We are seeing some weakness coming in as the US weekly jobless claims fell less than expected and core consumer prices rose at a slower pace which caused equities to stall for now.
This morning USD is broadly mixed across major currency pairs as the selling paused although we are still favouring higher prints on EURUSD and AUDUSD. In Mexico, Banxico cut interest rate yesterday by 25 basis points to 4%., which is likely to accelerate volatility in USDMXN, so we are waiting to see if 20.0 will hold.
Crude Oil slipped as both IEA and OPEC slashed their respective global demand outlooks stating, “renewed lockdowns with short-term demand to rebound slower than expected”, but both remain positive on long-term outlook.
In the US, better-than-expected jobless claims data appears to diminish the argument for a large $1.9 trillion stimulus. This helped push gold lower. The UK trade deficit widen by £10.9B to £14.3B in December, but GDP was up 1% in Q4. However, Sunak said that the UK economy has suffered “serious shock” from pandemic. GBPUSD weakened although it is still above 1.3750 key support.
Biden has announced that his administration has acquired 200 million doses of Moderna and Pfizer vaccines, enough to vaccinate all its citizens, back to full employment.
Numbers to Watch
- Russian Rouble weaker ahead of Central Bank rate decision. USDRUB support and pivot at 73. A breakdown may trigger selloff to 70 / 69.
- Bitcoin strong momentum continues as MasterCard and BNY Mellon to facilitate transactions. Price $48k heading to a test of psychological $50k
- EURUSD –The euro bulls lacked momentum yesterday for a push above the 200-SMA as markets have already priced in President Joe Biden’s proposed $1.9 relief package. The bears could take over in the near-term with their backs against the 200-SMA, pushing the pair towards the 50-SMA.
- GBPUSD – The US Dollar’s rebound pushed the cable below 1.38 after UK economy shrank by 9.9%, its largest contraction in record. Moreover, a rebound in the US Treasury bond yields helped revive the USD demand and triggered some profit taking around the pair. A cautious mood around the equity markets, could also benefit the greenback’s revival, as the Pound bears target 1.3750.
- USDJPY –The dollar took a turn higher as stocks remain under pressure as traders start to get frustrated with President Biden’s relief package uncertainty. If the bulls take out 105, then we will likely witness a pullback in equities, pushing the pair much higher.
- FTSE 100 – The FTSE 100 is back below both near-term moving averages on the hourly timeframe hinting at further weakness today following a slightly negative close on Thursday, as GDP figures earlier this morning show a 1% growth in Q4, down sharply on the 16% growth seen in Q3, driven by tougher restrictions. Investors look ahead to the upcoming results from UK banks starting next week which may provide the catalyst needed for the UK index of stocks to break out from its tight range between 6500 and 6580.
- DOW JONES – U.S. weekly jobless claims fell less than expected and core consumer prices rose at a slower pace which caused some traders to show restraint yesterday with markets now in a bit of a holding pattern waiting for the next positive or negative catalyst as the Dow index trades below the 50-period moving average but still above our key support level at 31225. Looking ahead, the U of Michigan’s report on consumer sentiment may attract attraction although trading volume is likely to remain subdued ahead of the long weekend in the U.S.
- DAX 30 – European markets are seen opening lower today as risk momentum seems to be stalling following a rather tepid and back and forth session yesterday. The DAX30 is still swinging around 14000 ahead of the weekend as it remains in a narrow sideways range with 13900 as next key support and target as the uncertainty regarding the economic consequences of the pandemic with new variants of the coronavirus has recently made investors act more cautiously.
- GOLD –Initial Jobless Claims came in at 793K vs. a revised previous of 812K, dropping by 19K, which proved to be enough to turn investors away from the safe-haven yellow metal, as it dropped below the 200 period SMA on the hourly chart and is currently holding above 1815 support level. A technical divergence however is indicating fading bearish momentum, with an hourly close above 1824 to favour higher prints with 1830 as the closest resistance target on the upside.
- USOIL – WTI Crude hit our support target at $58pbl as the International Energy Agency cut is demand forecast for 2021 describing the market as fragile as Covid-19 pandemic continues to weigh on demand outlook. We are currently printing between 57.50/58 support/resistance levels with a breach of either needed for a clearer direction with technical indicators favouring a higher probability for further downside with $57 as next support level.
Rony Nehme - Chief Market Analyst at SquaredFinancial
Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.