Gold is strongly bearish. Continuation below double bottom will open the doors to 1656. Watch for a continuation below the double bottom or a rejection from the POC zone.
1700-10 is the POC zone, we could see a move straight from the POC towards a retest of 1687 zone. We should see a move lower towards 1667 and 1656. From there, the move up is expected as a form of retracement. Gold has also formed the double top which cues for a continuation down.
Australian Dollar Is Mostly Flat Against U.S. Dollar
AUD/USD has managed to settle below the support at 0.7700 while the U.S. dollar is gaining ground against a broad basket of currencies.
The U.S. Dollar Index has managed to get above the resistance at the 92 level and moved closer to the next resistance level at 92.25. In case the U.S. Dollar Index settles above this level, it will head towards the next resistance at 92.50 which will be bearish for AUD/USD.
There are no important economic reports scheduled to be published in the U.S. and Australia today so foreign exchange market traders will focus on U.S. government bond yields and the dynamics of commodity markets.
U.S. Treasury yields are moving higher after Senate passed the huge coronavirus relief bill. The market believes that higher inflation is a real threat, although the U.S. Fed has downplayed such risks.
Meanwhile, commodity markets remain strong which is good for commodity-related currencies like Australian dollar. WTI oil managed to get to the $67 level after Saudi facilities were attacked by the Houthis, but rising U.S. yields offset the positive impact of strong oil for AUD/USD.
AUD/USD is currently trying to get to the test of the support level at 0.7665. If AUD/USD declines below this level, it will head towards the next support at 0.7635. This support level has been recently tested and proved its strength.
In case AUD/USD settles below the support at 0.7635, it will head towards the next support level at 0.7600. RSI remains in the moderate territory so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
On the upside, the nearest resistance level for AUD/USD is located at 0.7700. If AUD/USD gets above this level, it will head towards the 50 EMA at 0.7720. A move above the 50 EMA will push AUD/USD towards the next resistance level which is located at the 20 EMA at 0.7760.
The U.S. Dollar is trading higher against a basket of major currencies on Monday after clawing back from an earlier setback. The intraday rally has put the greenback in a position to challenge Friday’s three-month high.
Traders are saying the dollar is being underpinned after the U.S. Senate passage of a massive stimulus bill sparked another sell-off in the bond market, while commodity-linked currencies retreated as a broader risk-on trade lost momentum.
At 07:58 GMT, March U.S. Dollar Index futures are trading 92.175, up 0.185 or +0.20%.
The Senate passed a $1.9 trillion COVID-19 relief plan, a day after a stunning U.S. jobs report sent the greenback to its highest level since November 2020. The yield on the benchmark U.S. 10-year Treasury hovered near one-year highs on Monday, while U.S. NASDAQ futures fell about 1% and European stock index futures pared gains as the selloff also spread to other higher risk assets.
In other news, speculators cut their net short dollar positions in the latest week to $27.80 billion, which is the smallest short position since December 15 and suggests that dollar bears are giving up on betting against the greenback.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 92.225 will signal a resumption of the uptrend. The next main trend target is the November 23 top at 92.730.
A trade through 89.675 will change the main trend to down. This is highly unlikely. However, since the index is up seven days from the last swing bottom, today’s session starts with the index in a position to post a potentially bearish closing price reversal top.
The main range is 94.250 to 89.165. The index is currently testing the upper level of its retracement zone at 91.710 to 92.310. This zone is controlling the near-term direction of the index.
The minor range is 90.635 to 92.225. Its 50% level at 91.430 is additional support.
Daily Swing Chart Technical Forecast
Given the prolonged move up in terms of price and time, the direction of the March U.S. Dollar Index will likely be determined by trader reaction to 92.00.
A sustained move over 92.00 will indicate the presence of buyers. The first targets are 92.225 and the main Fibonacci level at 92.310.
Taking out 92.310 could generate the upside momentum needed to challenge the November 23 main top at 92.730.
A sustained move under 92.00 will signal the presence of sellers. The first downside target is the main 50% level at 91.710. This is followed by the short-term 50% level at 91.430.
A close under 92.00 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day counter-trend break.
When the economy grows, prices for cyclical stocks tend to go up. Cyclical stocks represent companies that make or sell discretionary items and services that are in demand when the economy is doing well.
They tend to include restaurants, hotel chains, airlines, high-end clothing retailers, auto manufacturers, etc… So it’s not that the big cap tech is doing bad but rather we are simply seeing a rotation of investing dollars out of stocks that have had a massive run higher and into the stocks that have been beaten up but might now show a big rebound when the consumer comes back into a more wide-open economy.
The big question is how long will money flow in that type of direction?
Some Wall Street insiders argue that big cap tech could remain out of favor until the economy fully restarts, gets back on its feet, we move back closer to full employment, and the Fed starts to give off a more hawkish vibe.
Fed officials have been very outspoken in their belief that prices may be higher for some things as we first ramp back up the economy but persistent inflation is not seen as a threat, particularly with unemployment numbers still so high.
Adding to investor anxieties on the inflation debate is the fact that longer-term interest rates continue to push higher. Fed Chair Jerome Powell didn’t have much luck calming the market or taking away the inflationary worries during his question-and-answer session but he really only repeated what the Fed has said for months – that the central bank will maintain low-interest rates and its bond purchases while also keeping inflation in check.
Wall Street investors are wanting to hear more specifics on how the bank plans to keep long-term borrowing rates from pushing higher and inflation from running hot.
Perhaps one curveball delivered last week that made inflationary concerns even worse was the surprise decision from OPEC to keep output “unchanged” which pushed crude oil prices higher.
Keep in mind, some energy market insiders had been forecasting a +1 million barrel per day increase coming down the pike .
Next week brings updates for two key inflationary metrics with the Consumer Price Index on Wednesday and the Producer Price Index on Friday. Headline CPI climbed in both December and January. However, core CPI, which strips out food and energy was unchanged during both months.
Investors also continue to monitor the U.S. vaccination campaign that seems to be gathering good momentum. The country is now on track to supply enough doses to every adult that wants one by May. From what I understand, the U.S. is now vaccinating an average of +2 million people a day, up from 1.3 million in early February, and steadily moving higher.
As we previously discussed there is no clear direction based on cycles, seasonals, and Advance Decline Line. Nothing changed yet. However, we have 2 interesting ranges to watch. Breaking and holding below 3720 will signal deeper pullback. At the same time, if the price sustains above 3935, we can expect a new wave to the upside.
After the Senate passed a $1.9 trillion coronavirus relief package on Saturday I will not be surprised to see a gap up or short-term rally in SP500. Overall, till the price continues to trade in the neutral range 3720 – 3935, we can stick to day trading. Personally, I use Gann levels to identify sell and buy points on an intraday basis.
The Australian Dollar is trading slightly better early Monday, but off its high. Despite Friday’s late session rebound rally, there was no follow-through rally. A stronger U.S. Dollar is weighing on the Aussie. The greenback was underpinned by higher U.S. Treasury yields. Sparking the rise in yields and the subsequent sell-off in the bond market was the U.S. Senate’s passage of a massive stimulus bill.
At 07:15 GMT, the AUD/USD is trading .7687, up 0.0006 or +-.07%.
The Senate passed a $1.9 trillion COVID-19 relief plan, a day after a stunning U.S. jobs report sent the greenback to its highest level since November 2020.
The yield on the benchmark U.S. 10-year Treasuries hovered near one-year highs on Monday, while U.S. NASDAQ futures fell about 1% and European stock index futures pared gains as the selloff also spread to other risk assets.
The AUD/USD is going to have a hard time rallying without the help of lower Treasury yields and higher demand for riskier assets like stocks.
It’s not too early to start preparing for the March 17 Federal Reserve monetary policy decisions. That being said, don’t be surprised if we see some short-covering and counter-trend buying this week as speculators position themselves ahead of the Fed’s announcements.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7622 will signal a resumption of the downtrend with .7564 the next potential downside target.
A trade through .8007 will change the main trend to up. This is not likely, but the AUD/USD is down seven days from its last main top, which puts it in a position to form a potentially bullish closing price reversal bottom.
The main range is .7564 to .8007. The AUD/USD is currently trading on the weak side of its retracement zone at .7733 to .7786. This zone is controlling the near-term direction of the Forex pair. This area is also new resistance.
The minor range is .8007 to .7622. If there is a short-covering rally then its retracement zone at .7815 to .7860 will become the primary upside target. Since the main trend is down, sellers could come in on a test of this area.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD will be determined by trader reaction to the main Fibonacci level at .7733.
A sustained move under .7732 will indicate the presence of sellers. The first downside target is a minor pivot at .7676. This is followed by last week’s low at .7622.
A sustained move over .7733 will signal the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into a pair of 50% levels at .7785 and .7815.
EUR/USD is currently trying to settle below 1.1900 while the U.S. dollar is attempting to gain more ground against a broad basket of currencies.
The U.S. Dollar Index has managed to get above the resistance at the 92 level and is slowly moving towards the next resistance level which is located at 92.25. If the U.S. Dollar Index gets to the test of this level, EUR/USD will find itself under more pressure.
Today, foreign exchange market traders have chance to take a look at Industrial Production report from Germany. Industrial Production decreased by 2.5% month-over-month in January compared to analyst consensus which called for growth of 0.2%.
The disappointing report from Germany may put additional pressure on the euro which is moving lower because of Europe’s economic problems and rising yields in the U.S.
Currently, the yield of 10-year Treasuries is trying to settle above 1.59% while the yield of 30-year Treasuries is testing the 2.31% level. If Treasury yields continue to move higher, the U.S. dollar may get additional support.
EUR/USD is currently trying to settle below the support level at 1.1900. RSI is close to the oversold territory but there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
If EUR/USD settles below the support at 1.1900, it will head towards the next support level at 1.1880. A move below this level will push EUR/USD towards the next support at 1.1850. In case EUR/USD declines below the support at 1.1850, it will head towards the support at 1.1830.
On the upside, EUR/USD needs to stay above 1.1900 to have a chance to gain upside momentum in the near term. The next resistance level for EUR/USD is located at 1.1925.
If EUR/USD gets above the resistance at 1.1925, it will head towards the next resistance level at 1.1965. A move above this level will open the way to the test of the resistance at 1.2000.
Traders Focus On Yields In Absence Of Economic News
GBP/USD is currently trying to settle back above the resistance at 1.3835 while the U.S. dollar is flat against a broad basket of currencies.
The U.S. Dollar Index is testing the nearest resistance level at 92.00. If this test is successful, the U.S. Dollar Index will head towards the next resistance level at 92.25 which will be bearish for GBP/USD.
There are no important economic reports scheduled to be published in the U.S. and UK today so foreign exchange market traders will focus on general market sentiment and U.S. government bond market.
Treasury yields remain close to multi-month highs after U.S. Senate passed the huge coronavirus aid package. The market is worried about inflation so traders sell Treasuries, pushing their yields higher.
Rising yields continue to provide support to the American currency, but it remains to be seen whether further upside in yields will be able to help U.S. dollar as the huge stimulus bill may ultimately serve as a bearish catalyst.
GBP/USD is testing the nearest resistance level at 1.3835. If GBP/USD manages to settle above this level, it will head towards the next resistance level at 1.3865. This resistance level has been recently tested and proved its strength.
In case GBP/USD settles above 1.3865, it will head towards the next resistance at the 20 EMA at 1.3900. A move above the 20 EMA will signal that GBP/USD will try to gain upside momentum. In addition, GBP/USD will have a good chance to settle back in the 1.3900 – 1.4000 range which will be a welcome development for GBP/USD bulls.
On the support side, the nearest support level for GBP/USD is located at the 50 EMA at 1.3800. If GBP/USD declines below the 50 EMA, it will move towards the support at 1.3780. A move below the support at 1.3780 will push GBP/USD towards the next support level which is located at 1.3745. Most likely, GBP/USD will get significant support from traders at this level as there was plenty of interest near 1.3745 back in January.
The U.S. Dollar soared on Friday after a government report showed jobs growth came in above expectations in February. The news helped drive the benchmark 10-year Treasury yield into a one-year high of 1.625%, before pulling back to 1.577 into the close.
The data backed up the view of Federal Reserve officials including Federal Reserve Chairman Jerome Powell who have said that a recent rise in U.S. government bond yields is justified by an improving economic outlook.
The jobs improvement came amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government, putting the labor market recovery back on firmer footing and on course for further gains in the months ahead.
On Friday, March U.S. Dollar Index futures settled at 91.990, up 0.346 or +0.38%.
Big Decision on Monday
Over the weekend, the U.S. Senate passed a $1.9 trillion coronavirus relief package on Saturday as Democrats rush to send out a fresh round of aid.
This news will be the source of volatility on Monday because there are two ways to play the story.
Bullish traders will read the news as driving the economic recovery at an even faster pace on top of Friday’s bullish jobs data. If this drives up Treasury yields then look for demand for the dollar to strengthen.
Bearish traders will view the story as weak for the U.S. Dollar. A drop in yields will help drive the greenback lower.
It’s a tough call because the story has been in the news for months. We won’t really know how traders feel about it until we see what bond yields do. However, if Friday’s price action is any indication, yields should fall, stocks should rise and the dollar weaken.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 92.225 will signal a resumption of the uptrend with 92.730 the next key target price.
A trade through 89.675 will change the main trend to down. This is not likely, but price and time have put the index in a position to form a potentially bearish closing price reversal top.
The minor trend is also up. A trade through 90.635 will change the minor trend to down and shift momentum to the downside.
The main range is 94.250 to 89.165. The index is currently testing the top end of its retracement zone at 91.705 to 92.310. This zone is controlling the longer-term direction of the index.
The minor range is 89.675 to 92.225. Its 50% level at 91.430 is the first downside target.
The short-term range is 89.165 to 92.225. Its retracement zone at 90.695 to 90.335 is the next key support area.
Friday’s price action suggests the direction of the March U.S. Dollar Index on Monday will be determined by trader reaction to 92.310.
A sustained move over 92.310 will indicate the presence of buyers. This could create the upside momentum needed to challenge the November 23 main top at 92.370. This is potential resistance and trigger point for an acceleration into the November 11 main top at 93.165.
A sustained move under 92.300 will signal the presence of sellers. The first downside target is the main 50% level at 91.705. This is followed by the minor 50% level at 91.430. This is a potential trigger point for an acceleration into the short-term retracement zone at 90.695 to 90.335.
March E-mini NASDAQ-100 Index futures posted a dramatic closing price reversal bottom on Friday after touching its lowest level since November 30 earlier in the session. For those scoring at home, this means the recent sell-off has taken away three-month’s worth of gains, while turning the index lower for the year.
None-the-less, we have to respect the chart pattern because if confirmed, it could trigger the start of a minimum 2 to 3 day correction or a 50% to 61.8% correction of the entire break from 13900.50 to 12207.25.
The main trend is down according to the daily swing chart, however, the closing price reversal bottom suggests momentum may be getting ready to shift to the upside.
A trade through 12207.25 will negate the closing price reversal bottom, signaling a resumption of the downtrend.
A move through Friday’s high at 12797.00 will confirm the closing price reversal bottom, while a move through 13328.25 turns the main trend to up.
The main range is 10936.25 to 13900.50. Its 50% to 61.8% retracement zone at 12418.25 to 12068.50 stopped the selling on Friday at 12207.25.
The minor range is 13328.25 to 12207.25. Its 50% to 61.8% retracement zone at 12767.75 to 12900.00 is the first upside target area.
The short-term range is 13900.50 to 12207.25. Its retracement zone target is 13054.00 to 13253.75.
The minor and short-term retracement zone are very important to the longer-term structure of the market. Sellers could come in on a test of these areas in an effort to form a potentially bearish secondary lower top.
The closing price reversal bottom chart pattern indicates the direction of the index on Monday will be determined by trader reaction to 12797.00.
A sustained move over 12797.00 will indicate the presence of buyers. The first target is the minor 50% level at 12767.75, followed by last year’s close at 12885.50 and the minor Fibonacci level at 12900.00.
Turning higher for the year and taking out 12900.00 will indicate the buying is getting stronger. If this move generates enough upside momentum then look for the rally to possibly extend into the short-term retracement zone at 13054.00.
A sustained move under 12797.00 will signal the presence of sellers. This could trigger a retest of the main 50% level at 12418.25. This is followed by the closing price reversal bottom at 12207.25, followed by the main Fibonacci level at 12068.50.
Over the week-end, the U.S. Senate passed President Joe Biden’s Covid Relief Package. Although this has been in the news for weeks, we could see a bullish reaction on Monday. Furthermore, the price action on Friday suggests Treasury yields may have hit a short-term top. If this come off the highs strong then look for NASDAQ stocks to soar.
Additionally, it’s not too early to think about the Fed’s monetary policy decisions on March 17. With Powell’s speech out of the way and the bullish jobs data, there isn’t a lot to think about so traders could begin to take profits and square positions ahead of the FOMC meeting. This could trigger a short-covering rally in the NASDAQ.
Gold futures finished slightly lower on Friday after clawing back earlier losses. Despite reports in the press and from some lazy analysts, the market did not make its low of the session following the release of the stronger-than-expected U.S. Non-Farm Payrolls report.
During the pre-market session, gold futures hit a low of $1683.00. Shortly after the release of the report, gold plunged to $1683.80. This is significant because it represents a potentially bullish divergence from U.S. Treasury yields which touched a new high for the year after the jobs data was released.
Although gold futures closed lower for the session on Friday, it actually closed higher than it was trading immediately before the release of the robust jobs report. In my opinion, this was an important event that could translate into higher prices this upcoming week.
More importantly, at 13:30 GMT, gold was trading $1693.70. So following the release of the U.S. Non-Farm Payrolls report, gold closed up $4.80 or +0.28%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through $1683.00 will signal a resumption of the downtrend. The main trend will change to up on a trade through $1815.20.
The minor trend is also down. A trade through $1739.10 will change the minor trend to up. This will also shift momentum to the upside.
The major retracement zone is $1711.70 to $1787.30. This zone is controlling the longer-term direction of the market. Gold closed on the weak side of this zone, but just below the lower or Fibonacci level at $1711.70.
The minor range is $1815.20 to $1683.00. Its 50% level at $1749.10 is the first short-term upside target price.
The short-term range is $1966.80 to $1683.00. If the main trend changes to up then look for the rally to extend into its retracement zone at $1824.90 to $1858.40.
Daily Swing Chart Technical Forecast
The direction of the April Comex gold market on Monday is likely to be determined by trader reaction to the major Fibonacci level at $1711.70.
A sustained move under $1711.70 will indicate the presence of sellers. The first downside target is Friday’s low at $1683.00, followed by the April 21, 2020 bottom at $1683.00.
A sustained move over $1711.70 will signal the presence of buyers. If this move creates enough upside momentum then look for the buying to extend into the minor bottom at $1739.10. This is followed by the minor 50% level at $1749.10.
The 50% level at $1749.10 is a potential trigger point for an acceleration into at least the major 50% level at $1787.30.
The US dollar is the most widely used and recognized currency worldwide. Central banks and governments hold US dollars as the primary exchange asset of their foreign exchange reserves. The dollar is the world’s reserve currency.
Reserve currencies are liquid, making them the foreign exchange instruments of choice for central banks and financial institutions for settling international transactions. Settling cross-border obligations with a reserve currency eliminates the need to exchange a country’s currency for each transaction.
The US dollar is the leading reserve currency because of the long history of political and economic stability in the US, the world’s leading economy. The dollar index (DXY) trades in the futures market on the Intercontinental Exchange (ICE) and the over-the-counter market between foreign exchange dealers.
The DXY reflects dollar strength or weakness and is a pricing mechanism for many commodities
Commodities are the raw materials that feed, clothe, power, and shelter the world. Production is a local affair in areas where the earth’s crust is rich in ores, minerals, metals, and energy. Agricultural products require suitable climates and available water supplies. Consumption is ubiquitous as people worldwide require essential commodities.
The pricing benchmark for most commodities is the US dollar because of its liquidity, stability, and role as the leading reserve currency. Local production costs and consumer prices may in various currencies, but wholesale supplies use the US dollar as the means of exchange. Over time, a rising dollar is typically bearish for commodity prices, while weakness in the reserve currency is a bullish factor. A strong dollar makes local production expenses fall, allowing foreign producers to sell output at lower prices and vice versa.
How is the DXY Index Calculated
The dollar index measures the US currency against other reserve currencies. Since the euro is the second-leading reserve currency, it has the highest weighting in the dollar index.
The dollar index is calculated according to the following formula of currency pairs:
The six currencies that comprise the dollar index are freely traded foreign currency instruments from politically stable countries. There is no regularly scheduled rebalancing or adjustment in the dollar index. The ICE exchange monitors the index methodology. The index calculation occurs in real-time from a multi-contributor feed of the spot prices of the Index’s components.
The dollar index reached an almost two-decade high in March 2020
In March 2020, at the height of the risk-off price action caused by the global pandemic, the dollar index spiked higher. The US dollar’s role as a reserve currency makes it a safe-haven during turbulent market periods. Source: CQG
As the chart highlights, the ICE dollar index rose to a high of 103.96 in March 2020, the highest level in eighteen years since 2002. While the index exploded higher during the week of March 16, it turned lower the next week.
A falling knife led to price consolidation
The dollar index entered a bear market after reaching its highest level in nearly two decades. Source: CQG
As the weekly chart illustrates, the index moved from an eighteen-year high to its lowest level since February 2018 as it fell steadily through 2020 and into early 2021. The most recent low was at 89.165, only 1.015 above the early 2018 bottom, which was the lowest level since late 2014.
Interest rate differentials play a leading role in the value of one currency versus another. The short-term Fed Funds rate dropped to zero percent as the financial fallout from COVID-19 gripped markets, narrowing the rate difference between the dollar and the euro currency. As the yield benefits of the dollar declined, it sent the US currency lower.
Moreover, as Europe settled the Brexit issue in late 2020, it lifted the cloud of uncertainty hanging over the euro and British pound. The two currencies account for 71.2% of the dollar index.
After dropping from 103.96 to 89.165 or 14.2% in nine months, the dollar index has traded in a narrow range. Source: CQG
The daily chart shows that the ICE dollar index futures contract has traded between 89.165 and 91.605 in 2021, a narrow 2.44 range after falling 14.795 points. The index remains not far from the low, but it is consolidating and has yet to challenge its critical technical support level at the 88.15 low from February 2018.
Bearish sentiment is a dark cloud over the dollar for three reasons
The trend in the dollar index remains bearish since the March 2020 multi-year high. Three compelling factors are weighing on the dollar as it consolidated near the downside target at 88.15.
Short-term US interest rates remain only 50 basis points higher than short-term euro deposit rates. The narrow differential continues to support the euro as the yield difference collapsed from pre-pandemic levels.
The US Fed continues to inject record liquidity into the financial markets, increasing the US money supply. Government stimulus to stabilize the economy has caused the US deficit to soar over the $28 trillion level. The tidal wave of liquidity and tsunami of stimulus weigh on the dollar’s purchasing power.
The technical trend in the dollar remains lower. The trend is always your best friend in markets as it reflects the wisdom of the crowd. Crowds tend to make better decisions than individuals.
The dollar remains the world’s reserve currency, but that does not mean it will not continue to lose value versus other world currencies. A break below the February 2018 88.15 low in the dollar index could cause technical traders and speculators to pile in on the index’s short side. Meanwhile, central banks, monetary authorities, and governments tend to manage the foreign exchange market via coordinated intervention that provides stability by reducing volatility. Currency trends can last for prolonged periods. At the beginning of March 2021, the dollar’s trend remains lower.
Dow component Microsoft Corp. (MSFT) could trade lower on Monday after a cybersecurity firm revealed at least 30,000 U.S. organizations, including local governments and small businesses, have been hacked by an aggressive Chinese cyber espionage unit. According to KrebsOnSecurity, the hack exploits “four newly-discovered flaws in Microsoft Exchange Server email software, and has seeded hundreds of thousands of victim organizations worldwide with tools that give the attackers total remote control over affected systems.”
Microsoft Testing Breakout Support
Mr. Softee has sold off with other big tech names since posting an all-time high in February but has traded better the majority of its mega-cap peers, holding steadfastly to new support generated by a January triangle breakout. It bounced strongly at that price level and the 50-day moving average on Friday, in a perfect position to attract fresh buying interest. However, the post-market bombshell could have the final say on short-term price direction.
The Chinese hacking crew, dubbed “Hafnium”, is believed to be conducting “targeted attacks on email systems used by a range of industry sectors, including infectious disease researchers, law firms, higher education institutions, defense contractors, policy think tanks, and NGOs”. Microsoft responded by releasing an emergency update on Mar. 2, plugging security holes in Exchange Server versions 2013 through 2019.
Wall Street and Technical Outlook
Wall Street consensus has been pristine in the last year, with a ‘Buy’ rating based upon 30 ‘Buy’, 3 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $245 to a Street-high $315 while the stock ended the week more than $12 below the low target. This weak placement highlights Main Street caution after years of outsized share gains.
Microsoft entered a powerful uptrend in 2016 and hasn’t traded below the 20-month moving average in the last five years. It broke out above the February 2020 high in June, posting strong gains into the September peak at 232.86. Price action then eased into a symmetrical triangle, ahead of a January 2021 breakout that hit an all-time high at 246.13 in February. The stock has been testing new support since that time, with a decline through 224 signaling a failed breakout.
Ranges are wide this week and markets are easily capable to handle the big moves expected. Watch in particular EUR/NZD and EUR/AUD then GBP/USD.
AUD/USD and NZD/USD topside pairs NZD/CAD and AUD/CAD both broke lower and signifies its a matter of time before AUD/USD and NZD/USD break and trade much lower. Bottom pairs AUD/CHF and NZD/CHF are both overbought and assists to further downside to AUD/USD and NZD/USD.
GBP/AUD last week’s vital points were located from 1.8130 to 1.7885. This week 1.8130 to 1.7905. GBP/AUD broke 1.7885 and traded 80 pips lower. GBP/AUD correlates to GBP/USD at – 64% and caution is warranted to trade GBP/AUD.
GBP/NZD last week reported ranges from 1.9318 to 1.9176. This week 1.9318 to 1.9188. GBP/NZD last week first broke 1.9176 to trade 82 pips to 1.9094. GBP/NZD then traded above 1.9176 to achieve 1.9415 highs and closed at 1.9290 vs last week’s close at 1.9244. GBP/NZD correlation to GBP/USD run -43% and caution to this week’s trade.
EUR/USD and all EUR pairs are deeply oversold and matches to richter scale overbought to USD/JPY and USD/CHF. Moves lower to USD/JPY and USD/CHF are corrective unless 105.70 and 0.9064 breaks lower. EUR/USD higher is corrective unless 1.2020 and 1.2034 trades higher. Weeks ago was reported EUR/USD targets at 1.1800’s and 1.1700’s.
JPY cross pairs represent the best market moves for most pip gains beginning with GBP/JPY as all JPY cross pairs are overbought and current prices are miles to high.
Last post was shown GBP/JPY true moving averages and the 20 day is located at 148.38 then the 50 day at 145.26. The 20 day average matches the 10 year average at 148.36 and off by 2 pips. A break at 148.00’s then GBP/JPY larger range becomes 148.38 to 142.30.
Watch EUR/CAD higher this week, EUR/GBP oversold and GBP/USD overbought.
Next 2 and 10 year yields, levels, ranges and targets. Inflation as a 3 month interest rate and its relationship to the 2 year yield.
March E-mini Dow Jones Industrial Average futures bounced back from a series of setbacks on Friday as stronger-than-expected U.S. jobs data boosted optimism for a speedier economic recovery. The blue chip average received an additional boost as Treasury bond yields eased after soaring earlier in the session in reaction to government report.
The Dow was led higher by components Apple and Microsoft, which gained 1% and 2% respectively.
While an optimistic outlook for the economy may have stop the selling pressure on Friday, price climbed throughout the session as bond yields retreated from their session highs. The 10-year Treasury yield eased back to 1.55% after popping above 1.6% to touch a 2021 high following data showing a surge in jobs growth.
In breaking news, the Dow could rally early Monday in reaction to the news that the Senate passed a $1.9 trillion coronavirus relief package on Saturday as Democrats rush to send out a fresh round of aid. Although the news may have been priced into the market for weeks, the announcement could trigger strong kneejerk buying especially since some shares have hit oversold territory.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 30512 will signal a resumption of the downtrend. The main trend will change to up on a move through the record high at 32033.
The minor trend is also down. A trade through 31637 will change the minor trend to up. This will also shift momentum to the upside.
The minor range is 32033 to 30512. On Friday, the Dow closed on the strong side of its 50% level at 31273. Trader reaction to this level is likely to set the tone on Monday.
The short-term range is 29552 to 32033. Its 50% level at 30793 is support.
The main range is 23918 to 32033. Its retracement zone at 30676 to 30355 stopped the selling last week at 30512.
The Dow also found support when buyers came in to defend the December 31 close at 30497.
The direction of the March E-mini Dow Jones Industrial Average on Monday is likely to be determined by trader reaction to the minor pivot at 31273.
A sustained move over 31273 will indicate the presence of buyers. The first upside target is the minor top at 31637. Taking out this level could create the upside momentum needed to challenge the record high at 32033.
A sustained move under 31273 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into a series of potential support levels at 30793, 30676, 30497 and 30355.
Given the positive news over the weekend, we should know on the pre-market opening whether investors consider the passing of the COVID relief bill as bullish.
U.S. West Texas Intermediate crude oil futures soared over 3% on Friday, falling short of its contract high reached in October 2018. The rally was fueled primarily by Thursday’s decision by OPEC and its allies not to increase production in April. Prices continued to accelerate on Friday after the U.S. government released a report showing the U.S. economy added more jobs than expected in February.
Despite the strong rally, the market could start facing some headwinds if the U.S. Dollar continues to move higher. A strong greenback tends to reduce foreign demand for the dollar-denominated asset.
Additionally, analysts and traders have said that slow physical crude sales and recovery for demand not predicted until around the third quarter suggest that the price rally is unwarranted.
Given the prolonged move up in terms of price and time, the best sign of a major top will be a closing price reversal top chart pattern on both the daily and weekly charts.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $66.23 will signal a resumption of the uptrend, while a move through the October 3, 2018 main top at $66.92 will reaffirm the uptrend.
The main trend will change to down on a move through $59.08. This is not likely, but due to the prolonged move up in terms of price and time, we should start watching for a dramatic closing price reversal top. This won’t change the trend to down, but it will be an early indication that the selling is greater than the buying at current price levels. This could trigger the start of a 2 to 3 day correction.
The new minor range is $59.08 to $66.23. Its retracement zone at $62.66 to $61.81 is the first downside target.
If you read my analysis daily then you know I use the entire futures contract for my analysis rather than the nearby futures chart. I feel this gives me more accurate support/resistance levels and price targets. Using the nearby chart creates problems because not everyone agrees on when to rollover. The first of the month, the last day, the first day of the rollover, and sometimes when volume drops, these are all use to determine the trading range during the last month of trading.
Sometimes it’s accurate. This usually occurs when there aren’t any wide price swings during the delivery month. But sometimes it’s the highs and lows used are different if there are volatile price swings during the delivery month.
Last May when prices turned negative on the last trading day is one example. If you rolled over the first notice day, the low price doesn’t exist. If you rolled over the last trading day then you see the low.
That being said, I prefer using the entire contract being traded. My May WTI crude oil chart shows the contract high was reached on October 3, 2018 at $66.92. This is my target this week.
Taking out $66.92 could trigger an acceleration to the upside with the psychological $70 level the next upside target.
Taking out $66.92 then closing below $65.92 on Monday will form a closing price reversal top. If confirmed, this could trigger the start of a minimum 2 to 3 day correction. The sell-off could extend even further if the market forms a closing price reversal top on the weekly chart.
And that low is flirtatiously close to the defined bottom of the 1789-1672 structural support zone as shown in the following chart of Gold’s weekly bars:
Further infused (as a week ago mused) is the annoyance of weathering price so abused. Obviously per the graphic’s rightmost declining red dots, the parabolic trend (our friend?) is Short, but as we’ve sassed in the past, “…with friends like that, who needs enemies…”
“Uh, mmb, are you going to also mention the deeper COVID 1704-1451 zone?”
Well clearly ’tis there, Squire, but best that we not mention it, as:
a) ’tis comprehensively nonsensical for Gold to venture much lower from here;
b) we don’t want to unduly shock our valued readership; and
c) why trade lower when our forecast high for this year of 2401 means Gold trade higher?
Moreover, always maintain in mind that price historically “reverts to the mean” (if you will) of its currency-debased value (even as adjusted for the relatively wee increases in the supply of Gold) which per our opening Scoreboard today puts price at 3710. Other pop-valuation schemes of where Gold “ought be” we deem as comparatively meaningless.
Speaking of means, we’ve been herein wary for some time of Gold’s price having traveled so far above its stalwart 300-day moving average that a technical correction was realistically in the cards: and there it starkly shows at right in the following graphic of price’s daily closes across the past ten years. Such reversion to that mean now seen, ’tis time for Gold to hit the brakes whilst wresting the steering wheel into full 180° lock, let it snap back to center, pop the clutch and hit the throttle!
Fact is, as you regular readers well know, hardly are we as concerned about the price of Gold as are we about the unsupportable (understatement) level of the stock market as measured by the S&P 500. Herein we’ve been hammering on the yield of the riskless 10-year U.S. Treasury Note (1.554%) at some point surpassing that of the riskfull S&P (1.517%).
And in the wake of our writing a week ago to “watch for increasing volatility in the markets”, so it came to “pass” (not surprising you a wit) this past Thursday when at precisely 17:20 GMT the yield on the 10-year U.S. Treasury Note passed above that of the S&P in eclipsing 1.500%. The S&P Index at that moment was 3827 … but 97 woeful minutes later at 18:57 GMT, the S&P had careened down 100 points … that is over double the median trading range of an entire day (in measuring from one year ago-to-date).
Moreover, ’tis just another of many indications that the stock market is due for a wholesale crash, be it due to rising yields, a terrible earnings season for the S&P (only 59% bettered their bottom lines, and worse, 82 of the 505 constituents don’t even have earnings), single stock manias, bogus bits**t, and our favourite measure: the honestly-calculated S&P “live” price/earnings ratio now being 68.7x.
But the S&P may have one saving grace from a fall with same: the p/e of TSLA finally is under 1,000x (at 818x). “We’re saved!” Besides, Bloomy just reported that for February, a record $86 billion was invested into exchange-traded funds. “It’s all good!” (Remember 2008? Or 2001? Or ’98, ’90, ’87?)
In the midst of it all, there are those presently arguing for inflation, some for stagflation, some for depressionary deflation and at the other end of the spectrum those for hyper-inflation. But regardless your flavour of flation, at the end of the day, again ’tis the supply of faux dough vs. that of the yellow metal which ultimately determines the price of Gold. (Unless after 5,000 years ’tis suddenly different this time … we don’t think so).
Meanwhile the Federal Reserve — the oft-overlooked role of which is to maintain a steady valuation of the Dollar (stop laughing) — is looking to “keep prices well in check” even as Chairman Powell adamantly desires sticking to “easy money” all ’round.
And as for the Economic Barometer, its week was chock full of “better buts”: February’s Payrolls (Bureau of Labor Statistics) grew, but those per ADP fell; Hourly Earnings grew, but the Average Workweek fell; the Institute for Supply Management’s Manufacturing Index grew, but its Services Index fell; whilst for January, Factory Orders grew, but so did the Trade Deficit, and Construction Spending increased, but Consumer Credit decreased. Dump it all into your Osterizer, press “purée”, and voilà, here’s the Baro along with the S&P (red line) commencing what we believe ought be a long overdue journey lower:
Lower of course remains Gold as to our proprietary technicals we go, the last three months-to-date of daily bars on the left and 10-day Market Profile on the right. Neither panel is pretty, Gold’s baby blue dots of linear regression trend consistency declining ever more so, whilst in the Profile some supportive defense has been created ’round the denoted 1696 level:
As for Sister Silver, the like dual-panel drill finds her “Baby Blues” only barely below their 0% axis, albeit looking to accelerate lower into the new week; Silver’s 26.13-to-24.04 support area (below left) is thoroughly being tested, with the key trading supporter per her Profile (below right) at 25.25:
To wrap it all for this week, we saw the Dow Newswires report that (according to the Congressional Budget Office) StateSide national debt is projected to be some 202% of Gross Domestic Product by 2051. Should we make it that far, we’ll be nearly 100 and the price of Gold (by regression extrapolation) up beyond 5000. Which put us in mind of this graphic from away back in our 18 February 2012 missive:
So don’t allow such destiny to brush you away; rather, take advantage of Gold’s brush with the 1600s today!
March E-mini S&P 500 Index futures closed higher on Friday, reversing a three-day setback, as government data showing faster-than-expected monthly jobs growth reinforced bets on an economic rebound driven by massive fiscal stimulus and vaccination drives.
The rally came as a surprise after robust non-farm payrolls data drove the benchmark 10-year U.S. Treasury yield to a new one-year high of 1.626%.
All major S&P 500 sectors rose, led by gains in energy and financial stocks. Rate-sensitive bank stocks rose about 1.6% on prospects of an improved economic outlook.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 3720.50 will signal a resumption of the downtrend. The main trend will change to up on a trade through 3934.50.
The minor range is 3959.25 to 3720.50. Its 50% level at 3840.00 stopped the buying on Friday, but will be an important pivot on Monday.
The short-term 50% level at 3807.75 and the intermediate 50% level at 3777.50 is support.
The main range is 3216.25 to 3959.25. Its retracement zone at 3587.75 to 3500.00 is the major support zone controlling the longer-term trend.
Based on Friday’s price action, the direction of the March E-mini S&P 500 Index on Monday is likely to be determined by trader reaction to the pivot at 3840.00.
A sustained move over 3840.00 will indicate the presence of buyers. This could trigger a near-term surge into 3934.50. Taking it out could lead to a test of the record high at 3959.25.
A sustained move under 3839.75 will signal the presence of sellers. This could trigger a labored break into a pair of 50% levels at 3807.75 and 3777.50.
If 3777.50 fails as support then look for a retest of last week’s low at 3720.50.
The market could start off on a strong note on Monday after the Senate passed a $1.9 trillion coronavirus relief package on Saturday as Democrats rush to send out a fresh round of aid. Although the news has probably been priced into the market for weeks, we could see some knee-jerk buying especially in the wake of Friday’s strong U.S. jobs report.
The Dollar/Yen surged to its highest level since June on Friday as remarks from Federal Reserve Chair Jerome Powell and better-than-expected U.S. jobs data drove Treasury yields sharply higher. The move widened the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive asset.
On Friday, the USD/JPY settled at 108.391, up 0.409 or +0.38%.
Powell set the wheels in motion for the rally on Thursday when he expressed no concern about a recent sell-off in bonds and stuck to his stance of keeping interest rates low for a long time. Powell also said the current jump in Treasury yields was not “disorderly” or likely to push long-term rates so high the Fed might have to intervene more forcefully.
Buyers continued to drive the USD/JPY on Friday after data showed jobs growth beat expectations in February. The news also backed up the view of Federal Reserve policymakers who said the volatility in the bond market is justified by an improving economic outlook.
The jobs improvement came amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government. Meanwhile, the Bank of Japan’s Governor Kuroda said that the BOJ has no need to change its yield guidance.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 108.645 will signal a resumption of the uptrend. The main trend will change to down on a move through 104.923. This is highly unlikely, but the prolonged move up in terms of price and time has put the USD/JPY in a position to form a potentially bearish closing price reversal top. This won’t change the main trend to down, but it could trigger the start of a 2 to 3 day correction.
The main range is 111.715 to 102.593. The USD/JPY is currently trading on the strong side of its retracement zone at 108.230 to 107.154. This zone is controlling the longer-term direction of the Forex pair.
The minor range is 104.923 to 108.645. Its retracement zone at 106.784 to 106.345 is another potential downside target.
The direction of the USD/JPY early Friday is likely to be determined by trader reaction to the main Fibonacci level at 108.230.
A sustained move over 108.230 will indicate the presence of buyers. The first upside target is last week’s high at 108.645. This is a potential trigger point for an acceleration to the upside with the June 5, 2020 main top at 109.849 the next target.
A sustained move under 108.230 will signal the return of sellers. If this move creates enough momentum over the near-term then look for the selling to possibly extend into the main 50% level at 107.154.
With two major events out of the way: Powell’s speech and the U.S. Non-Farm Payrolls report, investors may decide to start booking profits and positioning themselves ahead of the March 17 policy announcements from the Fed. Don’t be surprised by the start of a choppy, two-sided trade.