23-Feb-2021

1) EUR/USD: Gearing Up For A Bullish Breakout Through 1.2190-1.2200 Hurdle
2) GBP/USD: Bulls Take Breather Near Ascending Channel Hurdle Ahead Of UK Jobs Data
3) XAU/USD: Gold’s Recovery Appears Limited Ahead Of Powell

1) EUR/USD: Gearing Up For A Bullish Breakout Through 1.2190-1.2200 Hurdle

The EUR/USD pair edged higher for the fourth consecutive session on Tuesday and climbed to near one-month tops during the Asian session. The US dollar languished near six-week lows amid doubts about a relatively faster US economic recovery and was seen as one of the key factors driving the pair higher. The shared currency was further supported by Monday’s upbeat German IFO Business Climate Index, which jumped to 92.4 in February as against an uptick to 90.5 anticipated from 903 in the previous month. Adding to this, the Current Economic Assessment and the Expectations Index arrived at 90.6 and 94.2, respectively, both beating consensus estimates.

Meanwhile, the prospects for the passage of US President Joe Biden’s proposed $1.9 trillion stimulus package continued fueling the reflation trade. In fact, the House Budget Committee on Monday voted to advance the Democrats’ massive coronavirus relief plan and is on course to get a floor vote later this week. This, in turn, pushed the yield on the benchmark 10-year US government bond to fresh one-year tops. The USD, however, failed to gain any respite and seemed rather unimpressed by the continuous surge in the US Treasury bond yields, instead took cues from the underlying bullish sentiment in the financial markets amid the progress in COVID-19 vaccinations.

The pair was last seen hovering around the 1.2170-75 region as market participants now look forward to the final Eurozone CPI figures for a fresh impetus. The US economic docket highlights the release of the Conference Board’s Consumer Confidence Index. The key focus, however, will be on Fed Chair Jerome Powell’s testimony before the Senate Banking Committee. Powell is expected to reassure ultra-accommodative policy stance, which could potentially calm bond markets. Dovish signals could exert some additional downward pressure on the greenback and pave the way for a further near-term appreciating move for the major.

From a technical perspective, the recent price action now seemed to constitute the formation of an inverted head and shoulders chart pattern. The neckline resistance is pegged near the 1.2180-85 region, which if cleared decisively will set the stage for an extension of the ongoing positive momentum. The pair might then surpass an intermediate hurdle near the 1.2220 region and test the 1.2270-75 resistance zone. Bulls might eventually aim to reclaim the 1.2300 round-figure mark and push the pair back towards 32-month tops, around mid-1.2300s touched on January 6.

On the flip side, immediate support is pegged near the 1.2130-25 region and is followed by the overnight swing lows, around the 1.2100-1.2090 area. A sustained break below might prompt some technical selling and accelerate the slide towards the 1.2040-35 horizontal support. The key 1.2000 psychological mark could be the next relevant target on the downside ahead of monthly lows around mid-1.1900s.

2) GBP/USD: Bulls Take Breather Near Ascending Channel Hurdle Ahead Of UK Jobs Data

The GBP/USD pair traded with a mild positive bias for the fourth consecutive session on Tuesday and was seen hovering near the highest level in almost three years during the Asian session. The British pound remained well supported by the UK government’s plan to ease lockdown measures and the impressive pace of COVID-19 vaccinations in Britain. In fact, UK Prime Minister Boris Johnson unveiled a new four-step plan to end restrictions by 21 June and lifted hopes for a swift UK economic recovery. This, in turn, underpinned the British pound, which, along with the prevalent US dollar selling, remained supportive of the pair’s positive move.

The USD languished near six-week lows amid the underlying bullish sentiment in the financial markets and failed to gain any respite from the continuous upsurge in the US Treasury bond yields. The prospects for the passage of US President Joe Biden’s proposed $1.9 trillion stimulus package have been fueling the reflation trade. The House Budget Committee on Monday voted to advance the Democrats’ massive coronavirus relief plan and is on course to get a floor vote later this week. This, in turn, pushed the yield on the benchmark 10-year US government bond to fresh one-year tops, albeit did little to impress the USD bulls.

Market participants now look forward to the UK economic docket, highlighting the release of monthly employment details for a fresh impetus. The ILO unemployment rate for the three months to December is expected to have edged higher from 5.0% to 5.1%. Meanwhile, the number of unemployed people is anticipated to have risen by 35K in January as against 7K reported in the previous month. Later during the early North American session, the Conference Board’s US Consumer Confidence Index will influence the USD and also produce some trading opportunities. The key focus, however, will be on Fed Chair Jerome Powell’s testimony before the Senate Banking Committee.

From a technical perspective, the pair, for now, seems to have paused near the top boundary of the monthly ascending trend-channel. Slightly overbought RSI on the daily chart seemed to be the only factor holding bulls from placing fresh bets. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback from the current resistance zone before positioning for any further appreciating move. That said, a sustained breakthrough will be seen as a fresh trigger for bullish traders and pave the way for additional gains. The pair might then surpass the 1.4100 mark and aim to test the next relevant hurdle near the 1.4140 region.

On the flip side, immediate support is pegged near the 1.4030 region ahead of the key 1.4000 psychological mark. Any subsequent slide is more likely to attract some dip-buying near the 1.3960 horizontal support. This, in turn, should help limit the downside near the trend-channel support, currently around the 1.3925-20 region. The latter should act as a strong base for the major, which if broken decisively might prompt some aggressive long-unwinding trade and pave the way for some meaningful corrective slide in the near-term.

3) XAU/USD: Gold’s Recovery Appears Limited Ahead Of Powell

The retreat in the US Treasury yields from yearly tops and rising inflation expectations worldwide render supportive for the inflation-hedge gold (XAU/USD). Although markets weigh in the prospects of passage of US President Joe Biden’s $1.9 trillion, which could limit the advance in the metal. Also, the XAU bulls could turn cautious ahead of the Fed Chair Jerome Powell’s testimony on the Semi-annual Monetary Policy Report before the Senate Banking Committee due later this Tuesday.

Powell is likely to reiterate his dovish stance, exerting additional downside pressure on the US dollar. Meanwhile, the market optimism-driven by encouraging vaccine developments could likely bode ill for the safe-haven gold. All in all, gold is likely to hold onto its recovery mode, awaiting fresh cues from the US CB Consumer Confidence data and Powell’s testimony.

Gold’s hourly chart spots a bull flag breakout, with the bullish crossover adding credence to the upside bias.

The 21-hourly moving average (HMA) pierced through the downward-sloping 200-HMA from below, registering a bull crossover in the last hours.

Therefore, the bulls could extend control towards the $1820 round number, above which the horizontal trendline (orange) resistance at $1825 could be challenged.

The overbought Relative Strength Index (RSI) conditions suggest that there is limited scope for advances.

Meanwhile, the daily chart shows that the bearish 21-simple moving average (DMA) at $1821 could cap the recovery from seven-month tops, as the RSI turns flat below the midline.

Further, an impending bear cross on the daily sticks also warrants caution for the XAU bulls. The 100-DMA is set to cross the 200-DMA from above.

Should the downside pressure regain momentum, a test of the November lows at $1765 would be back on the table. Also, the seven-month lows at $1761 could be at risk.