06-Jan-2021

1) AUD/USD: Bulls in Control near Multi-Year Tops, Eyeing A Move Beyond 0.7800
2) GBP/USD Jumps to Two-Day Tops, Just Above Mid-1.3600s
3) EUR/USD: Euro Rides the Blue Wave Higher, Why There Is Room for More Gains
4) XAU/USD: Gold Refreshes Two-Month Tops, Challenges 61.8% Fibo. Level

 

 

1) AUD/USD: Bulls in Control near Multi-Year Tops, Eyeing A Move Beyond 0.7800

The AUD/USD pair added to the previous day’s strong positive move and continued scaling higher for the second consecutive session on Wednesday. The momentum pushed the pair to fresh 33-month tops, with bulls now eyeing a move beyond the 0.7800 mark.

Increasing bets for a Democrat-led Senate and expectations for additional fiscal measures prompted some fresh selling around the US dollar. This, in turn, was seen as a key factor that provided a goodish lift to the AUD/USD pair and remained supportive.

Meanwhile, RSI on the daily chart is already flashing overbought conditions. This, along with a cautious mood around the equity markets, makes it prudent to wait for some near-term consolidation or a modest pullback before placing fresh bullish bets.

That said, the near-term bias remains tilted firmly in favor of bullish traders. Hence, any corrective slide might still be seen as a buying opportunity and remain limited near the 0.7740-35 horizontal resistance breakpoint, now turned support.

Any subsequent weakness might prompt some profit-taking and turn the pair vulnerable to break below the 0.7700 mark. The corrective slide could further get extended and drag the AUD/USD pair back towards weekly swing lows, around the 0.7640 region.

On the flip side, a sustained move beyond the 0.7800 mark has the potential to lift the AUD/USD pair further towards the 0.7845-50 region. Bulls might then aim to reclaim the 0.7900 mark and challenge March 2018 swing highs, around the 0.7915 area.

 

2) GBP/USD Jumps to Two-Day Tops, Just Above Mid-1.3600s

The USD witnessed some fresh selling during the early European session and pushed the GBP/USD pair to two-day tops, around mid-1.3600s.

The pair quickly reversed an intraday dip to the sub-1.3600 level and moved into the positive territory for the second consecutive session on Wednesday. The uptick also marks the fifth day of a positive move in the previous six and was exclusively sponsored by the emergence of some fresh selling around the US dollar.

As investors await the results of a US Senate runoff elections in the state of Georgia, increasing bets on a Democrat victory raised expectations for an additional US financial aid package. A Democrat-led Senate will have a big impact on the incoming US President Joe Biden’s ability to pursue his preferred economic policies.

Apart from this, hopes for a strong global economic recovery in 2021 remained supportive of the underlying bullish tone in the financial markets. This, along with speculations that the Fed will keep rates lower for a longer period undermined the safe-haven greenback and further extended some support to the GBP/USD pair.

Bulls seemed rather unaffected by concerns about the economic fallout from the imposition of a third nationwide lockdown in the UK, which might have raised prospects for additional policy easing by the Bank of England. Nevertheless, the USD price dynamics remain an exclusive driver of the GBP/USD pair’s intraday positive move.

Hence, the key focus now shifts to the latest FOMC monetary policy meeting minutes, scheduled for release later during the US session. In the meantime, the US economic docket – highlighting the release of the ADP report on private-sector employment – will be looked upon to grab some short-term trading opportunities.

 

3) EUR/USD: Euro Rides the Blue Wave Higher, Why There Is Room for More Gains

Surfers go out to sea also in winter – and EUR/USD is catching the blue wave to ride to fresh highs near 1.2350. The safe-haven US dollar is sold off as Democrats are on course to secure control of the Senate after most votes have been counted in Georgia. That would enable President-elect Joe Biden to pass more stimulus, while the razor-thin majority – 51 to 50 thanks to Vice-President-elect Kamala Harris’ tie-breaking authority – is insufficient for market unfriendly reforms.

At the time of writing, networks called Democrat Rapahel Warnock the winner against Republican Kelly Loeffler. In the second race, GOP Senator David Perdue is trailing Democrat Jon Ossof by only 0.29% but the remaining votes are from Democratic-leaning counties. Additional results are due out later in the day.

The flight away from the safety of the greenback is a repeat of a familiar move. On the other hand, the dollar’s retreat is somewhat limited by the rise in US Treasury yields –the ten-year return surpassed 1%, making the world’s reserve currency more attractive. Prospects of additional government spending mean higher bond issuance.

That could depress yields and cement the dollar’s downfall. Clues about Fed policy are due later in the day when minutes from its December meeting are released. Back then,

Fed Chairman Jerome Powell provided guidance about the bond-buying scheme and pledged to do more if necessary. The protocols may provide clues about how close the bank is to expanding its scheme, now standing at around $120 billion/month.

Earlier, ADP’s labor statistics for December are forecast to show a slowdown in private-sector hiring after a healthy increase of 307,000 positions in December. While the payroll firm’s figures often fail to correlate with official data, the release tends to move markets. The ISM Manufacturing Purchasing Managers’ Index beat estimates with 60.7 points and signaled increased hiring in the services sector.

Coronavirus cases and deaths continue rising across the northern hemisphere. The US reported nearly 4,000 mortalities on Monday and Germany extended its nationwide lockdown through the end of January. Moreover, British scientists are worried that the South African strain is resistant to vaccines.

On the immunization front, the European Medicines Agency is set to approve Moderan’s jab on Wednesday. At the moment, the bottleneck is in distributing the inoculation rather than at the regulatory level. Policymakers on both sides of the pond are under pressure to ramp their vaccination campaigns, following Israel’s example.

America vaccinated only around 1.5% of its population, Germany 0.4%, while Israel topped 15%.

 

4) XAU/USD: Gold Refreshes Two-Month Tops, Challenges 61.8% Fibo. Level

Gold attracted some dip-buying near the $1941 region and jumped to fresh two-month tops during the early European session. The commodity was last seen hovering around the $1952-53 region, marking the 61.8% Fibonacci level of the $2075-$1764 downfall.

The emergence of some fresh selling around the US dollar was seen as one of the key factors that assisted the dollar-denominated commodity to regain traction. The precious metal has moved back into the positive territory for the third consecutive session.

Meanwhile, any subsequent positive move is likely to confront resistance near the $1960-65 congestion zone. Given that RSI on the daily chart is holding just above the 70.00 mark, the XAU/USD is more likely to take a brief pause near the mentioned barrier.

That said, some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent bullish move. The yellow metal might then aim to reclaim the key $2000 psychological mark for the first time since August 2020.

On the flip side, immediate support is pegged near the $1930 level and is closely followed by the 50% Fibo. level near the $1920 area. Any further decline might be seen as a buying opportunity, which, in turn, should help limit the downside for the commodity.