01-Apr-2021

1) GBP/USD Pressured Towards 1.3750 Ahead Of UK/US PMI
2) XAU/USD Forms A Double-Bottom Near $1677-76 Region, March Lows
3) EUR/USD Struggles Under 1.1750 On Dollar Strength, Europe’s Covid Concerns
4) USD/CAD Clings To Gains Near 1.2600 Mark, OPEC+ Meeting Eyed For Fresh Impetus

1) GBP/USD Pressured Towards 1.3750 Ahead Of UK/US PMI

GBP/USD has been under some pressure amid fresh dollar strength, as markets digest President Biden’s infrastructure spending plan. US jobless claims and manufacturing PMIS on both sides of the pond are eyed.

While GBP/USD are less likely to enter above March’s low of 1.3670, buyers will have to cross the 1.3840-45 resistance confluence including a 50-day SMA and a five-week-old falling trend line to keep controls.

One-month lockdown in France and the UK’s successful battle with the coronavirus (COVID-19), not to forget the ability to get AstraZeneca accepted in the EU, favor the British pound. It should be noted that the UK-China tussle and the Sino-American tension join mixed vaccine updates from Pfizer and Johnson & Johnson to weigh on the risks.

Further, Ontario’s fresh activity restrictions and US President Joe Biden’s inability to please the American business lobby, even with a $2.25 trillion infrastructure spending plan, add to the risk-off mood. However, positive vibes from the UK GDP and recent British UK, coupled with the ability to gain the fourth vaccine, namely Novavax, keep GBP/USD traders hopeful.

Amid these plays, stock futures struggle for clear direction but the US 10-year Treasury yields pause the latest rally, and the US dollar index (DXY) also seesaw amid mixed clues.

Moving on, UK Manufacturing PMI for March, expected to confirm 57.9 initial forecasts, will be the key to watch as any further advances in the data can extend the previous day’s run-up. However, Brexit chatters and any further deterioration in the EU-UK relation should heavy the quote. Also, the US traders’ reaction to the recent stimulus proposal and US ISM Manufacturing PMI will be the key.

2) XAU/USD Forms A Double-Bottom Near $1677-76 Region, March Lows

Gold survived the first test of YTD lows touched on March 8 and staged a goodish rebound on Wednesday, snapping two days of the losing streak. The yield on the benchmark 10-year US government bond remained below 14-month tops, or levels beyond the 1.75% threshold touched in the previous session and prompted traders to take some profits off their US dollar bullish positions. This, in turn, was seen as a key factor that extended some support to the non-yielding yellow metal. Apart from this, a cautious mood around the equity markets further benefitted the safe-haven XAU/USD.

The combination of factors pushed the precious metal back above the $1,700 mark, though the recovery lacked any strong bullish conviction. Investors remained hopeful about the prospects for a relatively faster US economic recovery amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan. The optimism helped limit the intraday USD losses and kept a lid on any further gains for the dollar-denominated commodity. In fact, Biden announced the opening of the US COVID-19 vaccine program for 90% of American adults by April 19.

Meanwhile, the Democratic president unveiled a more than $2 trillion infrastructure package on Wednesday to bolster the post-pandemic economic recovery. The market reaction, however, turned out to be muted and the announcement did little to provide any meaningful impetus to the commodity. Nevertheless, the XAU/USD settled with gains of over 1%, still down almost 10% for the quarter. That said, a softer tone around the US bond yields continued lending some support and assisted the XAU/USD to edge higher for the second consecutive session on Thursday.

Market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI for some impetus. The key focus, however, will remain on Friday’s release of the closely-watched US monthly jobs report – popularly known as NFP. This, along with the broader market risk sentiment, the US bond yields, and the USD price dynamics will play a key role in determining the next leg of a directional move for the precious metal.

From a technical perspective, the commodity could be in the process of forming a bullish double-bottom near the $1,677-76 region. The pattern, however, will be confirmed once the metal breakthrough a previous strong support breakpoint, now turned resistance near the $1,760-65 region. In the meantime, the $1,720 region might act as an immediate hurdle, above which a fresh bout of short-covering has the potential to lift the XAU/USD further towards the $1,742-44 supply zone.

On the flip side, sustained weakness back below the $1,700 mark might turn the precious metal vulnerable to retest the $1677-76 strong support. Some follow-through selling will negate the bullish set-up and pave the way for an extension of the recent downward trajectory. Bears might then aim to test the next relevant support near the $1625 level before eventually dragging the commodity further towards the $1600 round-figure mark.

3) EUR/USD Struggles Under 1.1750 On Dollar Strength, Europe’s Covid Concerns

EUR/USD is trading below 1.1750 as investors worry about France’s new lockdown, joining additional restrictions in the old continent. Markets are shrugging off US President Biden’s well-telegraphed infrastructure and tax plan. PMIs are eyed.

“Further selling should wait for a clear break below the 1.1700 round-figure, which in turn will target 1.1610-1600 support-zone comprising multiple lows marked since late September 2020. Alternatively, an upside clearance of 1.1744-52 area comprising the stated resistance lines will aim for the early March low near 1.1835 but a 100-SMA level of 1.1865 will challenge the EUR/USD bulls afterward”.

The US dollar clings to the recovery gains, with the further upside seems to be limited by a retreat in the Treasury yields, as bond bears contemplate starting out a fresh month. The US dollar index traded flat at 93.22, consolidating its bounce from 92.99 lows reached in the American last session.

On Wednesday, the main currency pair was offered some temporary reprieve from four-month lows after the ECB President Christine Lagarde said that the central bank “won’t be guided by the short-term economic moves.” Markets ignored mixed Eurozone Preliminary CPI figures for March.

Looking ahead, we have a busy economic calendar, with the German Retail Sales to grab some attention ahead of the final Euro area Manufacturing PMI readings for March. However, the US ISM Manufacturing PMI will hold the key for fresh direction on the major.

In the meantime, the latest covid updates, dynamics in the yields, and broader market sentiment will continue to influence the pair.

4) USD/CAD Clings To Gains Near 1.2600 Mark, OPEC+ Meeting Eyed For Fresh Impetus

The USD/CAD pair maintained its bid tone heading into the European session, albeit has retreated few pips from daily tops. The pair was last seen trading just below the 1.2600 mark, up 0.25% for the day.

The pair managed to regain some positive traction on Thursday and recovered a part of the overnight heavy losses to over one-week lows. Following the previous day’s modest profit-taking slide, the US dollar was back in demand and stood tall near four-month tops. This, in turn, was seen as a key factor lending some support to the USD/CAD pair.

Investors remained optimistic about the outlook for the US economy amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan. In fact, In fact, Biden recently announced the opening of the COVID-19 vaccine program for 90% of American adults by April 19 and also unveiled a $2.3 trillion infrastructure package.

Wednesday’s mostly in-line/upbeat US macro releases added to the narrative of a relatively faster US economic recovery from the pandemic and remained supportive of the bullish sentiment surrounding the greenback. According to ADP, the US private-sector employers added 517K jobs in March as compared to the previous month’s upwardly revised reading of 176K.

Separately, the Chicago Purchasing Managers’ Index (PMI) improved sharply to 66.3 in March from 59.5 in February and surpassed consensus estimates pointing to a reading of 60.7. This, to a larger extent, helped offset a modest pullback in the US Treasury bond yields and continued underpinning the buck, which, in turn, provided a modest lift to the USD/CAD pair.

That said, a pickup in crude oil prices – now up over 1% for the day – benefitted the commodity-linked loonie and kept a lid on any further gains for the USD/CAD pair, at least for now. The black gold remained supported by expectations that OPEC+ members will roll over the supply curbs into May at its meeting on Thursday, though renewed coronavirus jitters capped gains.

Apart from the outcome of the OPEC+ meeting, traders on Thursday will confront the release of the US ISM Manufacturing PMI. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the USD/CAD pair. The focus, however, will remain on Friday’s release of the closely-watched US monthly jobs report – popularly known as NFP.