Date 15th February 2021
Direction

We ended last week risk-on with equities very well supported and this is the theme for the start of this week.  The consensus dollar lower trade is back in play supported by the US fiscal stimulus programme.

Drivers

Reflation trade is still going strong, US indices closed at all-time highs as their European peers attempted to follow suit, while the dollar continued to lose ground despite stronger US yields with the 10Y breaching 1.20% for the first time since February 2020

Materials, financials and energy have seen a strong pickup while big tech sold off

The consensus trade of the year, weaker greenback, seems to be back on track with the DXY now well below 90.50, sending the pound above 1.39

Vaccine optimism is high as the UK hit their 15 million vaccination milestone pushing signs of easing restrictions to the forefront along with higher energy prices should keep bullish momentum strong on the index.

A daily death cross on gold still in formation, while the yellow metal continues to   hold above key 1815 support level

Market Updates

EURUSDThe euro is trading back above 1.21 amid a risk-on mood in equities. Strong expectations for US fiscal stimulus after the disappointing NFP is still weighing on the greenback. However, the bulls need to break above the 200-SMA for further upside momentum. For now, the pair seems stuck between the 200 and the 50-SMAs.

GBPUSD  Cable has hit our 1.39 target after UK vaccinated more than 15 million people. Additionally, markets are still expecting President Biden’s $1.9 trillion relief bill to be passed soon. Meanwhile, US equity futures broke to new record highs as risk-on sentiment take over the marketplace. Moving forward, the bulls will be eyeing to rally towards 1.3950 and possibly 1.40 in the upcoming week.

USDJPYThe dollar bulls found support above 105 as the rallying US bond yields remained supportive of the move. However, sustained USD selling bias might keep a lid on any major rally for the pair. Additionally, the progress in the rollout of vaccines along with US fiscal stimulus, boosted the investor’s confidence, which is the reason behind the extension in the equity markets. The bulls will need a break above 105.30 for a possible push towards 105.70.

FTSE 100 The FTSE 100 ended Friday’s session by registering gains of more than 1% and breaking out above a sideway channel along with the 6600 resistance level, on the back of signs of easing restrictions as the UK passed the 15 million vaccination target. Higher oil prices also helped lift the index, with technicals favoring further upside in today’s session, to be confirmed on an hourly close above 6650 resistance.

DOW JONES –  The Dow Jones ended Friday’s session on an all-time-high close (along with the S&P500 and Nasdaq), overshadowing the earlier daily red toppish candle, after investors poured into materials, financial and energy on anticipation of a looming economic recovery. Today, the index is printing fresh all-time highs, however failure to hold above 31600 will dent bullish momentum favouring a pullback towards 31550 as closest support target. US stock markets closed for President’s day.

DAX 30 The Dax 30 bounced off the 200 period SMA on the hourly chart as it attempts to reach all-time highs in early session today as risk-on sentiment on the back of further US stimulus and a reflation trade rhetoric is keeping demand strong. Eurozone consumer confidence data along with industrial production to provide some volatility today, with technicals favouring a retest to all-time highs.

GOLDWeaker than expected Michigan Consumer Sentiment Index data (Actual:76.20, consensus: 80.80, Previous: 79) along with ongoing weakness in the US Dollar kept the yellow metal support, holding above $1815 support level, however still maintaining a downtrend with the 50 and 200 period SMA on the daily chart itching closer and closer. An hourly close below 1815 will open the door to further downside with 1800 as next closest support.

USOIL – WTI Crude hit our support target at $57.50 on Friday only to end the session in the green, climbing to 13-months highs in early trade today on the back of rising tensions in the middle east and fear of supply disruption after Saudi Arabia intercepted an explosive drone heading towards the Kingdom along with a cold snap in the US boosting energy demand. Technically, a divergence on the hourly chart with momentum indicators are signaling a retracement lower with $60 as closest support.

 

 

 

 

Rony Nehme

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.

 

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