08-Apr-2021

1) EUR/USD Trades Near 1.19 After Fed’s Dovish Message
2) EUR/GBP Corrects From One-Month Tops, Bullish Potential Intact
3) GBP/USD Extends Bounce Above 1.3750 Amid Renewed USD Weakness
4) XAU/USD Clings To Gains Near Two-Week Tops, Around $1,745-46 Hurdle

 

 

1) EUR/USD Trades Near 1.19 After Fed’s Dovish Message

EUR/USD is edging higher, nearing 1.19 after the Fed’s minutes showed the bank is set to continue supporting the economy. Concerns about AstraZeneca’s vaccines weighed on the euro. US jobless claims are eyed.

Momentum on the four-hour chart is to the upside and EUR/USD is trading above the 50 and 100 Simple Moving Averages, both bullish signs. However, it is capped by the 200 SMA. The Relative Strength Index is just below 70, outside overbought conditions.

Some support awaits at 1.1860, the daily low. It is followed by 1.1820, which capped euro/dollar early in the week, and then by 1.1785 and 1.1760.

Resistance is at 1.1920, which is where the 200 SMA hits the price, and then by 1.1945 and 1.1990.

“It is too early to start talking about talking about a QE taper” – the words of Charles Evans, President of the Federal Reserve, reflect the general message from the world’s most powerful central bank. It is set to continue printing dollars for some time, pushing the currency lower. The FOMC Meeting Minutes also reflected the Fed’s commitment to supporting the economy, despite acknowledging its recent recovery and improving prospects.

After several Fed members spoke on Wednesday, Chair Jerome Powell will take the stage on Thursday and he will likely reiterate the same message. That will likely keep the downward pressure on the greenback, but upbeat data could push it higher.

US jobless claims are set to drop below 700,000 in data for the week ending on April 2, after rising in the previous week. Other labor figures such as the Nonfarm Payrolls and the JOLTs job openings showed an upbeat employment market.

In the old continent, hopes for a quicker exit from the covid crisis remain elusive. While the US reached a third of its population with at least one jab, EU countries are barely at half that pace. Moreover, Europe heavily depends on AstraZeneca’s jab, where a line between rare blood clots and the jab was confirmed.

Member states’ health ministers failed to agree on a uniform approach, one that would allow sending a clear message. Some countries have banned inoculations with AZ’s immunization for younger people. Even if authorities clear the vaccine for all, confidence has been shattered.

In the meantime, Germany is considering extending its lockdown, France remains under severe restrictions and Italy is also paralyzed. The virus continues spreading, weighing on the recovery.

The European Central Bank’s meeting minutes are also due out on Thursday, and will likely reiterate the bank’s pledge to keep long-term yields at lower levels.

All in all, while the dollar is pressured by the Fed, concerns about Europe’s recovery may push the euro lower, potentially turning the currency pair’s trajectory back down.

 

2) EUR/GBP Corrects From One-Month Tops, Bullish Potential Intact

The EUR/GBP cross-edged lower through the first half of the trading action on Thursday and extended the previous day’s modest pullback from over one month tops. The cross was last seen hovering near the lower end of its intraday range, around the 0.8625-20 region, down 0.15% for the day.

Looking at the technical picture, the previous day’s follow-through positive move pushed the cross beyond 200-period SMA on the 4-hour chart and a short-term descending trend-line resistance. The momentum, however, stalled near the 23.6% Fibonacci level of the 0.9218-0.8472 decline.

The mentioned trend-line, along with another downward sloping line constituted the formation of a bullish falling wedge pattern. A sustained move beyond suggests that the EUR/GBP cross might have bottomed out and support prospects for an extension of the recovery from over one-year lows.

The constructive set-up is reinforced by the fact that technical indicators on the daily chart have just started moving into the bullish territory. That said, slightly overbought RSI (14) on hourly charts held bulls from placing aggressive bets and capped the upside for the EUR/GBP cross.

Nevertheless, the near-term bias remains tilted in favor of bullish traders. Hence, any subsequent slide towards the falling wedge resistance breakpoint, now turned support might still be seen as an opportunity to initiate fresh bullish positions and remain limited near the 0.8600 mark.

On the flip side, the overnight swing high, around the 0.8660-65 region (23.6% Fibo.) should continue to act as an immediate hurdle. Some follow-through buying will reaffirm the bullish outlook and push the EUR/GBP cross beyond the 0.8700 mark, towards the 0.8730-40 area, closer to 38.2% Fibo. level.

 

3) GBP/USD Extends Bounce Above 1.3750 Amid Renewed USD Weakness

GBP/USD trades above 1.3750, extending the recovery, as the US dollar resumes its corrective decline amid the upbeat market mood. Markets await Fed Chair Powell’s speech after the dovish FOMC minutes.

The GBP/USD pair trades near its daily lows around 1.3740 as the day comes to an end, firmly bearish according to the 4-hour chart. In the mentioned time frame, the pair has extended its slump below all of its moving averages, with the 20 SMA turning south between the longer ones. Technical indicators reached oversold readings, the Momentum maintaining its downward strength, and the RSI stable at around 31, all of which support another leg lower, mainly on a break below 1.3720, the immediate support.

The March UK Markit Service PMI came in at 56.3, below the 56.8 expected, although still within expansion levels. The European Medicines Agency finalized its review of the AstraZeneca vaccine and concluded that blood clots are a “very rare side effect” of the shot. The UK said that the risk of blood clots is higher for under-30s, and the local authority recommended providing a different vaccine for that age group.  Meanwhile, the UK has started using the Moderna vaccine after buying 17 million doses of the jab.

In the meantime, the greenback remained under selling pressure, as US Treasury yields remained subdued, while equities traded with a soft tone, with most major indexes down for the day. On Thursday, Markit will publish the March Construction PMI, foreseen at 54.6 from 53.3 in the previous month.

 

4) XAU/USD Clings To Gains Near Two-Week Tops, Around $1,745-46 Hurdle

Gold refreshed intraday tops during the early European session, with bulls making a fresh attempt to clear a strong barrier near the $1,745-46 region.

Following the previous day’s modest pullback, the precious metal managed to regain some positive traction on Thursday. The US dollar struggled to capitalize on the previous day’s modest bounce from over two-week lows, instead edged lower during the first half of the trading action on Thursday. This, in turn, was seen as a key factor that provided a modest lift to the dollar-denominated commodity.

That said, a combination of factors kept a lid on any strong follow-through gains for the XAU/USD, at least for now. The underlying bullish sentiment in the financial markets could hold bullish traders from placing any aggressive bets around the safe-haven commodity. This, along with a modest uptick in the US Treasury bond yields, might further collaborate to cap the non-yielding yellow metal.

Minutes from the latest FOMC meeting held on March 16-17 revealed that policymakers remained cautious about the continuing risks stemming from the pandemic. The Fed reiterated its commitment to extending monetary policy support until the recovery was more secure. Investors, however, seem convinced that a stronger economic recovery would force the Fed to raise interest rates sooner than anticipated.

The optimistic outlook for a relatively faster US economic recovery from the pandemic remained well supported by the impressive pace of coronavirus vaccinations. This, along with US President Joe Biden’s infrastructure spending plan, has been fueling speculations about an uptick in US inflation. This further raised doubts that the Fed will retain ultra-low interest rates for a longer period.

This, in turn, pushed bond yields higher, which along with the upbeat US economic outlook should help limit any meaningful USD corrective slide. Even from a technical perspective, the commodity’s inability to break through the $1,745-46 supply zone makes it prudent to wait for some strong follow-through buying before positioning for an extension of the recent bounce from multi-month lows.