Markets remain risk-on but we are seeing a tentative start to trading as the vaccination roll-out and fiscal stimulus packages continue to support trading. It may be a sign of the times but as Bitcoin broke through the US$50,000 level a death cross was forming on the gold daily chart. Large investors now seem to be moving into BTC, and gold can only find sellers.
The markets remain positive as equities take a hit as US10Y print at yearly highs above 1.30%. US deep freeze took off around a third of crude production with Texas pipelines freezing. API report weekly inventories today, which will be important with US$60 as the key support level.
UK inflation has unexpectedly risen 0.7% in January as the country went back into a coronavirus lockdown, however, we are still bullish on UK stocks and the FTSE 100 6800 resistance is the next key level to break for further upside prints.
USD/JPY holds steady near ¥106 after the pair cracked the key important 200-day moving average as the US Dollar comes back into demand.
- EURUSD –The euro weighed below 1.21 along with the 50-SMA after the 10-year US Treasury yields breaking to yearly highs on rising inflation expectations. The US Dollar is starting to rebound from its multi-year lows, tracking the rally in US rates. The single currency bears will attempt to push the pair lower today towards 1.2050 and 1.2010 if US Retails Sales beat expectations.
- GBPUSD – The Cable struggles to hold above 1.39 despite the upbeat UK CPI as the US Dollar rises alongside the 10-year yields. That said, the downside remains limited for now amid the impressive pace of vaccinations in the UK which would allow the UK PM Boris Johnson to lift COVID-19 restrictions and get the economy moving. The bulls will remain in control for now, as long as 1.3850 holds.
- USDJPY –USD/JPY holds steady near ¥106 after the pair cracked the 200-day moving average as the US Dollar comes back into demand. Some profit-taking is highly likely at this point as the strong momentum seems to be fading, however, going forward, moves lower should remain well supported by the January highs and short-term resistance levels now turned support at ¥105.60/70.
- FTSE 100 – The FTSE100 index closed slightly lower yesterday but the bullish rally that started last week shows no signs of slowing after Rio Tinto posted stellar earnings today as it looks like the mining sector is once again thriving. About an hour ago, the Office for National Statistics showed UK inflation has unexpectedly risen 0.7% in January as the country went back into a coronavirus lockdown, however, we are still bullish on UK stocks and the 6800 resistance is the next key level to break for further upside prints.
- DOW JONES – US stocks pulled back from a record rally with the blue-chip Dow Jones Industrial Average hitting our support level at 31470 as investors assessed the effect of a cold snap across the American Midwest on coronavirus vaccinations. The index now trades below the 200-period moving average which is a bearish signal for short-term traders from a technical perspective, although the 31470 support has held twice therefore it’s an important level to watch going forward. In the economic calendar today, there is US producer prices and retail sales due at 1330 GMT and minutes from the last US Federal Reserve meeting at 1900 GMT.
- DAX 30 – Both Eurozone GDP contracting by less than expected and German ZEW survey on economic sentiment ticking higher, failed to push the DAX 30 into the green, with the index now trading below the 200 period SMA and testing the 14000-support level. An hourly close below 14000 will confirm bearish momentum with 13900 as next support target.
- GOLD –US10Y yields jumped to one-year highs, printing above 1.30%, as optimism around a recovering economy continued to build-up, pushing the non-interest bearing safe haven below the $1800 mark with the death cross now confirmed on the daily chart, a bearish technical formation that foreshadows further downside. An hourly close below 1790 support level will have 1780 and 1770 as next support targets, as investors wait for FOMC minutes along with PPI and Retail Sales data out of the US today.
- USOIL – WTI Crude Oil printing higher in early trade today, holding above $60pbl as the US deep freeze continues to disrupt supply, shutting down refineries and taking around a third of US crude production offline. A basket of economic data out of the US today, with the American Petroleum Institute API reporting weekly inventory change with the previous week registering a drawdown on 3.5Mb. $60 handle remains key support level, with $61 as closest resistance on the upside.
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.