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President Joe Biden looks to impose a higher tax rate on the…

President Joe Biden looks to impose a higher tax rate on the corporation and wealthy Americans, with relief eyed for middle-class households

20210317
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Market Focus

US stocks market was mixed on Tuesday while the 10-year yield edged slightly higher. Apple Inc. and Microsoft Corp. lifted the tech-heavy Nasdaq 100 index. Meanwhile, the S&P 500 index closed marginally lower, with energy and industrials stocks leading the decline.

President Joe Biden looks to impose a higher tax rate on the corporation and wealthy Americans, with relief eyed for middle-class households. Biden’s proposal will mostly affect families earning more than $400,000 a year and could lay out a path for his long-standing economic and infrastructure plans. However, the road to higher taxation will be bumpy since any tax changes will have to move through Congress, and Biden has almost no power to push through his plan via executive order.

European Union looks to resume vaccination campaign as the block’s drug regulator signaled AstraZeneca’s Covid shot was safe. Shortly after, Italy and France hinted that they would resume using the AstraZeneca vaccine. Despite the setbacks, European Commission will unveil its strategy to gradually lift coronavirus lockdowns on Wednesday.

Bloomberg’s key takeaways from China’s economic data releases:

  • The official figure showed growth rates of more than 30% for industrial production, retail sales, and fixed-asset investment.
  • Economists warned that recovery remains imbalanced, and the foundation for economic recovery is not yet solid.
  • The jobless rate was 5.5% at the end of February, up from 5.2% in December.

Market Wrap

Main Pairs Movement

Eurodollar dipped 0.17% albeit upbeat investor’s confidence data. Germany published the ZEW Economic Sentiment for March on Tuesday, the figure came on top of the forecast of 74, printed 76.6. Speculators now await the Fed announcement to look for a clue on how the central bank will deal with its current account deficit and whether they will push agenda to hike interest rates.

Aussie, Kiwi, and Cable plunged before the EU session but pared most of their loss later in the day. Safe-haven pairs such as USDJPY and USDCHF dropped 0.14% and 0.42% respectively. However, low-yielding currencies should remain subdued given the global rise in yields triggered by the US-led reflation trade.

Technical Analysis

XAUUSD (Daily Chart)

Gold is gradually losing its bouncing strengths as $1740 kept a solid lid on any upward moves. Price is close to kissing its descending trendline that started in January, but the price has been rejected by a $1740 hurdle three times. This in turn diminishes the likelihood of price touches the dynamic resistance line. Sellers are patiently waiting for bond yields to edger higher to kick off another round of bearish run, and the price would breach below the support band of $1691 and $1673 this time. Further on the south, bears ultimately eyes for $1600 handle. MACD on the daily chart is printing a bullish picture.

Resistance: 1765, 1839

Support: 1691, 1673, 1600

GBPJPY (Weekly Chart)

GBPJPY is extending its gains to the tenth consecutive week, approaching the highest price of 152.83 since April 2018. Strong fundamentals for the Sterling combined with receding demand for safe-haven currency have helped this pair to forge such an incredible surge. Meanwhile, the continuous appreciation has driven RSI deeply into the overbought zone, currently printing 77. We expect the price to contest a 152.83 resistance level before profit takings, which would prompt a correction toward the purple trendline. However, the prospect of this pair remains to be bullish within a risk-on environment in 2021.

Resistance: 152.83

Support: 149.43, 145.9, 141.17

EURUSD (Daily & Monthly Chart)

Euro is under pressure amid recovering US dollar and is on a third losing streak. Despite price managed to overcome horizontal resistance of 1.1954, but it failed to reclaim the key 1.2 psychological level. The false breakout marked a retracement of the current bearish trend, which looks to resume toward 1.1778.

On the monthly chart, the euro-dollar is correcting toward a 23.6% Fibonacci level of 1.167, which is in confluence with the daily picture. However, we expect a robust rebound at this stern support line. In the longer term, the bulls look to challenge the previous high of 1.25.

Resistance: 1.1954, 1.2215

Support: 1.1778, 1.163

20210317
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With a strengthened US dollar index and the news of the possibility…

With a strengthened US dollar index and the news of the possibility of Iranian oil coming back onto the market, oil prices are weak today

20210316
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Market Focus

US equity markets turn positive with the Dow Jones, S&P 500, and the Nasdaq are trading in the positive territories. Technology shares led US stocks higher as investors weighed the economic recovery and progress on vaccines against the risk of inflation. Both S&P 500 and the Dow Jones hit fresh records as investors continued keeping their eyes on the bond yield, which remains the primary risk facing the stock markets. In the next upcoming days, the market will have to continually grapple with the anxiety about economic overheating and the upcoming FOCM event.

The US might face the first major tax hike since 1993 in the next economic plan as President Joe Biden is planning to announce to help pay for the long-term US recovery program. For Biden’s administration, the upcoming changes are an opportunity not just to fund key initiatives, but also to address the inequities of Trump’s tax system. Thus, the next economic plan might act as a major turnover of the US tax system.

Market Wrap

Main Pairs Movement

DXY opens the week on a positive footing, remaining higher against most G-10 currencies peers. The dollar is expected to stay bid into this week’s Federal Reserve policy decision, which will refrain from any explicit action to rein in yields.

The precious metal, gold heads for a second straight days gain on bets that the Fed will decide to keep rates unchanged this week during the meeting. The Fed meeting will be a major driver for the gold’s movement as if rates remain low, potentially lifting the inflation rate, then it will drive the gold market upward.

After last week’s fluctuation, crude oil prices consolidate around $65 in a narrow band on Monday amid a lack of significant fundamental drivers. With a strengthened US dollar index and the news of the possibility of Iranian oil coming back onto the market, oil prices are weak today.

Technical Analysis

XAUUSD (Daily Chart)

Gold extends its positive trend on Monday, currently trading around 1730 area. On the daily chart, the technical outlook seems to suggest that Gold might extend its recovery toward its resistance level at 1746.91 in the near- term. The RSI indicator continues to stay below overbought, implying that there is still more room for the pair on the upside before it confronts a bearish pressure. In the meanwhile, the MACD indicator just turns to a bullish mode, suggesting that the pair has the potential to grow upward. However, in the bigger picture, gold remains bearish as it continues to fall within the descending channel whilst trading below the 50 Simple Moving Average and the midline of Bollinger Band.

Resistance: 1746.91, 1790.23, 1825.24

Support: 1676.89

GBPUSD (Four- Hour Chart)

From a technical aspect, repeated failure to break the resistance at 1.3954 marks the formation of a bearish double-top pattern in the near- term. The double top formation may bring the pair down to the next support level at 1.3779, and then pullback; thus, any decline is likely to find a place near the support confluence region. The MACD indicator also suggests that the bearish momentum is likely to continue. However, in the bigger picture, GBPUSD remains bullish as it continues to stay in the ascending channel.

Resistance: 1.3954, 1.4008, 1.4062

Support: 1.3779

EURUSD (Daily Chart)

EURUSD retreats as the US dollar index recovers its poise, currently trading around 1.1930. On the daily chart, EURUSD continues to trade within the descending channel; at the same time, it is located below the 50- and 100-SMA, indicating a bearish mode. However, the RSI indicator stays in a neutral situation, suggesting that there is room for the pair to climb or drop. That being said, the pair might be in a consolidated mode as of now. If the pair can successfully climb above the resistance at 1.1945, then it will open a chance to contest the next resistance at 1.2349, where turns the pair from bearish to bullish in the near-term and long-term. To the downside, if the pair fails to test 1.1945, then it will potentially head toward 1.1695, which confirms a bearish trend.

Resistance: 1.1945, 1.2349

Support: 1.1695, 1.1492, 1.1290

20210316
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US 10-year yields touched 1.43%, the highest since Feb 2020

US 10-year yields touched 1.43%, the highest since Feb 2020

20210225
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Market Focus

US equities reversed losses and staged a rally as Federal Reserve Chairman Jerome Powell reaffirmed his view that the economy needs support. Government bond yields climbed along with oil prices.

Energy and industrial companies led gains in the S&P 500 Index, offsetting weakness for tech stocks. Banks advanced, sending an industry gauge to its highest since 2007, and small caps rallied more than 2% after U.S. regulators said Johnson & Johnson’s Covid 19 vaccine is safe and effective. Tesla Inc. gained after Ark investment Management’s Cathie Wood said she bought shares during this week’s selloff. US 10-year yields touched 1.43%, the highest since Feb 2020, before paring the increase.

Fed Chair Powell testified before lawmakers, saying the U.S. economy still had a long way to go to reach maximum employment and the Fed’s targeted inflation, a signal he wants to remain accommodative. Equity investors are weighing predictions for a post-pandemic surge in economic activity and corporate earnings with concerns that higher interest rates could dent the appeal of stocks.

While Europe Stoxx 600 climbed, the Asian stocks tumbled as Hong Kong officials announced its first stamp-duty increase on stock trades since 1993.

Market Wrap

Main Pairs Movement

US Treasury yields are back up, flirting with one-year highs and backing the dollar’s gains. EURUSD trades were seen near-daily lows in the 1.2130s area before Powell’s testimony and bounced back above 1.2160s afterward.

The Australian dollar is up against its American rival, trading above the 0.7960 price zone. Substantial gains in Wall Street underpin the commodity-linked currency.

The loonie remained depressed through the early European session and was last seen in 1.2510s, breaking below the 34-month lows set earlier this Wednesday.

DXY keeps the rangebound trading in the 90.00 regions. Front-month futures contracts for the WTI continue to advance to the upside on Wednesday and briefly even managed to rally above the $63.00 level for the first time since Jan 2020.

Technical Analysis

USDJPY (Four-hour Chart)

After a weak start for the week, USDJPY regained strong positive traction and posted its second consecutive wins today. A recovery in the investor’s sentiment across US equity markets undermines the safe-have JPY and the greenback reclaimed some momentum after the US yields peaked at 1.429%.

From a technical perspective, a recent golden cross between the pair’s 21-Day and 60-Day SMAVG indicates a bullish momentum has formed. The MACD histogram also supports the bulls. However, as the RSI approaches the mid-60s, the bulls might not have much room to advance further before a downward correction kicks in to adjust the price action. If USDJPY can find acceptance above the 106 price level, it can certainly open the doors for more gains. However, if the ongoing trend is reversed, we can expect to see USDJPY rest near 105.76 before dipping down towards 105.45, then 104.95.

Resistance: 106.23, 106.43

Support: 105.76, 105.45, 104.95

GBPUSD (Four-hour Chart)

Failure to extend further above the 1.4237 resistance, the Cable retreated modestly below the 1.41 level. A combination of the BoE pushing back on the need for negative rates and the Covid-19 vaccine rollouts attract investment back to sterling.

Technically speaking, the Cable is still on the upside as both 15-Day SMAVG and MACD histogram suggested. The ongoing retreat is largely due to the rising demand for the greenback on the day. If all things remained the same, the sterling still has the upper hand of being one of the first countries to reopen its economy. Thus, a consolidation above 1.42 will enhance the investors’ confidence in longing for the pair. Nevertheless, upcoming UK politics and Brexit-related issues still pose some threats to the sustainability of the UK economy. In all, investors can expect a bullish Cable in the short- to mid-term, but looking ahead, uncertainty surrounding UK politics requires investors to stay cautious on the potential deterioration of the sterling’s outlook.

Resistance: 1.4182, 1.4237

Support: 1.4089, 1.4059, 1.3977

XAUUSD (Four-hour Chart)

Although the Gold has made quite a few attempts to break above resistance levels at $1817, $1855, and $1875, the overall trend for the precious metal seems to be confined substantially on the back foot since the pair topped around $1960 in early Jan. The overall improved risk-on sentiment and the ongoing rising US 10-year Yields both crushed the XAUUSD bulls’ hopes to reclaim $1900.

From a technical perspective, the 60-Day SMAVG supports the bearish momentum. The 48ish RSI indicates that investors are indecisive at the moment. If XAUUSD can find acceptance above $1804, the precious metal can be trapped between $1804 and $1817. On the flip side, a price action that dragged XAUUSD below $1800 can leave the market under pressure. The XAUUSD bears are eyeing $1767 if the yellow metal bulls failed to keep the pair above $1788.

Resistance: 1804, 1817, 1825

Support: 1788, 1774, 1767

20210225
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