20-Jan-2021

1) XAU/USD: Gold Eyes Critical $1862 Resistance Ahead of Biden’s Inauguration
2) GBP/USD Clings to Gains near Weekly Tops, Moves Little Post-UK CPI
3) EUR/USD: Traders Seem Non-Committed, ECB Awaited
4) AUD/USD Refreshes Weekly Tops, Around 0.7740 Region

 

 

1) XAU/USD: Gold Eyes Critical $1862 Resistance Ahead of Biden’s Inauguration

Gold (XAU/USD) is advancing above the 200-day SMA, as the US inflation expectations continue to rise, in anticipation of a massive stimulus package under the incoming Biden administration. Stimulus expectations boost gold’s appeal as an inflation-hedge while downing the safe-haven US dollar.

Treasury Secretary nominee Janet Yellen’s backed President-elect Biden’s view for higher fiscal spending, noting that its benefits outweigh the expenses of a higher debt burden. Biden’s inauguration speech is eagerly awaited for fresh hints on the stimulus plan.

The Technical Confluences Indicator shows that gold has some additional room to the upside, with the immediate resistance seen at $1858. That level is the confluence of the SMA10 one-day and Fibonacci 38.2% one-month.

After crossing a dense cluster of mino9r resistance levels, the XAU bulls may run through strong offers at $1860/62, which is the SMA50 one-day.

The previous week’s high at $1864 is the level to beat for the gold buyers.

On the flip side, acceptance under the critical support around $1847/46 is needed to invalidate the recovery momentum. The Fibonacci 61.8% one-week intersects with the SMA200 one-day and the previous day high at that point.

The next relevant support awaits at $1840, which is the convergence of the SMA10 four-hour, SMA5 one-day, and the previous low four-hour.

The sellers will then target the Fibonacci 38.2% one-week at $1835, below which the $1829 (Fibonacci 23.6% one-week) support will challenge the bears’ commitment.

 

2) GBP/USD Clings to Gains near Weekly Tops, Moves Little Post-UK CPI

The GBP/USD pair maintained its bid tone near-weekly tops, around the 1.3665 region, and had a rather muted reaction to the UK macro data.

The pair built on this week’s solid rebound from the 1.3520 region and gained traction for the second consecutive session on Wednesday amid a softer tone surrounding the US dollar. The market bets for additional US fiscal stimulus increased further following the US Treasury Secretary nominee Janet Yellen’s confirmation hearing before the Senate Finance Committee on Tuesday.

Yellen urged lawmakers to act big on the COVID-19 relief package and not worry too much about debt. This comes on the back of the optimism over the rollout of vaccines for the highly contagious coronavirus disease and remained supportive of the underlying bullish sentiment. This, in turn, was seen as one of the key factors that undermined the greenback’s relative safe-haven status.

On the other hand, the GBP bulls seemed rather unaffected by the imposition of fresh travel restrictions in the UK, instead took cues from hotter-than-expected UK consumer inflation figures. In fact, the headline CPI rose more-than-anticipated and came in at a 0.6% YoY rate in December. Adding to this, the core CPI (excluding food and energy items) also surpassed consensus estimates.

That said, investors now seemed to have turned cautious ahead of President-elect Joe Biden’s inaugural ceremony later this Wednesday. This, along with a modest uptick in the US Treasury bond yields, amid expectations of a larger government borrowing, extended some support to the USD and kept a lid on any further gains for the GBP/USD pair, at least for the time being.

Investors on Wednesday will also take cues from a scheduled speech by the Bank of England Governor Andrew Bailey’s speech amid the absence of relevant market moving economic releases from the US.

 

3) EUR/USD: Traders Seem Non-Committed, ECB Awaited

A combination of supporting factors assisted the EUR/USD pair to regain positive traction on Tuesday and build on the previous session’s bounce from seven-week lows. The US dollar witnessed some profit-taking amid the prevalent upbeat market mood, while the euro got an additional boost from the upbeat German ZEW Economic Sentiment Index. The global risk sentiment remained well supported by the optimism over the rollout of COVID-19 vaccines and hopes for more aggressive US fiscal spending under Joe Biden’s presidency.

The buying interest around the shared currency picked up pace following the release of better-than-expected ZEW survey results. In fact, the German ZEW Economic Sentiment Index jumped to 61.8 in January as compared to 60.0 expected and 55.0 previous. Adding to this, the gauge for the broader Eurozone unexpectedly improved to 58.3 during the reported month as against 45.5 anticipated. Bulls seemed rather unaffected by reports that German chancellor Angela Merkel wants to extend lockdown measures until February 15.

Meanwhile, US Treasury Secretary nominee Janet Yellen – during her confirmation hearing before the Senate Finance Committee – urged lawmakers to act big on the COVID-19 relief package. Yellen’s comments did little to move the markets or provide any meaningful impetus to the major. Despite the supporting factors, the pair lacked strong bullish conviction as investors turned cautious ahead of President-elect Joe Biden’s inaugural ceremony on Wednesday and the latest ECB monetary policy update on Thursday.

That said, the pair remained on the front-foot for the second consecutive session on Wednesday and refreshed weekly tops, around mid-1.2100s during the Asian session. Market participants now look forward to the final Eurozone consumer inflation figures for some impetus. Later during the US session, Biden’s inaugural speech might influence the USD price dynamics and further produce some short-term trading opportunities. Traders, however, might refrain from placing any aggressive bets, rather prefer to wait on the sidelines heading into Thursday’s ECB event risk.

From a technical perspective, any subsequent positive move is likely to confront resistance near the 23.6% Fibonacci level of the November-January rally, around the 1.2170-75 region. A sustained move beyond has the potential to push the pair back above the 1.2200 round-figure mark, towards the next major hurdle near the 1.2165 area. Some follow-through buying will negate any near-term bearish bias and assist bulls to make a fresh attempt to build on the momentum further beyond the 1.2300 round-figure mark.

On the flip side, the 1.2100 level now seems to protect the immediate downside. This is closely followed by the 38.2% Fibo. level, around the 1.2070 region, which if broken decisively will set the stage for an extension of the recent corrective pullback from multi-year tops. The pair might then accelerate the slide towards challenging the key 1.2000 psychological mark en-route 50% Fibo. level, around the 1.1975 region.

 

4) AUD/USD Refreshes Weekly Tops, Around 0.7740 Region

The AUD/USD pair edged higher through the early European session on Wednesday and shot to fresh weekly tops, around the 0.7740 region in the last hour.

The pair managed to regain positive traction for the second consecutive session and recovered further from two-week lows, around the 0.7660-55 region touched on Monday. The underlying bullish sentiment in the financial markets was seen as a key factor that undermined the safe-haven US dollar and benefitted the perceived riskier Australian dollar.

Against the backdrop of the optimism over the rollout of COVID-19 vaccines, the global risk sentiment was further supported by hopes for additional US fiscal stimulus measures. It is worth reporting that the market has been pricing in the prospects for more aggressive fiscal spending in 2021 under Joe Biden’s presidency.

US Treasury Secretary nominee Janet Yellen further lifted market expectations during her confirmation hearing on Tuesday and urged lawmakers to act big on the COVID-19 fiscal package. The developments helped offset concerns about the ever-increasing coronavirus cases and the imposition of stricter lockdown measures.

Meanwhile, the increasing likelihood of larger government spending continued lending some support to the US Treasury bond yields. Investors also seemed to have turned cautious ahead of the President-elect Joe Biden’s inaugural ceremony. This, in turn, might limit the USD downside and cap any meaningful gains for the AUD/USD pair.

This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market moving economic releases. That said, the broader market risk sentiment will play a key role in influencing the AUD/USD pair ahead of the Australian monthly employment details on Thursday.