Thursday’s initial jobless data indicated 779,000 Americans applied for unemployment benefits in the week ended Jan. 30

5 February 2021, 07:25

Market Focus

US stocks market extended its rally into the fourth consecutive day as corporates continue to deliver handsome earnings. The S&P 500 Index is looking to close at a record high at 3855, climbed 0.83% on Thursday. Meanwhile, the Nasdaq Index and the Dow Jones Industrial Index gained modest 0.86% and 0.84% respectively. Ebay Inc. and PayPal Holding Inc. are leading the gain amid upbeat forecasts. GameStop Corp. plunged nearly 40% as traders are flocking to other stocks.

The White House reinforced President Joe Biden’s call for a minimum wage hike amid rising uncertainty it can get through Congress as part of his $1.9 trillion stimulus package. The Senate is set to start voting Thursday on a budget resolution of 2021. Treasury Secretary Janet Yellen reiterated her call for a large-scale bill to help Americans battered by the pandemic.

Thursday’s initial jobless data indicated 779,000 Americans applied for unemployment benefits in the week ended Jan. 30, marked the lowest level since the end of November. Although the number remains high, it is a good sign that layoffs related to the pandemic are starting to heal. Restaurants in New York City can now reopen indoor dining at 25% capacity on Feb.14, Governor Andrew Cuomo said.

Here are the key takeaways from BoE meeting minutes:

  • BoE is telling banks to start preparing for negative interest rates as a contingency but says that message shouldn’t be seen as a signal the policy is imminent.
  • UK economy is heading for a rapid pickup thanks to vaccination efforts.
  • Benchmark interest rate and QE are left on hold by unanimous vote, while policy maker Dave Ramsden says a slower pace of bond-buying could take hold later this year.
  • Will reconsider its sequencing for unwinding stimulus.

Market Wrap

Main Pairs Movement

Euro was under sieged on Thursday, surrendered 0.6% against the US greenback. The pair is down for a fourth consecutive day as investors are growing confident for a new US stimulus package. Surging Treasury yields are also supporting the dollar.

Cable experienced a volatile day, plunged 0.55% ahead of EU market session, but quickly pared all of its loss when BoE releases its December meeting minutes, the pair ultimately gained 0.18% on Thursday. BoE is projecting GDP to recover rapidly towards the pre-pandemic level throughout 2021, and expecting inflation to pick up. More importantly, the central bank pushed back expectations for negative interest rates, which prompted a large amount of short-covering.

Aussie has outperformed its rival Kiwi, AUDNZD plunged 0.5%. The commodity-linked Aussie staged a corrective pullback amid broad US dollar strength. The market will be eyeing for the RBA Monetary Policy statement on Friday.

Gold was heavily subdued amid rising US Treasury yield, erased 3.75% in the past three trading days. The safe-haven metal appeals to be unattractive to investors in an upward trending equity market. Moreover, the reviving bond market further drives demand away from precious metal.

Technical Analysis

EURUSD (Daily & Monthly Chart)

Euro-dollar was put back to sub 1.2 level, the pair plummeted 0.6% to 1.1965 on Thursday. After breaking the long-standing horizontal support of 1.206, the price is meeting with the yellow ascending trendline. The Euro is having a tough fight against the US greenback, failing to defend this trendline will leave the downside wide open, possibly falling onto 1.163 support.

Zooming out to the monthly chart, a retreat towards 23.6% Fibonacci at 1.167 looks quite plausible. Such a healthy retreat could be beneficial to long-term bidders as more money printing from Biden’s administration will continue to favor the so-called reflation trades in 2021.

Resistance: 1.206, 1.233

Support: 1.193, 1.163

USDJPY (Daily Chart)

USDJPY has overcome the long descending trend line that kept price subdued since last March. Bidders cheered the bullish reversal and ramped up 1.9% in the past seven consecutive days. The bulls are clinging to the 38.2% Fibonacci retracement of 105.4. We previously predicted price will at least touch this level before falling back down. That being said, the retreat looks more prominent given RSI is stepping into the overbought region. On the south, DMA100 could be supportive if the bulls lose steam. MACD on the daily chart is indicating a sustainable bullish trend.

Resistance: 106.72, 108.02

Support: 104.4, 103.84

XAUUSD (Daily Chart)

It took sellers two months to break the support band between $1839 and $1823, closed the day down 2.2%. After breaking the strong support, the bears are strengthening their downward momentum from here. Price now eyes for 50% Fibonacci retracement at $1765, the lowest level in three months. We do not expect the price to reach $1765 in the near term given the magnitude of the previous drop. That being said, there is no obvious resistance level between $1765 and $1823, it could be possible that Gold will consolidate above $1765. MACD is giving bearish signs since January 8th and will continue to support this trend.

Resistance: 1823, 1839

Support: 1765, 1691