Week In Review: Bond Selloff, Oil Soars, Blowout NFP

As markets roared back life, it felt like investors shrugged off the threat of rising Treasury Yields with the “buy the dip” theme in full force. This was reflected in the FTSE100, STOXX Europe 50, S&P 500, and especially the Nasdaq 100 which soared back above its 50-day simple moving average.

However, the rally across global stocks was short-lived with equity bears making an unwelcome return as the bond market selloff left investors jittery.

In our technical outlook, we covered the EURUSD and questioned the likelihood of prices breaching the 1.20 support level. An appreciating dollar eventually dragged the currency pair lower with prices trading around 1.1923 as of writing.

It was a big week for oil markets due to the OPEC+ announcement on its output decision. Buying sentiment towards the commodity jumped after OPEC and Russia decided against injecting more crude oil into the markets. The decision to keep the powder dry in the face of persistent uncertainty elevated oil prices more than 5% higher on Thursday.

With Saudi Arabia also maintaining its voluntary extra cut of 1 million barrels per day for another month, the supply-side dynamics remain in favour of bulls.

Let us not forget about Fed Chair Jerome Powell’s appearance at a Wall Street Journal summit on Thursday.

“Investors who were expecting Powell to soothe concerns over the bond market drama were left empty-handed after he simply dropped a gentle word of caution.”

It was another painful week for gold thanks to an appreciating dollar and rising US bond yields. As markets became increasingly jittery about the prospects of economic growth leading to higher inflation, this massaged expectations around the Federal Reserve raising interest rates. Given gold’s zero yielding nature, this development offered nothing but bad news.

On Friday, a sense of optimism swept across financial markets after US payrolls smashed market expectations.

“The US economy added 379,000 jobs in February, blowing out expectations for a 200,000 gain. January’s figure also was revised, from 49,000 to 166,000.”

In regards to the unemployment rate, this remained unchanged at 6.3% while average hourly earnings m/m hit the 0.2% forecasts.

Overall, this is an encouraging jobs report that will most likely fuel expectations around the US economy rebounding faster than expected.

“The key question is whether this goods news is actually bad news for markets?”

Treasury yields are already pushing higher, surpassing the February 26th peak – ultimately weighing on US equity futures. If yields continue to rise in the week ahead, stock markets could be instore for another rough and rocky ride downhill.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

All Eyes On Jerome

This is the last chance to hear from the Fed before it enters the two-week blackout period this weekend ahead of its 17 march FOMC meeting. The tone set today will in all likelihood determine risk sentiment for the next two weeks at least.

Although many retail traders especially, and also Wall Street equity traders too can switch off at the first mention of bonds, fixed income and yield curves, the debt market continues to drive the global investment environment, including risk-taking in FX markets. (Whisper it quietly but bond traders are always convinced that their market leads the way, acting as the best indicator and predictor of economic conditions, which other markets then follow…)

“So, does Powell continue to hold the view that the rise in long-term rates is proportionate with an improving economic outlook?”

Little concern of the recent sharp moves would probably trigger another spike in yields as the bond market tried to find the “right level”, while also seeing more dollar short covering. Or does the Fed Chair follow in Brainard’s footsteps that we mentioned yesterday and comment that he is monitoring events in the Treasury market, which might be enough to calm things down, which would probably result in the dollar softening.

USD/JPY toppy

US stocks have opened up very modestly in the green while the dollar is trading above 91 on the DXY.

Notably USD/JPY continues to travel north at a rate of knots, now touching levels not seen since July of last year. That month’s high at 108.16 looks to be the next target, although momentum indicators are now stretched, and the pair is trading way through its Bollinger and Keltner bands. Support lies at the 61.8% retracement of the move down from the June 2020 high around 107.01.

Oil volatile into OPEC+ meeting

Oil is climbing as key OPEC+ members are highlighting the ongoing uncertainty around the global recovery. They have urged “caution” and “vigilance” while also mentioning that they should “keep their powder” dry in a sign that markets presume means they will not flood the market with more output.

“The concern is that Russia may ask for an increase bigger than the 500k bpd for 1 April and ultimately pressure others, as they believe the conditions in the market are good.”

The 20-day SMA acted as good support in Brent just above $62.50 and with momentum now turning slightly higher, oil bulls will hope to push on to the recent cycle highs.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Market Yo-Yos

Regular discussions about stock market bubbles compete with fund managers desperate not to miss out on the unending gains. Are they too high and too fast?

“It seems that we are currently in the middle of a crossfire between a highly positive macro situation, and some excesses that have cropped up here and there in certain parts of the market.”

Fed action on its way?

While the “topic du jour”, rising bond yields take a breather this week, we did get some important comments from Fed governor Brainard overnight. The lady considered as a potential next chairwoman of the Fed echoed the words of ECB President Lagarde last week which implied that the Fed does very much care about the moves in the bond market and dislikes the speed with which yields tightened. Recall we did write about this last week too, suggesting we all keep an eye out for central bank reaction to any sharp moves.

So, while this doesn’t indicate imminent Fed action, the message points to a response if we see another swift upward leg. What does this mean for markets?

“Ultimately, some form of yield curve control which means bond yields are kept unnaturally low for an extended period…which bolsters stocks bulls. Watch this space!”

USD still consolidating

The US Senate is expected to take up President Biden’s $1.9 trillion pandemic package today with the Democrats aiming to get it signed into law before 14 March when some current jobless benefits expire. Notably, US states recorded a sharp decline in new infections and hospitalisations with Texas sweepingly rolling back many coronavirus restrictions.

The dollar is generally mixed so far today holding below the 91.60 February high, with ADP employment numbers disappointing ahead of NFP on Friday. Has the dollar correction run its course from last week’s low? Losses are expected over the long term, but we may see some sideways trade in the next few sessions ahead of the jobs numbers at least.

Rishi’s swifter recovery

UK Chancellor Rishi Sunak has laid out his finance plan to help the country recover from the devastation of the pandemic.

“The Office for Budget Responsibility forecast a quicker and more sustained recovery than previously expected, while Sunak extended pay for furloughed workers until September and carried forward a home sale stamp duty cut until the end of June.”

The leaked corporation tax rise to 25% from 19% was massaged by tiering, which the Chancellor says will only mean around 10% of big companies pay the new rate. A Chancellor usually sounds upbeat when dishing out his Budget but in these exceptional circumstances, the stronger fiscal support does give the economy a head-start to the post-lockdown recovery. This could even come sooner than expected according to Scotland’s Sturgeon.

GBP/USD made a push above 1.40 earlier today before easing back. Yesterday’s low of 1.3858 looks like a clear support line in the sand below the 20-day SMA which has acted as a decent guide for higher prices over the last few months.

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Markets: BTD, FOMO, TINA…

Even with China’s top bank regulator saying he is “very worried” about risks emerging from bubbles in global financial markets (and the nation’s property sector), today’s wobble in Asian stocks has not been seen in other markets with US indices opening mixed, after their best performance in almost nine months to kick off March.

“The S&P500 has been very well supported by its 50-day moving average so far this year. Prices have touched that indicator twice intraday and bounced strongly in the following sessions.”

If bulls can get beyond last week’s high, then more new record peaks can be reached, with good support now holding around 3,800.

Buck consolidation

The dollar is mixed against its major peers, with the DXY edging back from four-week highs. Last week’s rebound in the greenback eased near-term downside risks and perhaps indicates a period of consolidation in FX generally until directional risks become clearer.

“It seems the dollar doomsday scenarios of many on Wall Street have been premature, though it is unlikely that the world’s reserve currency can rally significantly in the medium-term.”

Notably, the dollar has rallied really strongly against the safe haven majors JPY and CHF. USD/JPY, well known for its correlation to US bond yields, is approaching 107 and USD/CHF has tried to break above 0.92. These currencies remain key laggards as markets take the chance to unwind CHF long positions especially, built through the pandemic period.

RBA stands firm

The aussie is the top performing major after the RBA left its policy message unchanged earlier today. There was extra focus on rising bond yields, but the bank showed little discomfort with their recent rise, even though it has heavily intervened recently to counter the bond selloff. The RBA refrained from touching its forward guidance out to 2025 with recovery prospects in Australia brightening.

After last week’s steep drop from 0.80, AUD/USD bas bounced back off the 50-day moving average and 0.77 support. Prices are now teetering at the previous January highs and need to close above 0.7820 to have a chance of getting to the February highs.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: EURUSD Poised To Breach 1.20

It has weakened against the dollar and Japanese yen but gained some ground against the New Zewland dollar. Over the past few weeks, the EURUSD has found itself within a very wide range with resistance at 1.2200 and support at 1.2000. Given how prices have cut below the 100 Simple Moving Average and pressing down fiercely against the 1.2000, the path of least resistance certainly points south.

The technicals swing in favour of bears on the daily timeframe. Prices are trading well below the 20 & 50 Simple Moving Average while the MACD trades to the downside. A solid daily close below 1.2000 could inspire a decline towards 1.9500 and 1.1920. Should 1.2000 prove to be reliable support, a rebound back towards 1.2050 and 1.2130 could be on the table.

Although the technicals are turning increasingly bearish, the fundamentals could still throw a proverbial wrench in the works for sellers. Later this morning, the Eurozone inflation reading and Germany’s unemployment rate will be published. Markets are expecting inflation to hold steady at 0.9% while the core reading is forecast to cool from 1.4% to 1.1%. The unemployment rate in Europe’s largest economy to projected to hold steady at 6%, unchanged from January.

Back to the technicals…

It is a different story on the weekly charts for the EURUSD. Prices respecting a bullish weekly channel and there have been consistently higher highs and lows. This is bull territory with bears under threat if prices trade back above 1.2150. A strong weekly close below 1.2000 could give the thumbs up for sellers to target 1.1900 and 1.1700.

1.20 pivotal on monthly timeframe

It is safe to say that the EURUSD remains bullish on the monthly timeframe. Prices are trading above the 100 SMA while the Relative Strength Index has yet to hit overbought levels above 70.00. If 1.2000 can hold the fort and keep bears out, prices could rebound back towards 1.2348. However, a solid monthly close below 1.2000 is likely to spell trouble for the bullish trend with the next key point of interest around 1.1600.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: G10 Currencies In Focus

“Today, our focus will be directed towards the G10 space and our weapon of choice…technical analysis.”

Dollar rebound or dead cat bounce?

Last Friday, we questioned whether the Dollar was experiencing a dead cat bounce.

After flirting around the 50-day simple moving average (SMA) for weeks, the Dollar Index pushed higher thanks to rising US Treasury yields. Prices are trading marginally below the 91.00 level while the MACD is flat. Interestingly, the Relative Strength Index (RSI) is venturing towards 70.00 – overbought territory. A solid close above 91.00 could open a path towards 91.60 and 92.00. A decline back below 90.50 may invite a selloff towards 90.00 and 89.30.

Pound experiencing a technical pullback?

“Sterling collapsed like a house of cards last week after punching above 1.4200 for the first time since April 2018.”

It looks like a pullback could be in play but this will depend on how prices behave below 1.4000. Sustained weakness under this resistance could encourage a steeper decline towards 1.3830 and 1.3760. Should 1.4200 prove to be unreliable resistance, prices may rebound towards 1.4140 and 1.4200.

Euro poised for further downside

A lot is going on with the EURUSD.

Prices are trading below the 50 SMA but above the 100 SMA. The MACD is flat but the recent selloff suggests another decline on the horizon. A solid daily close below 1.2050 could trigger a decline towards 1.2000 and 1.9050. For bulls to jump back into the game, a strong daily close above 1.2130 will be required.

AUDUSD respects bullish channel

As the title says, the AUDUSD remains in a bullish channel on the daily timeframe. However, prices have cut below the previous higher low of 0.7724, offering an opportunity for bears to re-enter the scene. If prices are unable to break above 0.7820, this may result in a decline towards 0.7660 and 0.7563.

EURGBP capped under 0.8700?

Is the EURGBP in the process of a technical rebound or a dead cat bounce? After rebounding from the 0.8538 level last week, prices failed to secure a daily close above 0.8700.

Where the EURGBP trades in the medium to long term may depend on whether the current range can be broken. Sustained weakness under 0.8700 may trigger a decline towards 0.8596 and 0.8538. Should bulls take prices back above 0.8700, the next key level of interest may be found around 0.8780.

USDJPY eyes 107.00

The USDJPY is firmly bullish on the daily charts. Bulls remain in the control as long as the 105.838 higher low proves to be reliable support. Prices are trading above the 20 Simple Moving Average (SMA) while the MACD trades to the upside. A weaker Dollar or intraday breakout above 106.80 could elevate the USDJPY towards 107.00 in the week ahead.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Tech Slumps, Yields Soar, Dollar Rebounds

“Markets were growing increasingly concerned about the prospects of economic growth leading to higher inflation and resulting in the Federal Reserve tightening monetary policy conditions.”

These fears heavily influenced bond markets, global stocks, currencies, and even commodities during the trading week.

On Monday, we covered the Pound which at the time was the best performing G10 currency year-to-date. A healthy combination of positive vaccine news, falling Covid-19 cases, improving economic data, reduction in Brexit uncertainty and hawkish Bank of England have sweetened appetite towards Sterling.

Although the GBPUSD later tumbled after rallying to 1.4240, this had little to do with a change in sentiment towards the Pound but an appreciating Dollar. Sustained weakness below 1.4200 may open a path towards 1.3820 in the short term.

Earlier in the week, I bet tech stocks caught your attention after the Nasdaq 100 collapsed like a house of cards? The Index recorded its longest streak since October thanks to the great reflation trade.

“In a nutshell, market players are expecting the US economy to outperform as it continues its post-pandemic recovery which may result in faster inflation and the Fed pulling back its support for financial markets.”

Can you believe the dollar was depressed around the 90.00 levels mid-week? Rising hopes around the $1.9 trillion stimulus package boosting growth and leading to inflationary pressures weighed on the greenback. However, soaring bond yields later offered bulls a lifeline with prices trading back above 90.50 as of writing.

The tech-led slump remained the main focus as rising inflation concerns triggered a sell-off in the bond markets. Given how higher yields had the potential to dent the tech “darlings” and reduce the present value of future profits, the Nasdaq got no love.

“Our stock of the week was Nvidia which released its fiscal fourth-quarter results for 2021 after US markets closed on Wednesday. The chipmaker posted strong fourth-quarter results with revenues hitting $5.00 billion, versus the $4.2 billion forecasts and earnings hitting $3.10 per share versus the $2.81 expected.”

For those who are wondering why stocks feel despite the positive earnings, this was based around the CEO Jensen Huang downplaying the cryptocurrency play. He stated that he does not expect the company’s business of selling processors to miners to grow extremely large.

“Since we are talking about cryptos, it was a horrible week for Bitcoin. After peaking above $57,500 on Monday…prices slumped towards $44,000.”

Do you remember the Reddit Gang? Well, they were back in action this week, sending their favoured stocks soaring higher. GameStop is up almost 200% this week while AMC has gained roughly 40%.

As the week slowly came to an end positive vaccine news boosted risk appetite. The US FDA released its report on the Johnson & Johnson single-shot vaccine and found it “safe and effective”. Such encouraging news boosted global sentiment and supported risk appetite. However, this was not fully reflected in stock markets.

“It is becoming increasingly clear that the surge in Treasury yields has sent shockwaves across global markets.”

This has hit appetite for equities while boosting the dollar. Looking at commodities, Gold is set to post its second straight monthly decline while Oil is finding comfort above $60 ahead of the OPEC+ meeting on March 4th.

For more information on the OPEC+meeting on March 4th, check out the “MARKETS EXTRA” Podcast: What do OPEC+ and “Guardians of the Galaxy” have in common?

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Stable, Yields Rocketing

Mr Powell’s high wire balancing act between acknowledging the upsides ahead while keeping the punchbowl full is seeing bond yields push to new cycle highs with the 10-year US Treasury hitting 1.42%. Next very big resistance stands around 1.43% which is the 2019 low and a major retracement marker of the 2018/2020 decline.

Meanwhile, stocks are mixed after the fun and games yesterday! The tech-heavy Nasdaq was down close to 4% at one point before Powell stepped in to help the index retrace and finish down only 0.5% with the S&P500 down 1.8% before finishing in the green. Of course, rising yields dent the allure of riskier assets, especially those high-growth tech companies that are not expected to reach the peak of their earnings potential for many years. That cost of waiting for companies’ earning growth increases, so we are perhaps at a critical juncture for certain stocks.

The dollar is slightly better bid today trading above 90 on the DXY. If all the market talk about inflation  is slightly premature and we should dismiss concerns about excessive inflationary pressures, then the next bumper Biden fiscal package should keep expectations supported. Together with an immovable Fed, this means the greenback may continue to struggle as real rates are moribund.

Sterling rockets higher and triggers stops

We said yesterday how GBP likes to overextend and boy it looks to have done that overnight when liquidity was at its thinnest. Cable spiked higher to 1.4241 while EUR/GBP dropped to a low of 0.8538. The Boris “Highway out of Hell” plan is gaining traction with a full reopening of the UK now firmly in sight. Money markets have also reacted to this potential normalisation with traders now piling into bets that will pay out if the Bank of England raises interest rates for the first time since 2018. Quite unthinkable just six months ago, NIRP (sub-zero rates) might well be a mere footnote in history.

Technically, we haven’t quite made it to the April 2018 high at 1.4377 and the daily candlestick does look like a bearish pin bar at the time of writing – this is essentially a sharp reversal and clear rejection of price. Overbought momentum signals haven’t as yet kept sterling subdued but the bulls will want to keep prices above 1.40 at least if they want to build on all this upside and head further north to the mid-1.40s.

Kiwi leads major gains

Overnight, the RBNZ didn’t really surprise markets as they kept their dovish message and signalled the need for extended monetary support. However, they upgraded their GDP and employment forecasts and the market has taken this positively, especially as the bank appeared to be slightly less dovish than its antipodean brother, the RBA in its forward guidance.

NZD/USD has broken to new highs this week having pushed above the year-to-date high around 0.73. Traders now have the July 2017 highs in their sights around 0.7558, with support now resting at last month’s high at 0.7315.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Earnings Preview: Game Time For Nvidia

Since the start of the new year, shares of the graphics card specialist have jumped over 8% with further upside on the cards if Nvidia posts a “beat-and-raise quarter”. Given the continued demand from remote-working trends, ramp up of Ampere gaming processors and resurgence in cryptocurrency mining, the business outlook remains encouraging.

What to expect from the earnings?

According to Bloomberg, Nvidia is expected to deliver $2.81 per share in earnings on revenues of $4.82 billion for the fiscal fourth quarter.

  • The data centre revenue is estimated to hit $1.88 billion
  • Gaming revenues at $2.39 billion
  • Professional visualization revenues estimated at $256.1 million
  • Automotive revenue at $141.9 million.

While the stay-at-home dynamics are good news for Nvidia, the question is whether the current momentum is sustainable. It must be kept in mind that the chipmaker set the bar high during the fiscal third quarter when it reported earnings of $2.41 per share on revenues of $4.72 billion – a massive improvement from Q2.

To add further colour, shares have jumped after 7 of the prior 12 earnings announcements while adjusted earnings per share beat estimates in 11 of the past 12 quarters. Although stocks are down over 5% this week, a solid beat could trigger a healthy rebound.

What to watch out for?

It’s all about Nvidia’s data centre business which is slated to deliver another impressive performance thanks to robust demand from cloud service providers. Over the past few months, demand for these services has increased thanks to the pandemic, resulting in a related rise in appetite for Nvidia’s chip. Given how the company has been ramping up the production of its data centers and even recently shipping its A100 GPUs to server partners, revenues from this segment of the business are forecast to hit $1.88 billion.

In regards to gaming, revenues spiked by 37% in the third quarter (reported on November 18. 2020) to $2.27 billion, a record for the company. It will be interesting to see whether gaming revenues meet or exceed the $2.39 billion estimate amid the stay-at-home dynamics. While gaming has driven the company’s growth for many years and remains the bread and butter, opportunities in the data centre could further strengthen the business outlook.

Nvidia stock gearing for a rebound?

The company’s shares have been quite volatile over the past few days with prices trading around $565.84 as of writing.

Lagging indicators in the form of the 50 & 100 Simple Moving Average favour further upside, while the MACD also trades higher. So far so good, technicals suggest a potential rebound on the horizon if $535 proves to be reliable support. However, a breakdown below this level could open a path towards $504 and $500, respectively. Should bulls gain enough inspiration to challenge $572.70, this could open the doors back towards the 52-week high of $614.90. Ultimately, where Nvidia shares conclude this week may be heavily influenced by the pending earnings report.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Tech-Led Selloff Accelerates

The selloff in US tech stocks is dragging the broader indices lower as there is increasing concern that rising borrowing costs will derail the historic surge in the prices of fast-growing companies. Is this the beginning of a long overdue correction? Let’s all not forget the tech-laden index is still up 40% over the past twelve months.

“That said, there are some notable decliners including Apple (-6%) and Tesla (-12%) which have fallen through or are just touching their 100-day moving averages and well-watched support.”

With rising inflation concerns sparking a sell-off in the bond markets, the market is scratching its head trying to assess how much higher yields will dent the tech “darlings”, given that it reduces the present value of future profits.

USD firmer…for now

The dollar has found some support today amidst the risk-off tone. The neckline on the head and shoulders pattern on the DXY is proving worthy support at present around the key 90 level. Blockbuster housing data and rising consumer confidence are no doubt helping the bid too.

Fed Chair Powell’s semi-annual testimony before Congress has also just been released where he echoes his recent remarks about the US economy remaining a long way from the Fed’s goals.

The FOMC remains fully committed to the current policy stance of supporting the economy and this has helped stock retrace some of their losses.

UK’s Highway out of Hell

Cable is closing in on 1.41 with continued optimism over the UK’s economic outperformance. PM Johnson’s reopening roadmap announced yesterday has June 21 imprinted on every UK residents mind (and perhaps May 17 too when pubs are set to open!) It was all dates rather than the promised data, but with current vaccinations rolling out faster than expected, perhaps the cautious nature of the route back to normality may be questioned in the coming months.

“The EUR/GBP “vaccine trade” continues to march on, with eight consecutive days of losses matching the March/April 2020 streak. Key support lies at 0.86 and with the RSI approaching 20, a pullback should be expected. That said, sterling does like overextending”

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: Dollar Index depressed around 90

The inverse head and shoulder pattern back in January initially boosted hopes of the dollar rebounding back to glory. However, the great “reflation trade” and Fed’s ultra-accommodative monetary policy simply threw a proverbial wrench in the works for bulls.

As the string of good news on the vaccine front elevates global sentiment and reinvigorates risk appetite, this could be bad news for the safe-haven dollar. Also, hopes around Joe Biden’s $1.9 trillion stimulus package boosting the US economy and leading to inflationary pressures are likely to weigh heavily on the already tired dollar.

Before we dig into the technicals, let us not overlook Fed Chair Jerome Powell’s testimony and US consumer confidence report later in the day. Markets are expecting Powell to reiterate the ultra-accommodative stance of the Federal Reserve and the need for more fiscal stimulus to support growth. These dovish comments may enforce additional pressure on the Dollar. In regards to the US consumer confidence, it is expected to rise slightly to 90 in February from 89.3.

Dollar knocks on 90’s door…

It is safe to say that the Dollar Index (DXY) remains heavily bearish on the monthly timeframe. There have been consistently lower lows and lower highs while the MACD trades to the downside. A strong monthly close below 90.00 could seal the deal for bears with the next key levels of interest around 89.20, 88.00, and 86.30.

The weekly timeframe illustrates a similar picture. Prices are respecting a weekly bearish trend while the candlesticks are trading below the 50 & 20 Simple moving averages. Bears clearly remain in a position of power below the 91.50 higher low. Sustained weakness under this level may open a path towards the 89.00 support level. If prices end up cutting through this checkpoint, the monthly targets of 88.00 and 86.30 will be on the table.

D1: Head and shoulders?

Well, what do you know? A head and shoulders pattern has formed on the daily timeframe with 90.00 acting as key support. A strong daily close under this level should instill DXY bears with enough inspiration to drag prices lower in the week ahead.

Commodity spotlight – Gold

After hitting an eight-month low last Friday, Gold has entered the week in better shape thanks to caution ahead of key speeches and economic data.

The precious metal remains supported by a weakening Dollar and reflation trade. Although the daily trend is starting to point south amid the consistent lower highs and lower lows, bulls still have a shot at the throne. If risk aversion makes an unwelcome return or the Dollar extends losses, Gold has the potential to push back above $1820.

Looking at the technical picture, a solid daily close above $1820 could spark an incline towards $1850 – a level below the 50,100 and 200 Simple Moving Average.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: GBPUSD Finds Comfort Above 1.40

Like a rampant bull, the Pound trampled its counterparts last week and even climbed above $1.40 for the first time in almost three years. With investors becoming increasingly optimistic over the UK’s rapid coronavirus vaccine rollouts and economic prospects, the outlook for Sterling remains bright.

It’s just remarkable that a year ago the currency plunged to its lowest level in over three decades as the coronavirus menace crippled the UK economy. Since then, the Pound has derived strength from a massive reduction in Brexit-related uncertainty, the quick rollout of vaccines, and an optimistic Bank of England.

As confidence continues to rise over the UK experiencing a quick economic recovery, this is likely to prompt investors to scale back expectations for the BoE to cut interest rates below 0%. If things continue to run smoothly on the vaccine front, economic data improves and lockdowns are eased, Sterling could rally towards pre-Brexit referendum levels beyond 1.5000 in the longer term.

Spotlight shines on Boris

Speaking of lockdowns, U.K Prime Minister Boris Johnson will give a statement to the House of Commons this afternoon on reopening measures. So far so good, we know that all schools will open from 8 March and outdoor gatherings of either six people or two households will be allowed from 29 March. Also, people will once again be able to travel out of their areas from the end of March. His speech will be thoroughly scrutinized by investors for more clarity on the roadmap to unwinding lockdowns as coronavirus cases drop.

In regards to the week ahead, keep your eyes peeled for the UK jobs scheduled for release on Tuesday 23rd February. Should this report exceed market expectations, the powerful pound could extend gains against the Dollar and other G10 currencies.

Time to break down the technicals

One word comes to mind when looking at the GBPUSD on the weekly timeframe. BULLISH.

There have been consistently higher highs and higher lows while the MACD trades to the upside. Although prices are trading well above the 100 and 200 Simple Moving Average, the Relative Strength Index (RSI) has entered overbought territory above 70.00.

Another weekly close above 1.4000 may encourage an incline higher towards 1.4200 and the high of 2018 beyond 1.4350. These levels may seem lofty but fundamentals remain in favour of Pound bulls while a weaker Dollar could provide critical support down the line.

Zooming into the daily

It’s the same story on the daily charts. Bulls remain the driving seat with prices above 1.4000 as of writing. A solid daily close above this level could trigger an incline towards 1.4050 and 1.4200. If 1.4200 proves to be unreliable support, the GBPUSD may sink back towards 1.3830 before rebounding back towards 1.4000. A breakdown below 1.3830 may open the doors towards 1.3750.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Oil Surges, Reflation Trade, Dollar Slips

Equity bulls were on a tear, pushing Asian and European markets to unchartered territories following a new record close for US indices last Friday.

In our technical outlook, we covered oil which climbed back to pre-pandemic levels having hit an all-time low last year. The healthy combination of stimulus hopes, optimism around global growth, and production cuts from OPEC+ have created an accommodating environment for oil bulls. On top of this, the number of tankers sailing to China has hit the highest level in 6 months, signalling robust demand. Brent Crude is trading around $61.50 while WTI just below $58.50 as of writing.

Risk-on pretty much remained in the name of the game on Tuesday thanks to progress over a proposed $1.9 trillion US fiscal package. As the reflation trade pushed equity markets higher, it weakened the dollar – ultimately dragging the DXY back below 91.00. As markets paused for breath later in the week, our focus was directed towards earnings reports from Twitter & Disney which both beat estimates.

Elon Musk was back in the spotlight after Tesla bought $1.5 billion worth of Bitcoin. The cryptocurrency sharply appreciated towards $49,000 raising expectations over bulls claiming $50,000 in the short term. Bitcoin has appreciated over 60% since the start of 2021.

We critically covered oil prices ahead of IEA and OPEC reports on Thursday. Although the economic indicators were not showing evidence of inflation yet, oil bulls remain in the driving seat. This uptrend comes against a backdrop of lockdown extensions that may threaten demand. Given how many producers are expected to enter the markets now prices are back above $60 this may cap upside gains in the medium to longer term.

Fed Chairman Jerome Powell was in focus after dampening down inflation expectations. There is no doubt that riskier assets are drawing strength from stimulus hopes and cheap money from central banks. This has sparked concerns around rapidly rising inflation, something that could hurt equity returns and force central banks to start tightening. Given how the Fed’s monetary punchbowl remains full, fears around rising inflation is poised to remain a key theme.

In regards to gold, the metal seems undecided and unable to breakout of the current range. A fresh directional catalyst may be needed for gold to break away from the sticky $1850 regions. Looking at the technicals, a breakdown below $1820 could open the doors towards $1800.

The week ahead promises to be eventful thanks to key economic data from major economies and earnings. The tired dollar could be offered a chance to redeem itself depending on how markets react to the FOMC meeting minutes, U.S retail sales & Markit PMI’s. While US markets will be closed on Monday due to the Presidents Day holiday, there could be some action across currency markets ahead of the Euro-area industrial production data and Japan GDP.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Find Comfort Near Record Highs

The S&P 500 and Nasdaq eked out modest gains on Thursday, just shy of record highs amid the risk-on mood. In Europe, futures are flat as mixed economic data from the US encouraged investors to adopt a guarded approach after another phenomenal week for global stocks.

There is no doubt that riskier assets are following the path of least resistance and moving higher amid increasing vaccinations against Covid-19, hopes for further U.S stimulus and loose monetary policy from central banks. Given how the Fed’s punchbowl remains full with the music blasting in the background, equity bulls are inspired to drive markets higher. However, after the binging on government spending and cheap money from central banks, a nasty hangover called inflation lurks in the shadows.

Although Powell recently dampened inflation expectations by saying any rise would be temporary, this will most likely remain a key theme that influences market sentiment this year. When considering how rapidly rising inflation could hurt equity returns and force central banks to start tightening, it seems likely that the party in stock markets could then be at risk.

Pound sulks after GDP data

UK GDP was released earlier this morning and the good news is that the UK economy avoided a double-dip recession by expanding 1% in the final three months of 2020. But the bad news is output shrank 9.9% in 2020, its worst annual slump on record. It’s safe to say that 2020 was an incredibly challenging year for the UK economy as the coronavirus menace spread its poisonous tentacles across key sectors and triggered national lockdowns. Although that is now history, some of the key themes impacting the UK economy are likely to rollover into this year. On the bright side, the UK economy has hit the ground running with the vaccine rollout opening the door to looser restrictions. Should economic data improve over the next few weeks, this may boost sentiment towards the UK economy and pound.

Speaking of the currency, prices have slipped towards 1.3790 this morning. However, bulls remain in the driving seat, especially after the Bank of England adopted a more hawkish stance during its last monetary policy meeting. A technical pullback could be on the cards for GBPUSD before the bulls try their luck with 1.3850.

Commodity spotlight – Gold

Gold seems to be unable to make its mind up as prices bounce around within a range on the daily timeframe.

It is becoming clear that the absence of a fresh directional catalyst to inspire bulls or bears has forced the metal to trade sideways over the past few weeks. What is even more interesting is how prices will behave around the sticky $1850 level which has turned into resistance this week. While an appreciating dollar could drag prices lower in the near term, a fresh catalyst may be needed to jolt prices out of the current range.

Looking at the technical picture, a breakdown below $1820 could open the doors back towards $1800.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

The Punchbowl Will Remain…

“Well, it seems perfectly apposite at the moment with current Fed chairman Powell once more underscoring the significance of “patiently accommodative” monetary policy in order to boost the pandemic-ridden US jobs market.”

He said unemployment was closer to 10% than the reported 6.3% so a very long way from full employment.

Further, Powell damped down inflation expectations, the narrative of the moment, by saying that any rises would be temporary and unlikely to affect policy until unemployment is back to pre-Covid levels. Although we have heard this before, the Fed is not even thinking about withdrawing policy support any time soon as there are years to go before tightening is needed.

“With the punchbowl still full and the music loud enough, global stocks are grinding higher for a ninth day in a row. Fourth quarter earnings have largely topped analysts’ expectations, mildly quelling fears of lofty valuations”

Improving economic growth, more fiscal stimulus and easy monetary policy are a nice cocktail to add to the punch! The Fed seem to be the only ones who can rock the boat, with today’s subdued initial jobless claims and yesterday’s dimming inflation simply adding to the mix.

Stretched sentiment?

While markets can go up much further than many wise commentators think, there are numerous extended indicators out there. For example, the percentage of NYSE stocks above the 200-day moving average is at extreme levels and earnings revisions are being upgraded at an acute pace. Long/short ratios are at record highs which has been driven by long leverage and a reduction in single stock shorts.

The move from the March lows of last year is one of the most extreme melt ups in history and if it follows the GFC rally, then a correction is due. But we only have to remind ourselves of the enormous size of the punchbowl to know that it any pullback is exactly that – a correction in an enduring uptrend.

DXY heading towards 90

The dollar is falling for a fifth consecutive day which is the longest streak since November. The ascending channel from the lows of the year at the start of January looks to have been pierced so bears are looking to strong support around 90.

“The soft undertone of the greenback is still obvious, even with the stimulus plans and vaccination progress.”

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets: Euphoria, Euphoria

The closely watched inflation data out of the US came in a touch weaker than expected and has caused the dollar to sell off, with those all-important bond yields falling as well. US CPI rose 0.3% in January after climbing 0.4% a month earlier, while core inflation, which excludes food and energy costs, came in a tenth lower than expected.

Oil flying

Although the headline economic indicators aren’t showing evidence of inflation yet, commodity prices are with WTI crude rallying for the ninth straight day, its longest winning streak in two years and now trading above $61 currently. The unrelenting uptrend comes against a backdrop of lockdown extensions and falling oil demand. But traders are looking beyond this with more producers expected to enter the market now the price is above $60 and last February’s highs. Bulls have their eyes firmly set on the 2020 January top above $70 with many now citing under-investment in the sector potentially causing a supply gap in the next few years.

Eyes on Fed Chair Powell

Jerome Powell speaks later this evening at 1900 GMT about the state of the US labour market. Markets are looking for reassurance that the Fed is not going to overreact to the expected ‘bump’ in inflation that is set to lift price data because of year-over-year comparisons. Any clues on how the Fed plans to respond to brighter economic prospects may cause some volatility.

The dollar is mildly lower on the day now with the rebound from early January running out of steam and momentum. Pressures from short-covering appear to be fading, even if seasonals still point to support for the greenback. GBP/USD has finally broken higher today past the 1.3750 resistance zone. The RSI is moving higher with strong upward momentum so the bulls will keen to push near to the next major resistance level which isn’t until the 1.40 mark.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Disney Earnings Preview: Do You Believe In Fairy Tales?

This may sound like something out of a fairy tale…yet this is the reality.

Since the start of the pandemic almost a year ago when Disney stocks collapsed to a 52-week low of $79.07 back in March, shares have gained over 110% as of writing while year-to-date prices are up almost 4%.

When is Disney’s earnings call and what to expect?

Disney reports earnings on Thursday, February 11 after US markets close.

It is widely known that 2020 was a tough year for the company thanks to the terrible combination of box office delays, cancelled cruises, and theme park closures. However, the fairy godmother known as Disney+ was able to save the day.

According to Bloomberg, the house of mouse is expected to lose $0.38 per share on revenue of $15.91 billion in Q4 marking a 23.7% fall from a year ago. For the full years, earnings per share are projected to decline 59.6% to $1.56, while full-year revenues are forecast to hit $69.24 billion – marking a 6.5% increase from 2019.

What to watch out for….

It’s all about Disney+ and the pandemic-battered theme parks.

The streaming platform boasted a whopping 86.8 million subscribers as of December when Disney reported at its investor day. Although this pales in comparison to Netflix’s nearly 204 million global subscribers, the rate of growth for Disney+ is phenomenal, especially when factoring in how the platform was only launched over one year ago. Bloomberg consensus is projecting about 91 million Disney+ subscribers for fiscal 1Q with some estimates ranging as much as 100 million. Given how the company will also be increasing the price of Disney+ by $1 to $7.99 for U.S. users starting in March, this could result in more revenues.

How about the cash producing juggernaut?

In regards to the theme parks, they may recover in 2021 with improved attendance as vaccines gain widespread adoption. Although Q4 was a tough year due to the surging Covid-19 cases, there is some light at the end of the tunnel.

There have been reports that Disney’s California Adventure Park is set to open for a “limited-time ticketed experience”. While no official opening date has been set, this development signals a shift and raises expectations over more theme parks re-opening in 2021. The positive impacts will not be reflected in the pending earnings but could offer clues over what to expect from Disney this year.

Disney to hit fresh record highs?

Taking a look at the technical picture, Disney shares are bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above 50, 100, and 200 Simple Moving Average while the MACD points to further upside. A positive earnings report may inject bulls with enough inspiration to push prices beyond the 190.64 all-time high. Should bulls run of steam due to disappointing earnings, prices may sink back towards 183.50.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets: Pause For Breath

“With a run of six straight days without losses, it is kind of inevitable that markets need to take a deep breath and take stock so to speak!”

Positive earnings results keep coming and talk of a larger stimulus package is making economists very busy with regard to their upwards revisions of GDP growth. Some estimates have the US expanding at close to 7% this year.

All the positive reflation stories continue to leave their mark on the dollar which is selling off for a third consecutive day and making last week’s strength look like a mere blip in the longer-term downtrend. The reversal below 92 indicates a failed technical breakout and we will see what the bears are made of as we approach the 50-day moving average around 90.45. Break this and we could see 90 very quickly. Interestingly the greenback is selling off in tandem with markets turning risk-off, which is not what we would normally expect.

Once-in-a-lifetime landgrab, or…?

But then we don’t normally expect the world’s richest man to move (part of) his treasury department into a highly volatile asset that many fund managers don’t believe in!

“That asset, Bitcoin, is up more than 50% already this year and is rapidly approaching the $50,000 mark, which is almost enough to buy one of the best-selling Tesla vehicles.”

After its biggest daily rise in over three years yesterday, is this a pivotal moment in the cryptocurrency’s evolution towards everyday acceptance and a standard method of payment? Or should we remind ourselves of what regulators across the globe often preach – bitcoin buyers must be prepared to lose all of their money.

“Vaccine trade” retrace

We’ve labeled EUR/GBP a “vaccine trade” with the UK well ahead of the continent in rolling out vaccines to its population and reopening its economy sooner.

It seems Germany may now go its own way in procuring vaccines as Chancellor Merkel is unhappy with the EU’s pace and is even considering Russian and Chinese alternatives.

Closer to home, pressure from UK industry is increasing on Chancellor Sunak to extend government support before its 3 March budget. The EUR/GBP downtrend has paused around the 0.8750/0.88 area, but if cable can sustain its break above 1.3750, then a bearish bias in the “vaccine trade” is still warranted and this pullback represents a nice selling opportunity. Near-term support lies around 0.8760 on the hourly chart ahead of the lows at 0.8738.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Risk-On Mood Fuelled By Stimulus Hopes

Asian shares were mixed this morning, despite the three major U.S. indexes setting another round of record highs overnight.

European stocks are expected to open in positive territory while US stock futures are flat. Despite the sense of caution in the air, equity bulls are drunk on the prospects for a robust federal spending package while a slowdown in virus infection rates is the cherry on the cake. With an increase in the global vaccination numbers adding to the overall optimism, equity bulls are still in the game and hungry for fresh record highs.

While the positive mood may spur demand for riskier assets, negative developments revolving around Covid-19 could still throw a proverbial wrench in the works for the current rally.

Dollar Index back below 91.00

Anyone else not surprised that the Dollar has tumbled back below the 91.00 level?

As much as the Greenback has shown resilience in 2021, it’s trapped in a losing battle against the great reflation trade. Market expectations over a large U.S. economic stimulus package triggering inflationary pressures continue to drain the Dollar. Looking at the technical picture, prices are likely to trade lower if a daily close below 90.50 is secured.

Euro rebounds on weaker Dollar

The title says it all. A weaker Dollar has elevated the EURUSD back above 1.2050.

Prices are back within the wide range with support at 1.2000 and resistance at 1.2130. If the Dollar continues to weaken, this could inject EURUSD bulls with enough inspiration to push prices beyond 1.2130 with 1.2200 acting as a key point of interest.

GBPUSD breaks above 1.3750

After almost one month of chipping away at the 1.3750 level, bulls have finally conquered this resistance with the help of a weaker Dollar.

A solid weekly close above 1.3750 may open the doors towards 1.4200 in the medium term. If prices sink back below 1.3750, the GBPUSD may decline towards 1.3600 and 1.3480.

Commodity spotlight – Gold

Gold remains a fierce battleground for bulls and bears.

The metal continues to be pulled and tugged by conflicting forces, and this continues to be reflected in the metal’s choppy performance.

On one side of the equation, gold bulls remain protected by the great “reflation trade” and negative developments revolving around Covid-19. However, stimulus hopes continue to lift the market mood and overall risk sentiment – themes that could limit upside gains.

Key levels of interest on gold remain around the sticky $1850 regions, $1820, $1800, and $1876. A fresh directional catalyst may be needed for prices to break away from the current wide ranges.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: Oil Rebounds To Pre-Pandemic Levels

“Who would have thought it would take less than 12 months for oil to stage a comeback from the biggest demand destruction in a generation after Covid-19 brought the world to a sudden standstill?”

Fast forward today, Brent crude oil is trading around $60 a barrel as stockpiles tighten while the demand outlook has been lifted by the global rollout of Covid-19 vaccines.

Can Oil prices push higher?

Oil bulls are in the driving seat and are unlikely to go anywhere anytime soon!

Renewed optimism over US stimulus plans is fuelling speculation around faster than expected global economic growth, essentially improving the demand outlook for Oil. Since agreeing to cut production last April, OPEC + producers have held back a cumulative 2.1 billion barrels of oil, stabilizing markets. According to the International Energy Agency (IEA), global stockpiles in onshore tanks and floating storage have shrunk by 300 billion barrels thanks to the OPEC cuts.

“The combination of improving demand and suppressed supply has injected Oil bulls with enough inspiration to remain in the game.”

On top of this, China the world’s second-largest economy has been a key driver of Oil’s rebound. The number of tankers sailing to China has hit the highest level in 6 months, signalling robust demand.

What can spoil the party?

Well…there are a couple of negative themes that may limit upside gains.

It must be kept in mind that global coronavirus cases have surpassed 100 million with the virus surging in parts of the world. Although the global Covid-19 vaccine rollout has gained momentum the threat of more hiccups and potential complications may invite oil bears back into the building. The reintroduction of strict lockdown measures in some parts of the world amid surging cases could also complicate matters for bulls.

Time to talk technicals

Brent Crude is firmly bullish on the weekly timeframe as there have been consistently higher highs and higher lows. Prices are trading above the 20 Simple Moving Average while the MACD trades to the upside. A solid weekly close above the $60 psychological level may open the doors towards $65 and beyond. However, should $60 prove to be reliable resistance prices may decline back towards the $55 regions.

On the daily charts, it’s the same bullish story. This is a healthy uptrend with $55 acting as a higher low. Interestingly, the Relative Strength Index on the daily charts is above 70 which suggests that the commodity could be overbought.

Drawing a Fibonacci retracement on the H4 timeframe, a technical pullback towards $57 could be on the cards if $60 proves to be reliable resistance.

It may be wise to keep a close eye on the OPEC monthly report on Thursday which could provide some fresh insight on what to expect from Oil markets in 2021. If the report signals a faster recovery in global demand, this could end up pushing oil prices even higher.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.