Date Tuesday 23rd March 2021
Direction

We don’t have a strong view on the markets apart from expecting to see a move lower in EURUSD.  The UK employment data tomorrow and CPI on Wednesday with the core YoY expected at 1.4%, along with the US GDP on Thursday may provide more guidance for sentiment.

Drivers

We are seeing divergent political and business sentiment as Europe looks at further lockdowns and the US warns on rising infections, while investors continue to be risk-on looking for markets to add value as buyers move out of the rotation trade.

There is continuing positive and negative news on vaccines and supplies.  The AstraZeneca’s vaccine was shown to be 79% effective in a US trial.  An independent board found no safety concerns and the shot prevented 100% of severe cases and deaths.  At the same time the war of words over vaccine supplies continues.

Germany is set to extend and tighten its current lockdown to stem increasing cases.  They announced that they will impose a drastic 5-day lockdown over Easter.

New Zealand announced measures to stem speculation on house prices and to limit their rise.  The measures are aimed at increasing taxes on investment properties and tightening mortgage lending. The macro-prudential measures will allow the RBNZ to keep monetary policy loose without worrying about fuelling the housing bubble. The move seems excessive given that RBNZ has already said multiple times that they would use macro prudential measures to limit house price rises rather than monetary policy.

NZD is under a lot of pressure on the back of this as the depression of house prices is expected to weigh on the NZ economy as well as rates being assumed to be able to stay lower for longer. NZDUSD has broken 0.7100 support and AUDNZD broken 1.0845 resistance.

TRY position cutting on the open yesterday led to some risk cutting in G10.  Fears that TRYJPY position cutting could drive a stop loss driven move in USDJPY led to some fast money selling of crossJPY on the open.  The TRYJPY selling never materialized showing how Japanese retail positioning is now much lighter.  Plenty   of TRY demand across the day showing how the market is still seeking yield and not overly concerned by the spot moves at these levels.

Buying growth currencies on dips still seems the right strategy, like AUDJPY on dips, 83.60 low on the open yesterday is support.

Market Updates

EURUSD  The Euro closed above 1.19 yesterday despite Angela Merkel confirming an extension to the lockdown until April 18. Rising coronavirus concerns in the EU are pushing the US Dollar higher, however so far, the EURUSD has failed to pivot back above the 1.1955 resistance. The focus now shifts to Powell’s testimony, although it is widely expected that the Fed will keep its dovish tone intact. Technically, the pair remains in the same range, and a retest of our 1.1870 key support level today is highly likely.

GBPUSD The Pound bulls couldn’t find enough momentum to break above the 1.3870 resistance level during yesterday’s session, despite a weaker US Dollar and a pullback in Treasury yields. Looking ahead, the Cable is seen sliding lower despite a better-than-expected UK unemployment rate released earlier today. However, the key important 1.38 support level is likely to attract dip buyers, as the RSI is starting to signal oversold conditions.

USDJPYThere was no action yesterday for the USDJPY as buyers and sellers continue to square off in a very tight range between ¥108.65 and ¥108.85. However, technical indicators still favor further weakness as the 50-period moving average continues to offer quite a bit of resistance. Our short-term target therefore remains the ¥108.40 support level, unchanged from yesterday’s analysis.

FTSE 100Concerns of a third wave of Covid-19 infections in Europe is dragging on London stocks this morning despite an impressive rebound yesterday that saw the FTSE100 bounce back from intraday lows below 6650 and close above our resistance at 6700 in what appeared to be a dip buying rise. However, the index failed to pivot back above the 50-period moving average, therefore we expect the price to experience further short-term decline today. A break of yesterday’s lows will indicate the selling pressure is getting stronger.

DOW JONESNasdaq stocks posted solid gains yesterday leading Wall Street higher as Treasury yields pulled back below 1.70%. The Dow Industrials recouped earlier losses with four tech giants: Intel, Apple, Microsoft, and Cisco, leading the bullish rebound. However, the blue-chip index is still on a minor downtrend technically, with the 50-period moving average crossing the 200-period moving average on the hourly chart, which is a bearish signal, for the short-term at least. A sustained move back above 32800 will generate buyer interest, otherwise look for further downside today with 32400 as nearest support level, ahead of Congressional testimony by Jerome Powell and Janet Yellen later today.

DAX 30 Germany will enter a strict shutdown for five days over Easter as it fights rising coronavirus infection in what Angela Merkel called “a new pandemic”, and this is weighing on sentiment today although the DAX30 managed to finish higher yesterday therefore, it would appear that much of the negative news has already been baked into the price. From a technical perspective however, the RSI is still pointing lower with a cross of the 200-period moving average around 14600 to trigger acceleration to the downside with 14468 as nearest support and target.

GOLD – Gold held above the 200 period SMA as US10Y yields eased below 14-month highs with all eyes today on Yellen and Powell’s two-day congressional hearings. A busy week for bond auctions with investors mostly monitoring the seven-year note, a maturity which struggled on the last offering. A breach of 1730/1740 support/resistance level is needed for a clearer direction, with $1718 and $1754 as respective targets.

USOILConcerns of near-term demand outlook coupled with an uneven global recovery from the pandemic is keeping higher prints on WTI Crude oil under pressure, with Germany the latest to extend lockdown measures, New York mayor urging a pause on reopening, while India cases climbed rapidly. API weekly inventory data expected later in the day, with short term technical indicators favouring lower prints with $60 and $59 as closest support targets.

 

 

 

 

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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