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The power outage in Texas also dragged down oil prices, and the…

The power outage in Texas also dragged down oil prices, and the WTI crude oil futures plunged 2.16%

20210222
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Market Focus

US equities slightly edged to the downside amid continuously rising US Treasury yields, hit as high as 1.36%. Soaring yields could derail the ongoing economic recovery by rising borrowing costs and depressing prices. The S&P 500 Index fell 0.1% with materials and industrial stocks leading the gain whilst utilities suffered amid Texas power outages.

The Federal Reserve warned of significant risk in business bankruptcies and acute drops in commercial real estate prices in a report released on Friday. The committee said “Business leverage now stands near historical highs. Insolvency risks at small and medium-sized firms, as well as at some large firms, remain considerable.”

Bitcoin’s market value surpassed $1 trillion as price topped $55,000. The leading cryptocurrency has added more than $450 billion since 2021, data compiled by Bloomberg show. Experts suggest FOMO (fear of missing out) may be creeping behind the scenes as various cryptocurrency prices constantly break higher ground.

The G7 group said they will work closely to defeat the coronavirus and rebuild their economy in a joint statement. Group members will “engage” with others, especially G20 countries including large economies such as China. Meanwhile, Biden and Merkel condemned Beijing for its economic abuses.

Market Wrap

Main Pairs Movement

Eurodollar rallied 0.21% on Friday. February’s German Manufacturing PMI increased to 60.6 from the previous month’s 57.1, and also beating expectation of 56.5. On the vaccination front, European countries are finally receiving more doses albeit the EU commission’s hesitancy to take the AstraZeneca shots.

The US dollar tracking index dropped 0.25% as vaccine rollouts were slowed down by the freezing storm in Texas. The power outage also hampered down oil price, the WTI crude oil futures plunged 2.16%. Rising US treasury yields touched 1.36%, the highest level since February 2020, and it is somewhat concerning to investors since such a steep climb could spook risk sentiment and trigger “tantrums” in the stock market. There are also speculations that the Fed will have to step in to initial an emergent yield curve control if yield continues to rise.

Cable extended its gain beyond 1.4 level. The groundbreaking move was inspired by an upbeat PMI figure, both Manufacturing PMI and Services PMI came on top of estimates, printed 54.9 and 49.7 compared to forecasts of 53.2 and 41.0. Successful Covid19 vaccination rollout resumes in the backdrop of Sterling’s strength.

Antipodean Aussie and Kiwi soared 1.25% and 1.07% respectively. RBA noted earlier this week that the trade-weighted Aussie would normally be expected to be around 5% higher based on higher commodity prices, which were greatly boosted by the reflation theme. Aussie’s bullish run is also supported by a cyclical recovery in Australia.

Technical Analysis

GBPJPY (Daily Chart)

GBPJPY is marching straight into the long-lasting resistance line of 148.3. Upward momentum accelerated after sellers failed to guard resistance band between 141.6 and 142, rising US yields should be credited for the depression of the Japanese Yen. Given the lack of technical levels established between 144.65 and 148.27, it is likely that this pair will be capped by near resistance and retreat toward the blue trendline to create some supports before advancing. Moreover, RSI on the daily chart indicates the price is overheated, which boosts the possibility of a temporary pause from the bulls.

Resistance: 148.27, 152.83

Support: 144.65, 142

AUDUSD (Weekly Chart)

Aussie refreshed three-year high amid broad dollar weakness. The pair is approaching resistance of 0.79 dated back to August 2017, it has been rising on a steep slope since March 2020. The current consensus of reflation continues to bolster commodities price, which in turn ekes out the commodity-linked Aussie. We have not seen any major retracements after it regained 0.7 handles or any further validations of the ascending trendline. Combined with an overheated relative strength index of 71.45, we expect some strong friction ahead of the 0.79 hurdles, then a pullback toward 76.4% Fibonacci of 0.7516 or at least a test of the upward trendline.

Resistance: 0.79, 0.8, 0.8136

Support: 0.7516, 0.7133, 0.6823

XAUUSD (Daily Chart)

Gold’s value continues to deteriorate in the wake of constantly rising US bond yields. The price plummeted nearly $70 in five consecutive days, and speculators were playing tug-of-war during yesterday’s session, which created a nice Doji pattern. That being said, Doji usually implies a trend reversal, and this would be a bullish reversal in our case. Moreover, selling bias was eased upon failing to breach 50% Fibonacci of $1765, some rebound would give bidder some breathing room, and provide sellers better entry prices to keep the longer-term downtrend alive. On the upside, $1789 will act as a near resistance, next to $1823.

Resistance: 1789, 1823, 1872

Support: 1765, 1691

20210222
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Yields on 10-year Treasuries climbed as high as 1.31% before paring the…

Yields on 10-year Treasuries climbed as high as 1.31% before paring the increase

20210219
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Market Focus

US stocks and bonds pared losses amid lingering concern rising borrowing costs could cap a rally that’s driven equity values to historic highs. The tech-heavy Nasdaq 100 trimmed its loss by more than half to 0.6%. The energy and technology sectors weighed on the SP 500, while utilities were in the green. A report earlier showed initial jobless claims rose more than expected. Walmart Inc. dropped after saying it will increase spending on worker salaries and automation.

Yields on 10-year Treasuries climbed as high as 1.31% before paring the increase. Yields reached the highest levels in a year earlier this week. Technology companies such as Tesla Inc., which have seen their valuations surge, are often seen as the most at risk of a pullback.

According to Peter Boockvar, chief investment officer at Bleakley Advisory Group, “This rise in rates will certainly test the mettle and staying power of the bulls.”

  • The SP 500 Index decreased nearly 0.45%, the lowest in more than a week on the largest dip in almost three weeks.
  • The Dow Jones Industrial Average decreased almost 0.4%, the first retreat in a week and the biggest dip in almost three weeks.
  • The Nasdaq Composite hit 13,865.36 (-0.7%), experiencing the lowest point in two weeks.

Market Wrap

Main Pairs Movement

EURUSD is rising toward 1.21 as US jobless claims disappointed with a leap to 861,000. US Treasury yields are off the highs. AUDUSD heads into the Asian opening trading around 0.7770, as bulls refuse to give up. The pair steadies around 0.7765 ahead of Australian Retail Sales take center stage. The Loonie dropped to a daily low of 1.2660 during the early trading hours of the American session but didn’t have a hard time staging a rebound with falling crude oil prices hurting the commodity-sensitive CAD.

The greenback loses further the grip and drops to session lows near 90.50. After a stunning recent run to the upside, crude oil markets have come off the boil a little on Thursday; front-month futures contracts for the delivery of West Texas, the US benchmark for sweet light crude oil, are back below the $61.00 mark and down about 40 cents or 0.7% on the day. The yield on 10-year Treasuries gained two basis points to 1.29%.

Technical Analysis

USDJPY (4-Hour Chart)

Extending on the previous day’s loss, USDJPY remains under the bearish pressure today. Retreating US bond yields weighed on the USD and exerted additional downward momentum on the USDJPY. At the moment, a cushion at 105.60 seems supportive as the bulls have fenced off the bears’ multiple attempts to drag USDJPY further down low in the past 12 hours.

From a technical perspective, the USDJPY still enjoys a modestly bullish trend as indicated by the 21-Day SMAVG and the 50ish RSI. However, looking at the long tails of the two-prior candlestick, I would assume the USDJPY is now slowly shifting its trend downward. If the pair can break below 105.60, it would be a confirmative signal for the bears to engage, and as a result, the price for USDJPY could dip to 105.31, then 105.13. Conversely, if an upward momentum resumes, the bulls will first meet some resistance at 105.85, followed by 106.16.

Resistance: 105.85, 106.16

Support: 105.60, 105.31, 105.13

GBPUSD (4-Hour Chart)

The Sterling continues to overwhelm the greenback on Thursday as the Cable surges above 1.3950, hitting the highest price level since early 2018. The upbeat UK coronavirus figures strengthen the markets’ expectations of a near-term UK economy reopen. There was a temporary downward correction during the early American session that was due to a modest recovery in the greenback as equity prices in Wall Street dropped further into the negative territory. The pullback was overturned, and the bulls continue to drag the Cable back near the 1.3980 territories.

From a technical perspective, the Cable’s bullish trend is supported by the 15-Day SMAVG, however, with an RSI nears the 70-threshold, a downward correction is likely. In the short-term, it would not be prudent to place additional long positions at the current price level, at least not until the pair finds acceptance above the 1.3979 resistance level.

Resistance: 1.4029, 1.3979

Support: 1.3922, 1.3875, 1.3849

XAUUSD (4-Hour Chart)

The Gold witnessed a modest recovery that brought the pair back near $1790 during the early European session, but the gain was immediately wiped out in the following sessions and XAUUSD now trades around $1774. Improving market sentiment and higher real bond yields put the non-yielding precious metal on the back foot.

Technically speaking, the XAUUSD is going to remain on the downward slide, as indicated by the 60-Day SMAVG. However, with a below-than-30 RSI, it implies that a near-term upward correction is likely. If the XAUUSD finds acceptance above the $1779 level, the bulls can cap their gains at $1785, followed by $1797. On the flip side, if the pair continues to dive low, the most immediate cushion is $1769 then $1764.

Resistance: 1779, 1785, 1797

Support: 1769, 1764

20210219
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UK Prime Minister Boris Johnson announced on Wednesday that they are planning…

UK Prime Minister Boris Johnson announced on Wednesday that they are planning to ease the recent lockdowns on February 22nd

20210218
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Market Focus

US equity market dropped on a second day amid rising long-term treasury yield, the US 10-year treasury yield hit as high as 1.33% before some pullbacks. Technology stocks lead the decline, with the Nasdaq Composite Index retreated 0.54% from high. Meanwhile, energy stocks like Devon Energy Corp. and Chevron Corp. hiked albeit Texans were hit by a power outage, blackouts are expected to last until at least Thursday.

US retail sales accelerated in January, increased by 5.3% from last December. The recovery in the retail segment is an encouraging signal that consumers are spending their stimulus checks on physical goods instead of putting them into saving accounts.

UK Prime Minister Boris Johnson announced on Wednesday that they are planning to ease the recent lockdowns on February 22nd, stating “the unwinding of restrictions will be done in stages”.

The cryptocurrency mania resumes with Bitcoin refreshing record high, jumped beyond $52,000 on Wednesday. The digital token recently gained tremendous traction after Tesla Inc. announced its $1.5 billion purchase. JPMorgan Chase & Co. strategists said Bitcoin’s volatility needs to ease to prevent its rally from fizzling.

Key takeaways from FOMC January meeting minutes:

  • The committee thinks it will be “some time” before it achieves the substantial further progress needed for tapering.
  • The board will not be bothered by a rise in prices later this year, given vaccines and pent-up demand.
  • Economy is far from achieving its goal of maximum employment.
  • FOMC saw inflation risks as more balanced, most still viewed the risks as weighted to the downside.

Market Wrap

Main Pairs Movement

Gold fell to the lowest level in more than two months as the US 10-yield Treasury yield topped 1.3%, and the dollar index rebounded to 91. The precious metal headed for a fifth straight decline on Wednesday and is currently struggling to penetrate the $1774 support line. The upbeat retail sales prompted demand for the US greenback, putting pressure on Gold.

The euro fell 0.54% against the US dollar, closed around 1.2041, the lowest price in two weeks. European restrictive measures will persist under spreading UK new variants, capping any upward move in the shared currency. Meanwhile, Italian Prime Minister Mario Draghi says the EU needs a common budget to combat recessions.

The Cable dropped 0.3% albeit upbeat CPI figure. The annual CPI increased by 0.1% from last year’s 0.6%, printed 0.7% compared to a forecast of 0.6%. PM Johnson’s plan to lift lockdown help to alleviate some of Sterling’s pressure.

Commodity-linked Aussie and Kiwi declined 0.1% and 0.4% respectively. Aussie has been outperforming Kiwi since Feb 4th, AUDNZD rallied 2.06% throughout this period. The uptrend would continue since RBA will likely maintain its current dovish tone until inflation and unemployment targets are achieved unless there is a downside surprise in Australian job data.

Technical Analysis

EURUSD (Daily Chart)

The eurodollar is drifting away from the short-term descending trendline towards a 1.193 support level. The pair will first encounter a longer-term upward trendline which was eking out a long bullish run during the last eight-month. A breakthrough from the downside will mark the end of the Euro’s bullish trend against the safe-haven greenback. However, the road to the south will be bumpy as it has to take down multiple critical supports such as the 1.2 handle and previous stern resistance of 1.193. Conversely, bidders will have to overcome the blue descending trendline to regain meaningful upward momentum. MACD on the daily chart shows the tendency of a bearish reversal.

Resistance: 1.206, 1.217, 1.2333

Support: 1.193, 1.163

GBPUSD (Daily Chart)

Cable retreated from yearly highs as price kissed the ceiling of an upward tunnel. Cable managed to stand above the 1.38 hurdle dated back to March 2018, but the overbought RSI signal helped to pull the overextended price down toward 1.38. If this support fails to defend further decline, then DMA50 will still be supportive on the downside. Nonetheless, we maintain our long-term bullish bias on this pair given its strong fundamentals, and most of the previous Brexit negativity has been removed from the market. MACD on the daily favors the bulls.

Resistance: 1.416, 1.4625

Support: 1.38, 1.338, 1.2769

XAUUSD (Daily Chart)

Gold’s value continues to deteriorate in the wake of dollar strengths and higher US long bond yield. Gold was previously stuck within the support band between $1838 and $1823, and it failed to stand on top of the previous neckline, which speculators usually perceive as a strong sell signal. Price then dipped to November’s low of $1770, but not quite reached 50% Fibonacci support level around $1765. The bearish bias will remain intact in the long term, but given the magnitude of the plummet in the past five trading days, we expect the bears to take a breather during the rest of this week. It seems like MACD on the daily chart changes its tone from a bullish reversal to a continuation of the bearish trend.

Resistance: 1823, 1872, 1930

Support: 1765, 1691

20210218
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