05-Mar-2021

1) AUD/USD Pierces 0.7700 As S&P 500 Futures Stay Heavy Near One-Month Low
2) EUR/USD Defends Key Support Near 1.1950 Amid Dollar Strength
3) XAU/USD: Downside Appears More Compelling For XAU/USD, NFP In Focus
4) USD/JPY: Bulls Seem Unstoppable, Fresh Multi-Month Tops And Counting Ahead Of NFP
5) USD/CAD: 1.2700 Mark Holds The Key For Bulls, Focus Shifts To NFP

 

 

1) AUD/USD Pierces 0.7700 As S&P 500 Futures Stay Heavy Near One-Month Low

AUD/USD stays heavy near the lowest levels since early February, currently down 0.37% intraday to 0.7698, during early Friday. In doing so, the risk barometer ignores the recently positive sign from China and New Zealand while respecting the broad US dollar strength amid a drop in S&P 500 Futures and sustained rally of the US 10-year Treasury yields.

Chinese Premier Li Keqiang recently crossed wires while saying, per Reuters, to target 2021 growth above 6.0%. Given the dragon nation’s close-knit trade relations with Australia, the news should have helped the AUD/USD prices.

Also on the positive side were the updates from New Zealand suggesting the downgrade in Tsunami alert level that was given to the North Island residents after witnessing three back-to-back earthquakes.

The reason could be traced from Italy’s blockage of AstraZeneca’s vaccine supply for Australia. Additionally, the extended downbeat performance of risk indicators like the S&P 500 Futures and Asia-Pacific stocks as well as the run-up in the US 10-year treasury yields and the US dollar index (DXY).

While checking the major blow to risks, the market’s reflation fears amid hopes of further fund inflows, due to the UK and the US stimulus, could be held responsible.

Considering the lack of major data/events in Asia, coupled with the cautious sentiment ahead of the US employment figures figure February, AUD/USD is likely to remain depressed ahead of the key US NFP.

With a clear break below an ascending trend line from November 2020 and 50-day EMA, respectively around 0.7755 and 0.7700 now, AUD/USD bears eye February’s low near 0.7560.

 

2) EUR/USD Defends Key Support Near 1.1950 Amid Dollar Strength

EUR/USD trades close to the critical Fibonacci support at 1.1945. Dollar rises, stocks drop as Powell refrains from jawboning yields. A big miss on expectations is needed to apply brakes on the rally in yields and put a floor under the spot.

EUR/USD’s technical chart shows bears are in control and could soon push the pair to three-month lows below the Feb. 5 low of 1.1952.  The pair formed a bearish candle on Thursday – a sign of a strong bearish mood in the market – validating a bear flag disruption confirmed earlier this week.

A bearish big red candle with little or no wicks appears when sellers pretty much dominate the proceedings. The pair dived out of a bear flag on March 3, signaling an extension a resumption of the sell-off from the Jan. 6 high of 1.2349 and opening the doors for a drop below 1.20.

A close above the lower high of 1.2243 created on Feb. 25 is needed to confirm a reversal higher.

The pair closed in on 1.1945 – the 23.% Fibonacci retracement of the rally from the early November low of 1.0636 to Jan. 6 high of 1.2349.  Selling pressure ran out of steam near that level four weeks ago, allowing the bulls to lift the pair back to above 1.22.

The support, however, could be breached this time, as the Federal Reserve President Jerome Powell expressed little concerns about rising bond yields on Thursday, paving the way for the Treasury market to find the “right level” in yields.

The right level in the 10-year yield could be much higher than the current 12-month high of 1.58%, as the copper-gold ratio, a barometer of global growth, continues to rise. In other words, the yield-led risk-off in stocks seen at press time could worsen, leading to a stronger haven demand for the dollar and deeper losses for EUR/USD.

The downside will likely gather pace if the German Factory Orders data for January due at 07:00 GMT on Friday prints below estimates.

Later the focus would shift to the US Nonfarm Payrolls for February. A big miss on expectations is needed to apply brakes on the rally in yields and put a floor under EUR/USD.

 

3) XAU/USD: Downside Appears More Compelling For XAU/USD, NFP In Focus

Gold (XAU/USD) holds the lower ground below the $1700 level, as Fed Chair Jerome Powell’s dismissal of the bond market turmoil triggered a fresh sell-off in the Treasuries, which drove the yields higher. US stocks tumbled on concerns about the growth and inflation forecasts, which boosted the safe-haven US dollar while knocking-off gold below $1700. Investors remain unnerved, as they believe that the rallying yields likely signals overheating of the economy. The benchmark 10-year Treasury yields rallied 4% and recaptured 1.50% on Powell’s comments while the US dollar index rose to three-month highs above 91.50.

Heading into the critical US NFP release, gold looks vulnerable, as the dollar holds firmer in tandem with the yields. If the headline NFP figures disappoint, the risk-off action in the global equities could intensify, bolstering the haven demand for the greenback, which could cause more pain for gold. The US economy is expected to add 182K jobs in February vs. the previous +49K figure. Also, the updates on the US $1.9 trillion stimulus will be closely followed as its nears approval by the Senate.

Gold’s four-hour chart shows that the price is testing the lower band of a potential falling wedge, with the key support placed at $1687.

A four-hour candlestick closing below the latter is needed to confirm the downside break, paving way for a drop towards the June 2020 low of $1671.

On the flipside, recapturing the $1700 level is critical to unleashing further recovery gains.

The confluence of the bearish 21-simple moving average (SMA) and the falling wedge resistance at $1717 is likely to be a tough nut to crack for the XAU bulls.

The Relative Strength Index (RSI) remains within the oversold territory, suggesting that a minor bounce could be in the offing before the downside resumes.

 

4) USD/JPY: Bulls Seem Unstoppable, Fresh Multi-Month Tops And Counting Ahead Of NFP

The USD/JPY pair prolonged its recent strong bullish momentum and reclaimed the 108.00 mark for the first time since July 2020 during the Asian session on Friday. The uptick marked the eighth day of a positive move in the previous nine and was supported by the optimistic global economic outlook. The impressive pace of COVID-19 vaccinations and the progress on a massive US fiscal spending plan continued fueling hopes for a strong global economic recovery, which, in turn, was seen weighing on the safe-haven Japanese yen.

On the other hand, the US dollar was underpinned by the overnight sharp rise in the US Treasury bond yields, which picked up pace in reaction to Fed Chair Jerome Powell’s comments. Speaking at an online event hosted by the Wall Street Journal, Powell did not indicate what the Fed could do regarding the recent sharp rise in long-term yields. The lack of concrete hint on an immediate action disappointing some investors and trigger a violent sell-off in the US bond markets and provided a strong lift to the greenback.

Meanwhile, the rout in the fixed income market raised fears about distressed selling in other asset classes and took its toll on the global risk sentiment. This was evident from a steep decline in the equity markets, though did little to benefit the safe-haven JPY or stall the pair’s ongoing positive move. That said, bulls might take some breather and move on the sidelines as the focus now shifts to the US monthly employment details.

The headlines NFP is expected to show that the US economy added 182K new jobs in February, up sharply from 49K in the previous month. Meanwhile, the unemployment rate is expected to hold steady at 6.3% during the reported month. A stronger than expected reading will add to the narrative of strong sequential recovery and provide an additional boost to the greenback, paving the way for a further near-term appreciating move for the major.

From a technical perspective, the pair on Thursday confirmed a fresh bullish breakout through an important confluence hurdle near the 107.00 mark. The mentioned level comprised of the top boundary of a two-month-old ascending trend-channel and the 61.8% Fibonacci level of the 109.85-102.59 downfall. This might have already set the stage for an extension of the ongoing upward trajectory. However, overbought technical indicators on short-term charts warrant some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg up.

From current levels, the next relevant resistance is pegged near the 108.40 region, above which the pair is likely to aim back to reclaim the 109.00 round-figure mark. On the flip side, the 107.60-50 congestion zone now seems to protect the immediate downside. Any further weakness might still be seen as a buying opportunity and remain limited near the 107.00 confluence resistance breakpoint, now turned strong support. Failure to defend the mentioned support levels might prompt some long-unwinding trade and force the pair to extend the corrective slide further towards the 106.00 mark, or the 50% Fibo. level.

 

5) USD/CAD: 1.2700 Mark Holds The Key For Bulls, Focus Shifts To NFP

The USD/CAD pair had some good two-way price swings on Thursday and influenced by a combination of diverging forces. Crude oil prices surged around 5% after OPEC and its allies agreed not to increase supply in April. Adding to this, Saudi Arabia decided to maintain its voluntary cut of 1 million barrels per day through April. This was seen as a key factor that underpinned the commodity-linked loonie and dragged the pair to one-week lows, around the 1.2575 region.

The early slide, however, turned out to be short-lived and the pair witnessed a dramatic turnaround amid resurgent US dollar demand. The Fed Chair Jerome Powell – speaking at an online event hosted by the Wall Street Journal – did not indicate any immediate action to curb the recent sharp rise in long-term yields. The lack of concrete hint disappointed some investors and trigger a violent sell-off in the US bond markets, which provided a strong boost to the greenback.

The pair rallied around 120 pips from daily swing lows, albeit struggled to capitalize on the momentum and once again faltered near the 1.2700 mark. Oil prices added to the overnight gains and held steady near 14-month tops through the Asian session on Friday. This, in turn, was seen as a key factor exerting some pressure on the major. On the other hand, the USD was seen consolidating its gains near three-month tops ahead of the closely watched US monthly jobs report.

The headlines NFP is expected to show that the US economy added 182K new jobs in February, up sharply from 49K in the previous month. Meanwhile, the unemployment rate is expected to hold steady at 6.3% during the reported month. A stronger than expected reading will add to the narrative of strong sequential economic recovery and continue pushing the US bond yields. This should benefit the buck and set the stage for an extension of the pair’s recent bounce from multi-year tops.

From a technical perspective, resilience below the 1.2600 mark and the emergence of some dip-buying favors bullish traders. That said, repeated failures near the 1.2700 mark warrants some caution before positioning for any meaningful positive move. Hence, traders are likely to wait for a convincing breakthrough in the 100 pips trading range to confirm the pair’s near-term trajectory. Given that technical indicators on the daily chart have just started moving into the positive territory, a sustained strength beyond the 1.2700 mark will be seen as a fresh trigger for bullish traders. The mentioned level coincides with an over one-month-old descending trend-line, above which the pair seems all set to aim back towards reclaiming the 1.2800 round-figure.

On the flip side, a short-term ascending trend-line, currently around the 1.2600 mark should protect the immediate downside. Some follow-through weakness, leading to a subsequent break below the overnight swing lows, around the 1.2575 region will negate any near-term bullish bias. The pair might then accelerate the slide further towards challenging the key 1.2500 psychological mark before eventually dropping to multi-year lows, around the 1.2470-65 region.