President Joe Biden looks to impose a higher tax rate on the corporation and wealthy Americans, with relief eyed for middle-class households

17 March 2021, 04:04

Market Focus

US stocks market was mixed on Tuesday while the 10-year yield edged slightly higher. Apple Inc. and Microsoft Corp. lifted the tech-heavy Nasdaq 100 index. Meanwhile, the S&P 500 index closed marginally lower, with energy and industrials stocks leading the decline.

President Joe Biden looks to impose a higher tax rate on the corporation and wealthy Americans, with relief eyed for middle-class households. Biden’s proposal will mostly affect families earning more than $400,000 a year and could lay out a path for his long-standing economic and infrastructure plans. However, the road to higher taxation will be bumpy since any tax changes will have to move through Congress, and Biden has almost no power to push through his plan via executive order.

European Union looks to resume vaccination campaign as the block’s drug regulator signaled AstraZeneca’s Covid shot was safe. Shortly after, Italy and France hinted that they would resume using the AstraZeneca vaccine. Despite the setbacks, European Commission will unveil its strategy to gradually lift coronavirus lockdowns on Wednesday.

Bloomberg’s key takeaways from China’s economic data releases:

  • The official figure showed growth rates of more than 30% for industrial production, retail sales, and fixed-asset investment.
  • Economists warned that recovery remains imbalanced, and the foundation for economic recovery is not yet solid.
  • The jobless rate was 5.5% at the end of February, up from 5.2% in December.

Market Wrap

Main Pairs Movement

Eurodollar dipped 0.17% albeit upbeat investor’s confidence data. Germany published the ZEW Economic Sentiment for March on Tuesday, the figure came on top of the forecast of 74, printed 76.6. Speculators now await the Fed announcement to look for a clue on how the central bank will deal with its current account deficit and whether they will push agenda to hike interest rates.

Aussie, Kiwi, and Cable plunged before the EU session but pared most of their loss later in the day. Safe-haven pairs such as USDJPY and USDCHF dropped 0.14% and 0.42% respectively. However, low-yielding currencies should remain subdued given the global rise in yields triggered by the US-led reflation trade.

Technical Analysis

XAUUSD (Daily Chart)

Gold is gradually losing its bouncing strengths as $1740 kept a solid lid on any upward moves. Price is close to kissing its descending trendline that started in January, but the price has been rejected by a $1740 hurdle three times. This in turn diminishes the likelihood of price touches the dynamic resistance line. Sellers are patiently waiting for bond yields to edger higher to kick off another round of bearish run, and the price would breach below the support band of $1691 and $1673 this time. Further on the south, bears ultimately eyes for $1600 handle. MACD on the daily chart is printing a bullish picture.

Resistance: 1765, 1839

Support: 1691, 1673, 1600

GBPJPY (Weekly Chart)

GBPJPY is extending its gains to the tenth consecutive week, approaching the highest price of 152.83 since April 2018. Strong fundamentals for the Sterling combined with receding demand for safe-haven currency have helped this pair to forge such an incredible surge. Meanwhile, the continuous appreciation has driven RSI deeply into the overbought zone, currently printing 77. We expect the price to contest a 152.83 resistance level before profit takings, which would prompt a correction toward the purple trendline. However, the prospect of this pair remains to be bullish within a risk-on environment in 2021.

Resistance: 152.83

Support: 149.43, 145.9, 141.17

EURUSD (Daily & Monthly Chart)

Euro is under pressure amid recovering US dollar and is on a third losing streak. Despite price managed to overcome horizontal resistance of 1.1954, but it failed to reclaim the key 1.2 psychological level. The false breakout marked a retracement of the current bearish trend, which looks to resume toward 1.1778.

On the monthly chart, the euro-dollar is correcting toward a 23.6% Fibonacci level of 1.167, which is in confluence with the daily picture. However, we expect a robust rebound at this stern support line. In the longer term, the bulls look to challenge the previous high of 1.25.

Resistance: 1.1954, 1.2215

Support: 1.1778, 1.163