Crude futures rose as much as 3.5% today, the largest intraday gain…
Crude futures rose as much as 3.5% today, the largest intraday gain in a week
US markets declined as a surge in US Treasury yield, reaching as high as 1.4859% added to concern about overstretched valuation amid an uneven economic rebound. The S&P 500 continued to lose for the second consecutive day as 10- year yields surged. The Nasdaq 100 was down about 2.5%. Additionally, weak economic readings on the US labor market and service, ADP Nonfarm Employment, also contributed the negative weight on equities markets. The Dow Jones Industrial Average was the only one that did not drop too much, led by the gain from Boeing Co. and JPMorgan.
In the US, lawmakers are heading to the final phase of enacting Joe Biden’s first pandemic- relief bill; at the same time, Joe Biden has rejected to trim extra unemployment benefits as the employee remains underwater, near 2015 levels a year after coronavirus hit.
UK Finance Minister Rishi Sunak announced that UK corporation tax is going to 25% in 2023 as pandemic support has reached around 570 USD. Moreover, according to Sunak, UK won’t allow the debt to keep rising, so the UK is going to pay high attention to its affordability; at the same time, Sunak also announced the freezing of personal tax thresholds, removing incremental benefits created as thresholds continued to increase with inflation.
Main Pairs Movement
Oil price jumped after the US reported that oil inventories showed a record drop in the aftermath of a deep freeze that shuttered refineries in the US South, especially Texas. Crude futures rose as much as 3.5% today, the largest intraday gain in a week. Moreover, the oil price has surged more than 25% so far this year as the OPEC+ continued its production curbs and expectations for demand to rebound as vaccines are rolling out worldwide.
Benchmark 10- year Treasury yields climbed as much as 6.8%, the highest rate since last Thursday’s startling selloff in government debt. In the meanwhile, the anticipated annual inflation rate for the next half-decade has exceeded 2.5% for the first time since 2008, along with surging crude oil prices. The high inflation anticipation also came from Joe Biden’s pandemic relief package, which is likely to get passed soon. Rising yields have started to draw the attention of Feral Reserve, leaving all eyes on Thursday’s Jerome Powell’s speech.
Cable extended gain after UK Rishi Sunak announced a new budget, taxations, and other measures to support the economy. Money markets are now pricing in 10bps of interest rate increases from the Bank of England by the end of 2022. The hawkish repricing of market expectations for the BOE policy seemed to offer some support for Cable.
GBPUSD (Four- Hour Chart)
GBPUSD has rallied a little today but gave back the gains just above the 1.40 level to continue showing the hesitation to penetrate the psychological resistance at 1.4000. The major resistance sits at 1.4180, a barrier that has been important more than once. On the four-hour chart, the pair remains bullish as it stays in the ascending trend and the 100 SMA; in the meantime, the bullish momentum is supported by the MACD as the MACD line is above the signal line. If and when GBPUSD can successfully break above the 1.40 level, it will open the way to continue the overall uptrend and drive the market towards the 1.4180 resistance in general. To the downside, if GBPUSD breaks below the current support at 1.3851, then it will open a chance to test the three-month support at 1.3748, potentially turning the near-term trend into a bearish mode.
Resistance: 1.4000, 1.4180
Support: 1.3851, 1.3748
USDJPY (Daily Chart)
The US dollar continues to extend north against the Japanese yen amid the rising Treasury yields. In the near- term, USDJPY is likely to confront a pullback as the RSI indicator has reached the overbought situation and the pair has reached the upper band of Bollinger Band. If not, the next retreat level is expected to see at the level of 107.7, which is the next resistance. In the bigger picture, USDJPY is still staying in long term descending channel that started back in 2016.
Resistance: 107.7, 109.24, 111.14
Support: 106.16, 104.26, 101.19
EURUSD (Daily Chart)
EURUSD remains neutral on the daily chart, trading in the 1.2050 price zone; at the same time, the RSI indicator is also in the neutral position, currently at 45. On the upside, a break from 1.2349 will open a path to extend its bullish momentum as breaking upward the ascending channel. To the downside, if EURUSD penetrates its current support at 1.1978, then it will likely head toward the next immediate support at 1.1748.
Support: 1.1978, 1.1748, 1.1562
EV manufacturer giant Tesla Inc. dropped 4.46%, dragging down the Nasdaq 100…
EV manufacturer giant Tesla Inc. dropped 4.46%, dragging down the Nasdaq 100 Index
US stocks gave back some of yesterday’s gain, the three big indices closed the day in the red. Technology stocks led to losses in the S&P 500, while Material stocks prevailed. EV manufacturer giant Tesla Inc. dropped 4.46%, dragging down the Nasdaq 100 Index. Interesting to note Bitcoin’s price is somewhat synced with Tesla Inc. recently, Bitcoin is down 4.06% as of writing.
The Federal Reserve is pushing banks to abandon the London Interbank Offered Rate (LIBOR). Banks now have less than a year before the Fed has indicated it will stop allowing them to enter into new contracts pegged to LIBOR. The Fed is probing into banks’ Libor related exposure and possible contracts tied to the benchmark. The probing comes after the Fed warned banks in November that entering into new Libor-linked deals after 2021 would pose significant risks.
China’s President Xi Jinping will approve a five-year policy blueprint to reduce dependence on the West during an annual session of China’s legislature. Trillions of dollars will be mobilized to build a self-sufficient supply chain such as computer chips. Investors should pay close attention to the National People’s Congress session, which starts Friday and will last about a week.
RBA kept the policy rate unchanged at 0.1%, here are Bloomberg’s main takeaways for RBA’s monetary statement:
The central bank remains committed to the 3-year yield target and recently purchased bonds to support the target and will continue to do so as necessary.
Despite saying the economic recovery was better than expected, the statement flagged that wage gains remain subdued and unemployment high.
Lowe hosed down any concerns about a bubble in house prices, describing lending standards as sound.
Main Pairs Movement
Euro-dollar once dipped below 1.2 in the early session but managed to gather enough strength to overturn the bearish bias. ECB president Christine Lagarde remains committed to ongoing economic recovery, saying on Monday that “ECB will ensure financing conditions will not tighten prematurely.”
Aussie reclaimed 0.78 as the US greenback lost traction, and traders are back to the reflation trades. The commodity-linked currency is receiving strong support from rising Iron Ore prices. Bloomberg commodity index plunged during last Thursday’s bond yield panic, but we are already seeing price recovery today. On the other hand, Kiwi is still lagging behind its antipodean peer albeit outperforming the US dollar by 0.49%, AUDNZD gained 0.3%.
Cable recovered 0.31% and snapped three losing streaks. Investors are waiting to hear UK’s budget announcement on Wednesday. The larger than the expected budget could offer some bid potentials for the Sterling, possibly regaining a 1.41 handle in the short term.
Gold swung between positive and negative territory on the day, ended the day up 0.63%. The precious metal furiously plunged $16 in the early Asian session, hitting as low as $1707. Then bounced back to $1736 nearly EOD. Meanwhile, the 10-year US Treasury yield is clinging to a 1.4% level.
EURGBP (Daily Chart)
Euro has been defensive against Sterling since last December, the steep decline was put to a pause after RSI threatened to breach 20. It then tried to bounce back up, but the recovery did not last very long, and the bulls were capped by the upper descending trendline. Continuation to the south would give bears a chance to contest 76.4% Fibonacci support around 0.8565, if this level could hold off then the price could undergo a double-bottom, gathering momentum for a bullish reversal. RSI on the daily chart is likely to resume its downward trend until hitting the oversold zone before pulling up.
Resistance: 0.8744, 0.8888
Support: 0.8565, 0.8277
USDJPY (Daily Chart)
USDJPY is running into a key 107 hurdle for the first time in six-month, the bears look to end the pair’s five consecutive run-ups, and are currently trading around 106.74. The Relative Strength Index has been acting as a decent predictive indicator on price retreats during the last month, whenever the RSI hits 70, the pair pulls back from the tops. Moreover, prices have been falling back onto the ascending support trendline. As of current, RSI is wondering around 70, and we expect this RSI-trendline synergy to kick in once again. The price will likely be traveling south toward the trendline.
Resistance: 107, 108
Support: 105.4, 104.6, 103.8
XAUUSD (Daily Chart)
Gold is still confined in a downward tunnel, but the bears were taking a breather on Tuesday, and the price rebounded 0.65%. The precious metal struggled to find demand under a high yield environment, consistent lower lows and lower highs on the daily chart suggest a strong selling bias. After breaching 50% Fibonacci support at $1765, which now coincides with a ceiling of the descending tunnel, we expect the price to come back to validate this resistance. If $1765 failed to contain the short-term bulls, then we may see Gold regaining further north territories. MACD on the daily chart still heavily favors a bullish trend.
Resistance: 1765, 1823
Support: 1691, 1600
Tencent was the notable boost to the MSCI Asia Pacific Index, rising…
Tencent was the notable boost to the MSCI Asia Pacific Index, rising more than 5% today
U.S. stocks climbed as confidence returned to markets, easing concerns about inflation and higher Treasury yields would undermine equity valuations. The Dow Jones Industrial Average surged around 2.2%, led by Boeing, which rose around 7%; at the same time, the S&P 500 rose around 2.1% while the Nasdaq gained about 2.0%. After last week’s intense volatility in bond markets, investors piled back into risk assets, leading to a rebound in stock markets. According to the C.F.O. at Bleakley Advisory Group, equity markets will fluctuate mainly focusing on the benefits of the vaccines and the challenge of higher yield rates this year.
After a huge tumbling week, dropping more than 20%, Bitcoin rallied back near $49,000, riding a broad resurgence in risk assets and bullish support from Citigroup Inc. Citigroup described Bitcoin as blockchain’s “North Star,” as it laid out a case for the cryptocurrency assets to play a bigger role in the global financial system, mentioning that cryptocurrency assets can potentially become the currency of choice for international trade in the future. At the same time, MicroStrategy Inc has decided to purchase more than $4 billion worth of Bitcoin, boosting the price of Bitcoin as of today’s bullish support.
Asian equity markets rebounded as technology giants climbed and expectations became optimistic. Among the markets, Tencent was the notable boost to the MSCI Asia Pacific Index, rising more than 5% today. The Hang Seng Index also climbed more than 1.5% after plans were announced to expand the gauge to 55 members from 52 members.
Main Pairs Movement
EURUSD was down around 0.12% at the time of writing as the European Central Bank tried to make a meaningful impact on the currency. The ECB announced to help ensure that companies and families can access the financial assistance they need to weather this economic storm. In the meantime, the ECB has decided to slow the pace of bond-buying to fight against rising bond yields. However, those actions from the ECB seem to not affectively help the currency.
Cable continued to trade below 1.40 as the US bond yield has resumed gains, lifting the US dollar. Rishi Sunak, UK’s Chancellor of the Exchequer, is set to unveil a new budget later this week and consider pushing up rates that corporations pay. Those agendas will raise the question of whether the UK is a good place for conducting business. As the US bond yields increase and the uncertainty in the UK, Cable is currently in negative territory at the time of writing.
Gold tumbled more than 6% in February, the biggest monthly slump since 2016. As the US bond yield rates increase, they dimmed the appeal of gold, which did not offer interest. Gold is typically viewed as a hedging instrument of untoward inflationary pressures, but gold has responded more to the combination of rising confidence and rising yield rates this time.
EURUSD (Four-hour Chart)
On the four-hour chart, EURUSD remains on the downside for 1.2022 support. A break of the support level of 1.2022 will confirm a continuous bearish momentum toward the next support at 1.1951. Moreover, on the downside, the bearish momentum is considered as active, supported by both the RSI indicator and MACD; the RSI indicator has not reached the oversold situation while the MACD line is still sitting below the signal line, both suggesting a bearish trend. On the upside, a break from the resistance of 1.2091 will give EURUSD a bullish signal as it is going to be settled in the ascending channel.
Resistance: 1.2091, 1.2161, 1.2221
Support: 1.2022, 1.1951
GBPUSD (Four-hour Chart)
GBPUSD is hovering around 1.3920 off the high from last week. As the pair consolidates, it remains neutral at the time of writing. On the upside, GBPUSD remains in a bullish trend in the big picture as it is located above the 50 SMA and the ascending channel. On the downside, a break from the current support of 1.3851 will lead the pair toward the next support at 1.3748. At the same time, the MACD line is still below the signal line, suggesting a bearish trend, while the RSI indicator has not reached an oversold condition.
Resistance: 1.3991, 1.4180
Support: 1.3851, 1.3748
XAUUSD (Daily Chart)
In the near- term, gold is due to a pullback as the RSI indicator has reached an oversold condition and the MACD is currently weak, implying a bearish- to- bullish trend; moreover, the pair has reached the lower band of Bollinger Band, also suggesting a retreat. However, in the big picture on the daily chart, gold remains a bearish trend as it stays in the 6-month descending trend and is located below the 50 SMA. A break of the support at $1722 will bring the pair toward the next support at $1676.
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