal.

Gold traders also wait for news on Trump's decision on the Federal Reserve chair position as recent reports showed Jerome Powell as the first candidate to replace Janet Yellen as next Fed Chairman. Powell is seen as the least hawkish in the shortlist of candidates, adding further support on gold.

The White House said Wednesday Trump will announce his decision in the "coming days."

Gold Chart

Pivot: 1282
Support: 1282 1276.5 1273
Resistance: 1291 1296 1301.5

Scenario 1: long positions above 1282.00 with targets at 1291.00 & 1296.50 in extension.
Scenario 2: below 1282.00 look for further downside with 1276.50 & 1273.00 as targets.
Comment: the RSI is mixed and calls for caution.

WTI Oil

The price of crude oil fell on Thursday still pressured by Wednesday’s data that showed a larger than expected increase in inventories sentiment.

Data showed a sharp rise in gasoline and diesel supplies however, the impact is partly offset by indications that Opec leaders will proceed with an extension of the output-agreement deal, set to expire in March.

Investors will continue to monitor developments in the Middle East and potential supply disruptions in the region.

WTI Oil Chart


Pivot: 51.7
Support: 50.95 50.75 50.55
Resistance: 51.7 52.05 52.35

Scenario 1: short positions below 51.70 with targets at 50.95 & 50.75 in extension.
Scenario 2: above 51.70 look for further upside with 52.05 & 52.35 as targets.
Comment: the RSI is capped by a declining trend line.

US 500

The Dow and S&P 500 continue to gain on Thursday after a report indicated that that Federal Reserve Governor Jerome Powell is the leading candidate for the nominee for Fed chair.

Tech shares posted the worse performances with Apple (NASDAQ:AAPL) falling by 2.4 percent in its biggest daily percentage decline since Aug. 10 as doubts about its 2017 iPhone release strategy weighed on investors.

Bad earnings from ebay and United Airlines also disappointed investors with their share prices falling 1.8 and 12.1 percent respectively

US 500


Pivot: 2561
Support: 2561 2554 2545
Resistance: 2571.75 2580 2585

Scenario 1: long positions above 2561.00 with targets at 2571.75 & 2580.00 in extension.
Scenario 2: below 2561.00 look for further downside with 2554.75 & 2545.00 as targets.
Comment: the immediate trend remains up and the momentum is strong. The upside breakout of the previous top area opened the way towards 2580 (Fibonacci projection).

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