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ECB Vice President Luis de Guindos noted “Eurozone economy is likely to…

ECB Vice President Luis de Guindos noted “Eurozone economy is likely to shrink in the first half of 2021”

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Market Focus

US equities edged higher amid improving investor’s confidence in the economic outlook in 2021. The S&P 500 index climbed 0.67% with financials and industrials stocks led the gain. US 10-year yields held steady after today’s seven-year notes auction.

Evergreen’s ‘Ever Given’ massive container ship blocked the Suez Canal for a third day, forcing other vessels to reroute around Africa. The incident will send ripples in global trade, most likely boosting shipment costs and delay countless arrivals. Oil price also buoyed around the situation, plunged 4.07%.

Federal Reserve said dividend restraints can be removed for US banks that pass the upcoming stress tests with sufficient capital. The restriction started last June when banks were prohibited to raise dividends, the act ensures lenders have enough capacity to sustain economic pain triggered by the COVID-19 pandemic.

During Thursday’s press conference, President Biden expressed he will run again in 2024 with Kamal Harris. The ambitious gentleman also boldly stated “China wouldn’t overtake the US in clout under his watch”, and emphasized technology and medicals are critical in battling with China. Finally, he doubled his vaccination goal to 200 million shots in his first 100 days in office.

Market Wrap

Main Pairs Movement

Eurodollar dipped 0.32% amid sluggish vaccination campaign. The European Council kicked off a two-day summit today, with the vaccination program being top priority on the list. However, the market seemed to be quite pessimistic on any meaningful outcome from these meetings. Rubbing salt into the wound, ECB Vice President Luis de Guindos noted “Eurozone economy is likely to shrink in the first half of 2021.”

Sterling was surprisingly well-performed among the G-7 space, appreciated 0.35% against the dollar. The rally snapped its fifth losing streak. Given the lack of impetus on Thursday, the upside move could be viewed as a correction rather than a reversal.

Safe-haven duos like the Japanese Yen and Swiss Franc were on the back-foot once again, dropped 0.38% and 0.45% against the greenback. These two currencies remained unmotivated as upward bond yield momentum is back in action.

Gold looks to surrender all of its gains from yesterday’s session, currently trading around $1727. The precious metal is confined in a $20 trading range, and the fight between bulls and bears is intensifying, one should expect a breakout soon. The constantly higher bond yields and strong US dollar keep Gold’s demand subdued, whereas concerns on infection resurgence in the Euro Zone eke out the yellow metal.

Technical Analysis

EURUSD (Daily Chart)

Eurodollar is extending its decline to 1.1778, a soft support level last seen in November. The overstretching downtrend is the last leg of a double-top pattern. Given solid close in the last two days, we suspect the selloff may be more robust than we’ve expected, thus this pair may look to contest 1.163 during next week. As we noted in the previous analysis, this pair will exit the current consolidation phase, and the bears will reclaim the driver seat. It is unsurprising to see a retaining selling bias given the breakout from an ascending trend. We are also seeing a bear revival from the MACD.

Resistance: 1.19, 1.195, 1.2215

Support: 1.1778, 1.163

USDJPY (Daily Chart)

Dollar Yen struggled to find firm direction as the pair zig-zagged between 109.1 and 108.6. Gains from yesterday and today completely wipe out the seller’s effort to bring down the overheated price, the daily RSI figure remains outside of its comfort zone. The dollar greenback continues to gain traction amid recovering bond yield. The 10-year Treasury yield looks to snap a three-consecutive loss, overall expectation for inflation in the US resumes upward. This pair will march toward 109.67, a major resistance not seen since last June. We expect at least some profit takings around this level.

Resistance: 109.67

Support: 108, 106.7, 104.9

XAUUSD (Daily Chart)

Gold is still clinging to the descending trendline, along with the mid-line of Bollinger Band. Bidders managed to launch an attack on $1745 during Thursday’s session, but the gain was quickly erased. The fact that we are seeing bounce-offs from the frequently visited $1727 soft support, any decisive upward drift could encourage bulls to pile in. Price may still trap inside a tight trading range as bulls and bears resume the tug-of-war, investors should be prudent to wait for a clear breakout from either side.

Resistance: 1765, 1839, 1872

Support: 1727, 1691, 1680

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Crude Oil gained more than 5% as the blockage of the Suez…

Crude Oil gained more than 5% as the blockage of the Suez Canal by a giant container ship

20210325
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Market Focus

US equity markets were negative as the bond yields became steady and investors rotated away from the stocks. In the meantime, European markets eked out a gain whilst most Asia shares fell the most in almost three weeks. Among those, Hong Kong equities declined to a 10 correction as it’s the decision to temporarily suspend BioNTech vaccines.

Suez Canal snarled by giant ship has choked the key trade route. As one of the world’s busiest trade routes, it is very vital for the movement of crude oil and consumer goods. According to officials, no progress has been made so far. And the canal may be blocked for days. As around 12% of global trade such as oil shipments need to pass through the canal, this incident may potentially raise oil prices and shipping costs. As a result, oil prices jumped more than 5% today.

German Chancellor Angela Merkel decided to pull the plan for five- day lockdown over Easter. The withdrawal of the lockdown plan essentially meant that Germany remains under restrictions that were loosened before the third wave of infections.

Market Wrap

Main Pairs Movement

Crude Oil gained more than 5% as the blockage of the Suez Canal by a giant container ship is likely to send a ripple of disruption through the global energy supply chain. Both US and European refiners that rely on the waterway may need to look for a temporary replacement.

Gold rose with ebbing yields and disappointing US economic data. The demand for five years notes increased, and it has dropped around 10 basis points this week. A good bond auction essentially supported gold. As a result, gold climbed about 0.4% today.

The British Pound struggled to close 1.37 against the US dollar as the US dollar gained traction and UK CPI missed estimates about 0.4%; at the same time, the Pound got weakened as the vaccination rollouts could slow down in the UK.

USDCAD declined further south below 1.2576 as oil prices rose above 60 on the back of an improvement in risk sentiment.

Technical Analysis

USDJPY (Daily Chart)

USDJPY clings to modest daily gains around 108.76, keeping up its momentum within the ascending channel. The pair is confined to a tight range, consolidating in the near -term on the daily chart as it tries to adjust from the recent surge of the US Treasury yields. Since the RSI is still overbought, it is expected to see USDJPY take a temporary break within the range from 109.45- 107.87. On the upside, the bulls need to contest and penetrate through the resistance of 109.45 to confirm the strength of the recent upside move. To the downside, the bears need to test down to the support of 106.29(Fib. Retracement 33.2% ) to break the uptrend. Today, the move of the pair will eye on the US GDP reports and initial jobless claims.

Resistance: 109.45, 111.40

Support: 107.87, 106.29, 104.34

GBPUSD (Four-Hour Chart)

GBPUSD pressures on downbeat mood amid strong US dollar and weak UK CPI report. The pair finally takes a break, trading at 1.37184, but still is in the negative territory after suffering from consecutive days of bearish momentum. On the four-hour chart, the RSI is in the oversold condition, below 30, suggesting that it is expected to see a retreat; however, as the MACD indicator is still showing a bearish sign, the pair might continue to trade in the negative mode after the adjustment. To the downside, the bears will confirm if the pair breaks through the next resistance level of 1.3674. On the upside, the bulls need to test up to 1.3868 to confirm a bearish-to-bullish momentum.

Resistance: 1.3674

Support: 1.3794, 1.3868, 1.3928

Gold (Daily Chart)

Gold continues to stay in a consolidation phase along with the resistance of 1746.91. The move of gold is likely to be determined whether the resistance level can be broken through. At this point, gold has hovered around the area for more than 5 trading sessions, thus expecting to see a breakthrough as bullish momentums are very strong at this point. At the same time, the MACD indicator also lends support to the bulls while the RSI is still neutral, giving gold rooms to move forward.

Resistance: 1746.91, 1790.23, 1825.24

Support: 1676.89

20210325
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Renewed lockdown in Europe undermined oil price on Tuesday, the WTI crude…

Renewed lockdown in Europe undermined oil price on Tuesday, the WTI crude and Brent crude futures plunged 6.17% and 6.59% respectively

20210324
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Market Focus

US equity market suffered despite easing bond yields. The three big indexes were on the retreat. The S&P 500 index slumped 0.64%, with industrials and materials stocks led the decline.

Here are Bloomberg’s key takeaways from Janet Yellen and Jerome Powell House CARES act testimony:

  • The Fed expects a temporary increase in fiscal stimulus in the coming months. Powell repeated that the Fed will communicate well in advance when it gets closer to bond-buying tapering.
  • Powell said inflation to move up over this year, but it won’t get out of hand.
  • Yellen characterized asset-price valuations as elevated by historical metrics. Powell added that while “some asset prices are a bit high,” banks are highly capitalized. 
  • Powell doesn’t favor complete privacy about ownership of and transactions in a digital dollar. A system that relies on private governance or anonymous owners “would not be viable”.

Market Wrap

Main Pairs Movement

The dollar was gaining traction on Tuesday, the dollar index ramped up 0.64%. The rally may be motivated by external forces, rather than the US greenback itself. New Zealand government unexpectedly announced its move to fight rising house prices with a set of measures. The act will heavily hamper down the rentier class as the newly rolled out tax code makes housing speculation less profitable. To be specific, capital gains on property investment will be taxed for any property held less than 10 years, compared to the previous 5 years. The bigger implication is perhaps pandemic resilient or recovered countries like New Zealand are already getting their hands on reversing the consequence of a too loosen monetary policy. This synchronized expectation in turn dragged down currency crosses like the Aussie and Cable, where similar steps are followed.

The eurodollar plummeted 0.2% as investors are still digesting the Turkey headline. Moreover, lockdown extension from Germany and Netherlands further weighed down on the shared currency. There is little sign of backdown from infection figures in Germany, Chancellor Angel Merkel noted “case numbers are rising exponentially thanks to the British variant of the virus, new British variant of coronavirus means we are effectively in a new pandemic. [lockdowns] will be extended until Easter.”

Renewed lockdown in Europe undermined oil price on Tuesday, the WTI crude and Brent crude futures plunged 6.17% and 6.59% respectively. Investors are worried that the sluggish EU vaccination campaign will fall further behind amid the resurgence of infections within the Euro Zone, thus decelerate the recovery in oil demand.

Technical Analysis

EURUSD (Daily Chart)

Eurodollar looks to close the day with a solid bearish engulfing. Price was very close to climbing back above 1.1954 during yesterday’s session, but today’s recovering dollar strength killed bulls’ hope. More importantly, the double-top pattern is manifesting itself as price broke through the neckline of 1.19. As we noted in the previous analysis, this pair will exit the current consolidation phase, and the bears will reclaim the driver seat. It is unsurprising to see a retaining selling bias given the breakout from an ascending trend. On the downside, the nearest contestant support lies around 1.1778, following by a long-standing 1.163. We are also seeing a bear revival from the MACD.

Resistance: 1.19, 1.195, 1.2215

Support: 1.1778, 1.163

NZDUSD (Daily Chart)

The long-awaited breakout on the Kiwi finally happened, after stuck inside a tight range between 0.7117 and 0.725. Price relentlessly plunged 2.14% on the news that the New Zealand government will fight rising house prices with a new set of policies. It is falling onto 50% Fibonacci of 0.7, which is also significant psychological support. We witnessed a strong bounce last time when this handle was contested, thus it is reasonable to induce a similar action this time around. However, if the price fails to pull away from 0.7, then we suspect the starved bear will take the price down to 0.69.

Resistance: 0.7117, 0.725, 0.7465

Support: 0.7, 0.69, 0.6768

XAUUSD (Daily Chart)

Gold is still clinging to the descending trendline, along with the mid-line of Bollinger Band. Price is backed to a corner, and awaits signals from the Treasury market. That being said, we remain a bullish stance on the precious metal since stimulus checks are in the rearview mirror, focus has returned to Fed’s dovish view and upcoming Treasury auction, which should eke out Gold. We are seeing bounce-offs from the frequently visited $1727 soft support, any decisive upward drift could encourage bulls to pile in. At this point, investors should be prudent to wait for a clear breakout from either side.

Resistance: 1765, 1839, 1872

Support: 1727, 1691, 1680

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