Uptrend for greenback puts pressure on Gold

Yellow metal moved lower on Tuesday following the long US holiday weekend. Gold prices were same on Monday with low volume. US yields shot higher on Tuesday rising 7-basis points and hitting the highest levels seen since February 2020. The uptrend momentum in US yields is adding support on the US dollar and weighing on gold.

Adding to it, US fiscal stimulus and vaccine optimism further supports the dollar, the expectations for higher global inflation drove the benchmark. Attention turns towards the US Retail Sales data and the FOMC minutes for fresh near-term trading opportunities in gold.

TikTok’s parent company ByteDance refuted reports that it is in preliminary talks to list the video app on the New York Stock Exchange (NYSE), China’s highly influential newspaper, Global Times, reported on Wednesday. The media outlet said: “ByteDance responded Wed that the previous media reports over the company being in preliminary talks to list TikTok in New York was not true.”

Earlier today, Global Times cited sources, saying that ByteDance was in preliminary discussions to list TikTok on the NYSE. Despite the denial from ByteDance, the risk sentiment is recovering amid US President Joe Biden’s upbeat remarks on the covid vaccinations.

Elsewhere, US President Joe Biden recently appeared for CNN’s townhall interview wherein he tried to downplay the British moves while promising the coronavirus (COVID-19) vaccine to all the Americans by July 2021.The US leader also highlighted covid vaccine manufacturer Pfizer and Moderna’s fast delivery while saying, “Pfizer and Moderna sped up delivery of vaccine using the US Defense Production Act (DPA).”

XAU/USD 4 Hour Chart:

Support: 1780.6 (S1), 1766.5 (S2), 1743.6 (S3).

Resistance: 1817.6 (R1), 1840.5 (R2), 1854.5 (R3).

Amidst all the catalysts favoring US dollar against the yellow metal, we expect a bearish trend for XAU/USD.

Uk’s vaccine benchmark supports pound

UK’s ability to reach its covid vaccine benchmark of 15 million has favored the pound for last 3 days. The Tory-government’s action also helped in gaining good covid results, which in return led to renewed chatters over easing virus-led activity restrictions. The broad US dollar weakness amid hopes of the US coronavirus (COVID-19) stimulus package helped the pound to gain more support.

UK PM Boris Johnson suggests the use of lateral flow tests could help reopen those businesses that have been “the toughest nuts to crack”. The news also mentions the Tory leader’s hints of this lockdown to be the last at the same time warning “cautious easing.”

The Guardian news says that “The UK will look at making excess doses of coronavirus vaccinations available to other nations after it has vaccinated its adult population, vaccine deployment minister Nadhim Zahawi said on Monday.” This adds to the strength of the pound.

The UK Finance Minister Rishi Sunak need to announce big tax hikes to the tune of extra 60 billion pounds ($83 billion) in order to aid the COVID-19 hit to the public finances, the Institute for Fiscal Studies (IFS), Britain’s leading independent microeconomic research institute, as noted in its latest study. Elsewhere, the British think tank added that Sunak’s March 3 budget is too soon for such a move.

IFS Director Paul Johnson said: “For now, Mr. Sunak needs to focus on support and recovery. A reckoning in the form of big future tax rises is highly likely, but not as yet inevitable.” “But there is tremendous uncertainty around this figure: borrowing would fall to pre-pandemic levels of around 50 billion pounds under Citi’s much more optimistic scenario and would remain at around 190 billion pounds under their more pessimistic scenario,” the IFS said.

The IFS said that “But there is tremendous uncertainty around this figure: borrowing would fall to pre-pandemic levels of around 50 billion pounds under Citi’s much more optimistic scenario and would remain at around 190 billion pounds under their more pessimistic scenario.”

GBP/USD 4 Hour Chart:

Support: 1.3857 (S1), 1.3814 (S2), 1.3783 (S3).

Resistance: 1.3931 (R1), 1.3962 (R2), 1.4005 (R3).

Amidst all the catalysts favoring the pound, we expect a bullish trend for GBP/USD.

Japan’s GDP impacts yen

Japan’s equity markets continue to rise on signs of economic recovery and expectations for US fiscal stimulus. The benchmark equity index Nikkei 225 rose to 30,000 early Monday to hit the highest level since 1190. The index has gained 8% so far this year, having rallied by 16% in 2020.

Global stock markets have rallied to record highs over the past 12 months, mostly on account of the monetary and fiscal stimulus measures adopted by authorities to counter the coronavirus-induced slowdown.

Japan’s GDP can be stronger as Japan’s fourth-quarter (Q4) GDP data crossed the 2.3% forecast with 3.0%, the data lagged behind the market consensus of 1.0% forecast on the YoY basis with a 0.2% mark. Also, these preliminary readings are below the previous announcements.

After the GDP release, Japan’s Economy Minister Yasutoshi Nishimura said that the economy is still below its pre-pandemic level. The Japanese diplomat also highlighted the need to pay close attention to the downside risks to the economy. The sentiment gets impacted with the hopes of a covid relief package.

Moving ahead,  Japan’s December month Industrial Production, expected to remain unchanged near -3.2%, this might create a negligible impact on the yen.

On the other hand, President Joe Biden is about to hold his first event with other leaders from the Group of Seven nations in a virtual meeting on Friday to discuss the coronavirus pandemic, the world economy, and dealing with China, the White House said on Sunday.

“This virtual engagement with leaders of the world’s leading democratic market economies will provide an opportunity for President Biden to discuss plans to defeat the COVID-19 pandemic, and rebuild the global economy,” the White House said in a statement.

Domestically, Biden is pressing Congress to pass a $1.9 trillion stimulus package to boost the U.S. economy and provide relief for those suffering from the pandemic.

USD/JPY 4 Hour Chart:

Support: 104.69 (S1), 104.46 (S2), 104.22 (S3).

Resistance: 105.17 (R1), 105.41 (R2), 105.64 (R3).

All the catalysts create pressurizes yen against the greenback and thus we expect a bullish trend for USD/JPY.

EUR/USD Weekly Forecast (15th February 2021 – 19th February 2021)

Fundamental view:

The EUR bounced against greenback in the previous week and reached 1.2149 but was unable to hold on to gains above the 1.2100 figure. The advance is related to the dollar self-weakness. The American currency fell off investors’ radar after the release of a tepid Nonfarm Payroll report, maintaining its sour tone throughout the week. US government debt yields soared, a sign of mounting optimism mostly related to the passing of a US stimulus package. Long-term bond yields reached levels lastly seen in March 2020 but quickly retreated afterwards. Optimism faded as the week went by, but the greenback remained near its weekly low.

Europe Exports monthly report & Current Account n.s.a. on 9th February and US CPI monthly report on 10th February favored downtrend for the pair whereas Europe Industrial Production monthly report and industrial report on 8th February and Wholesale Price Index on 11th February created uptrend for the pair.     

The major economic events deciding the movement of the pair in the next week are Europe Employment Change quarterly report, Europe GDP quarterly report at Feb 16, Fed Industrial Production yearly report at Feb 17, ECB Monetary Policy Meeting Accounts, US Initial Jobless Claims, Philadelphia Fed Manufacturing Index at Feb 18, and FOMC Member Rosengren Speech at Feb 19.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 0.10% higher than the previous week. Maintaining high at 1.2149 and low at 1.2020 showed a movement of 129 pips.

In the upcoming week we expect EUR/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. A solid breakout below 1.2045 may open a clean path towards 1.1968 and may take a way down to 1.1916. Should 1.2174 prove to be unreliable resistance, the EURUSD may raise upwards 1.2226 and 1.2303 respectively. Chart formation of a double top pattern in H4 chart sets prospects for a bearish trend. Bearish engulfing formation in H4 chart escalates the expectation for a bearish trend.

Preference
Sell: 1.2115 target at 1.1984 and stop loss at 1.2179

 

Alternate Scenario
Buy:  1.2179 target at 1.2302 and stop loss at 1.2115