18-Jan-2021

1) AUD/USD: Ranges Somewhat; Uptrend Under Some Strain
2) Crude Falls As US Rig Count Rises For The Eighth Week
3) GBP/USD: Bears Push Sterling To Oversold Conditions, Bounce On The Radar

1) AUD/USD: Ranges Somewhat; Uptrend Under Some Strain

AUDUSD has dipped below the 100-period simple moving average (SMA) and appears to be testing the lower boundary of a minor consolidation pattern at 0.7666. The directionless Ichimoku lines and the slightly slowed upward pace of the 50-period SMA are feeding the sideways direction in the pair. That said the steady climbing 100- and 200-period SMAs are bolstering the positive structure.

However, the short-term oscillators are leaning towards the downside, nurturing additional negative price action. The MACD is declining further below its red trigger line and the zero mark, while the gliding RSI is nearing the 30 oversold level. The stochastic lines are zig-zagging around the 20 levels, yet, the %K line’s dip into the oversold territory is promoting further fading in the pair. Traders may want to keep an eye on the downturn in the 50-period SMA, which may give clues on a deeper pullback.

If sellers manage to decisively push under the floor of the minor consolidation at 0.7666, early tough support may arise from the section of 0.7624-0.7642, which is defending the positive structure. Should the bears successfully breakthrough this base, the retracement may encounter next hardened support at the 0.7600 troughs and from the 200-period SMA at 0.7589 beneath.

On the flip side, a bounce on the floor of the small range could meet initial friction at the 100-period SMA at 0.7693. If the rebound is profound enough, the pair may extend towards the constricting zone from the 0.7727 barriers until the 50-period SMA at 0.7744. Overcoming this too, the price may challenge the resistance section of 0.7805-0.7820, which if conquered could see the bulls pressure the 0.7845 boundaries.

Overall, in the short-term timeframe, AUDUSD retains a bullish tone above the 0.7624-0.7642 border. A break above 0.7820 or below 0.7624 could suggest the next price direction.

2) Crude Falls As US Rig Count Rises For The Eighth Week

The price of crude oil declined in early trading as investors reacted to the rising number of oil rigs in the United States. In total, the number of oil and natural gas rigs increased by 18 to 424. In the Permian Basin, the number of rigs increased by the biggest number since the pandemic started. Oil rig count increased by 13, according to Baker Hughes. This is happening as shale producers rush to take advantage of high oil prices with Brent trading at $54.68 and the West Texas Intermediate (WTI) trading at $52.03.

The Chinese economy continued its recovery in the fourth quarter, helped by rising external demand. According to the latest data by the government, the economy increased by 2.6% after rising by 2.7% in the previous quarter. This increase was lower than the expected 3.2% On an annualised basis, the economy expanded by 6.5% after rising by 4.9% in the third quarter. This expansion was mostly due to stronger external demand. In December, industrial production increased by 7.3% while retail sales rose by 4.3%.

The market will see lower volume today due to the absence of US investors since the country will be celebrating Martin Luther King day. Nonetheless, there will be several key events to watch, including a speech by Governor Andrew Bailey of the Bank of England (BOE). In his speech, he will likely address the issue of negative rates as the economy continues to deteriorate. In Japan, the bureau of statistics will publish its preliminary industrial production and capacity utilization. In Italy, we will receive the latest CPI data.

3) GBP/USD: Bears Push Sterling To Oversold Conditions, Bounce On The Radar

The greenback is shining on Blue Monday – investors continue shifting funds to the dollar, following downbeat US data last week. The fall of 1.4% in Retail Sales was the latest factor causing fear about both America’s economy and the global one. After long days in which the dollar moved to the tune of Treasury yields, it began responding to concerns about the impact of the current slowdown.

GBP/USD has been struggling, falling by nearly 200 pips from the highs near 1.37. However, there are several reasons to expect an upswing in the currency pair – driven by forces on both sides of the pond.

Starting from the US – which is on holiday on Monday – the main event is the inauguration of Joe Biden as President. The new Commander-in-Chief is set to push through his $1.9 trillion stimulus program and a plethora of Executive Orders that would also promote growth. Fears of violence by pro-Trump supporters may be exaggerated, as seen by low participation in protests over the weekend.

Another US impetus comes from the Federal Reserve. Chair Jerome Powell put an end to speculation about an early tapering of bond buys – and the Fed may even go further with expanding its program. That would also weigh on the greenback.

In the UK, the vaccination campaign is getting another shot in the arm, with those over 70 being asked to get their jabs. Over 6% of Brits have received at least one dose, the highest in the Western world.

Another reason for optimism is the gradual descent in COVID-19 cases, which is showing that the lockdown is beating the effect of the new, contagious variants.

Pound/dollar has dropped below the 50 and 100 Simple Moving Averages on the four-hour chart, and also suffers from downside momentum. However, it is still holding above the 200 SMA – which is just around 1.35 – and the Relative Strength Index is touching 30. Oversold conditions indicate a bounce is coming.

Support below 1.35 awaits at 1.3455, the 2020 trough, followed by 1.33, a stepping stone on the way up in late December.

Some resistance is at 1.3545, which was a cushion early in the year. It is followed by 1.3610, a support line from last week, and then by 1.3675 and 1.37.