Daily Market Analysis
US stocks market was mixed amid spiking treasury yields. Higher yield seemed to be weighing down on Tech shares, with the Nasdaq 100 index dropped 0.9% on Friday. Meanwhile, the Dow Jones Industrial Index advanced higher towards 32,700 and the S&P 500 climbed 0.1%. Financials and industrials stocks edged higher as investors are shifting demand into value shares.
Italy Prime Minister Mario Draghi announced most part of Italy will return to lockdown on Monday amid hiking infections. The government has blamed more-contagious virus strains from the UK and Brazil, and pledges to triple vaccinations to more than half a million a day.
BoJ is considering releasing an analysis of the potential impact of lowering its negative interest rate to show its determination to use this option if needed. Details will be released on March 19 and is widely expected to tweak its stimulus framework while stopping short of major overhaul.
Main Pairs Movement
The US greenback stopped its losing streak amid rising yield backdrop, rallied 0.28% and 5.8% respectively. The 10-year treasury yield refeshed high of 1.632% on the last trading day. Investors are confident in the economical upside of Biden’s generous $1.9 trillion stimulus package, not to mention Fed Chairman Jerome Powell’s support in rising yield. That being said, bond price will continue to suffer amid higher expectation of inflation in 2021.
Euro was on the defensive against the dollar, slipped 0.28% on Friday. Vaccine rollouts in the Euro Zone is still sluggish albeit regulators’ approval on Johnson & Johnson’s single shot vaccine. Vaccination campaign has been halted in some European countries due to concerns that doeses supplied by AstraZeneca resulted in blood clots.
Cable picked up some volatility as economic docket failed to impress speculators, dipped 0.45%. UK’s Manufacturing Production for January decreased by 2.3%, whereas economists expected the figure to be around -0.8%, and marked the first decline in eight-month.
Fire sales in safe-haven currencies resume, the Japanese Yen and Swiss Franc lost 0.5% and 0.58% against the greenback. Investors are allocating money into risky assets, and leaving bond behind as they grew optimistic about the outlook in 2021 and 2022. Gold resembled similar trend recently, but somehow managed to stood up against the dollar on Friday, closed up 0.06%.
Canadian dollar was the only one swimming against the current, USDCAD plunged 0.52%. Optimism has been circulating in the oil market due to OPEC+ effort to keep supply constrained, thus boosting crude price and lending support to the oil linked currency.
EURGBP (Daily Chart)
EURGBP struggles to find a direction as price clings to 76.4% Fibonacci around 0.8565. Price has been trapped inside a descending wedge for the last four months, and will soon run into a dead end. If it is not able to pull off a strong rebound in the near term, then this pair will likely to resume its selling bias. However, since RSI is hovering over the edge of a oversold zone, we expect easing downward momentum. The bears will meet its first support around 1.845 followed by robust defense line of 0.828, last seen in last Febuary.
Resistance: 0.874, 0.8887
Support: 0.8565, 0.845, 0.828
USDCAD (Daily Chart)
USDCAD is extending its decline in fourth consecutive day, currently hovering above 1.246 support line. This support level was previously contested, followed by strong bounce. But the bulls look to give up its defense line as Loonie was only currency trading firmly against the US dollar on Friday thanks to upbeat Canadian unemployement rate and stablized oil price. Further on the south, price will meet support of 1.2268 dated back in Febuary 2018. MACD on the daily chart continues to eke out the current bearish trend.
Resistance: 1.275, 1.296
Support: 1.25, 1.227, 1.21
XAUUSD (Daily Chart)
Gold pared all of its loss on Friday, and is extending its recovery toward 50% Fibonacci resistance. On the upside, red descending trendline will put a lid on any attempts for a breakthrough. Price is approaching a corner where the red downward trendline, the purple long term support trenline, and horizontal support band intersect with each other. It would be intersting to see how price could maneuver inside this highlighted zone. If bidders are to give up the downside support zone between $1673 and $1690, then it would open doors to $1600 level and essentially mark the death of Gold. MACD on the daily chart seems to be in transition towards a bullish trend, but investors should be prudent to wait for a clear signal.s
Resistance: 1765, 1839
Support: 1690, 1673, 1600
Industrial Production (YoY) (Feb)