10-Feb-2021

1) EUR/USD: Bulls Looking To Seize Control, German/US CPI Eyed For Fresh Impetus
2) GBP/USD: Bullish Potential Intact, Ascending Channel Breakout Awaited
3) XAU/USD: Gold Prepping Up For A Big Break Higher, Technicals Suggest

1) EUR/USD: Bulls Looking To Seize Control, German/US CPI Eyed For Fresh Impetus

The EUR/USD pair gained strong positive traction on Tuesday and recovered further from two-month lows, around mid-1.1900s touched last week. The momentum pushed the pair further beyond the 1.2100 mark, to near two-week tops during the Asian session on Wednesday, and was exclusively sponsored by the emergence of some heavy selling around the US dollar. Friday’s rather unimpressive US jobs report raised doubts about a relatively faster US economic recovery and halted the recent USD bounce from multi-year lows.

Apart from this, the underlying bullish sentiment in the financial markets further undermined the safe-haven USD. The global risk sentiment remained well supported by the progress in coronavirus vaccinations, which, along with prospects for a massive US fiscal spending plan, has been fueling hopes for a strong global economic recovery. With the USD selling bias turning out to be an exclusive driver, concerns that the slow rollout of vaccines in the eurozone could hamper the economic recovery did little to hinder the ongoing positive move.

Meanwhile, investors remain divided about the impact of US President Joe Biden’s proposed $1.9 trillion stimulus package on the greenback. Hence, a modest bounce in the US Treasury bond yields failed to impress the USD bulls. The pair was last seen hovering around the 1.2125-30 region as market participants now look forward to the release of the final German CPI and French Industrial Production figures for some impetus. The US economic docket highlights the release of the latest consumer inflation figures.

Traders will further take cues from the broader market risk sentiment, the US stimulus headlines, and the US bond yields. This, in turn, might influence the USD price dynamics and produce some meaningful trading opportunities.

From a technical perspective, a sustained move back above the 1.2055-60 horizontal support-turned-resistance was seen as a key trigger for bullish traders. A subsequent strength beyond the 1.2100 mark, representing the 38.2% Fibonacci level of the 1.2350-1.1952 recent fall, and a near one-month-old descending trend-line resistance has set the stage for additional gains. That said, any further positive move is likely to confront resistance near 50% Fibo. level, around mid-1.2100s.

This makes it prudent to wait for some strong follow-through buying beyond the mentioned barrier before positioning for the resumption of the prior/well-established short-term bullish trend. The pair might then aim to surpass an intermediate hurdle, near the 1.2190-1.2200 supply zone (coinciding with the 61.8% Fibo level), and test the next relevant resistance near the 1.2275 region ahead of the 1.2300 round-figure mark.

On the flip side, the 1.2100 mark now becomes immediate support to defend. A convincing break below might prompt some technical selling and accelerate the fall towards the 1.2070 intermediate support en-route the 23.6% Fibo. level, around the 1.2045 zone. Some follow-through selling will negate any near-term positive bias and turn the pair vulnerable. The downward trajectory might then drag the pair back towards the key 1.2000 psychological mark, before bears eventually aim to challenge the recent swing lows, around mid-1.1900s.

2) GBP/USD: Bullish Potential Intact, Ascending Channel Breakout Awaited

The GBP/USD pair built on the previous day’s bullish breakout momentum through the 1.3755-60 congestion zone and refreshed multi-year tops during the Asian session on Wednesday. The British pound continued benefitting from its lead in terms of the coronavirus vaccination drive and diminishing odds for negative BoE interest rates in 2021. The momentum was further supported by the better-than-expected release of UK BRC Like-For-Like Retail Sales, which showed a growth of 7.1% in January as compared to 4.8% previous and 6% expected. This, along with the emergence of heavy selling around the US dollar, pushed the pair further beyond the 1.3800 round-figure mark.

The recent USD recovery started losing momentum following the release of a rather unimpressive US jobs report for January, which raised doubts about a relatively faster US economic recovery. Adding to this, the underlying bullish sentiment in the financial markets further undermined the greenback’s safe-haven demand. The optimism over the rollout of COIVD-19 vaccines, along with prospects for a massive US fiscal spending plan, has been fueling hopes for a strong global economic recovery. This, in turn, continued boosting investors’ confidence and remained supportive of the prevalent upbeat market mood.

Meanwhile, investors remain divided about the impact of US President Joe Biden’s proposed $1.9 trillion stimulus package on the greenback. This was evident from the fact that a modest uptick in the US Treasury bond yields did little to provide any respite to the USD bulls or hinder the pair’s ongoing positive move to the highest level since April 2018. Market participants now look forward to the release of the UK NIESR GDP estimate for the three months to January for some impetus. Later during the early North American session, the release of the latest US consumer inflation figures will influence the USD price dynamics and further contribute to producing some meaningful trading opportunities.

From a technical perspective, bulls took a brief pause near the top boundary of an upward sloping channel, extending from January swing lows. With technical indicators holding in the bullish territory and still far from being in the overbought zone, a convincing breakthrough should pave the way for additional gains. The pair might then accelerate the momentum and aim to reclaim the 1.3900 round-figure mark.

On the flip side, the 1.3755-60 resistance breakpoint seems to protect the immediate downside. Any meaningful fall below the mentioned resistance-turned-support might be seen as a buying opportunity and should remain limited. The 1.3700-1.3680 region now becomes a strong base for the major and acts as a key pivotal point for short-term traders.

3) XAU/USD: Gold Prepping Up For A Big Break Higher, Technicals Suggest

Expectations of a $1.9 trillion stimulus package likely to be passed in the US Congress keep the reflation trades alive and kicking, fuelling gold’s (XAU/USD) rally towards the critical $1850 level. Broad-based US dollar weakness amid record rallies in the US stock indices also adds to the strength in the bright metal.

Gold prices could likely benefit if the Treasury yields resume the recent declines amid uncertainty over the strength of the US economic recovery. The US CPI data and the Fed Chairman Jerome Powell’s take on the economy will be critical to the next direction in the metal.

Technically, gold looks ready for a big upside break, as the inverse head-and-shoulders formation in the making on the hourly sticks.

Also, an impending golden cross points to the additional upside in the XAU/USD pair. A golden cross is confirmed when the 50-simple moving average (SMA) cuts the 200-SMA from below.

The potential inverse head-and-shoulders neckline at $1850 needs to be scaled on a sustained basis for the big technical breakout, which would expose the February highs near the $1863 region.

The next stop for the bulls is seen at $1875, the January 29 high. The relative strength index (RSI) inches higher above the midline, backing the case for the further upside.

Alternatively, the 21-SMA at $1840 offers immediate support, below which the confluence of the 50 and 200-HMAs at $1834 could be tested. The horizontal 100-SMA at $1820 could provide strong support to the XAU bulls.