29-Mar-2021

1) GBP/USD Retreats On Dollar Strength, Brexit Concerns
2) EUR/USD Suffers From Risk-Off Mood, European Covid Concerns
3) NZD/USD Trades With Modest Losses, Remains Below 0.7000 Mark
4) USD/CAD Clings To Gains Above 1.2600 Mark Amid Stronger USD, Sliding Oil Prices

1) GBP/USD Retreats On Dollar Strength, Brexit Concerns

GBP/USD is retreating from the 1.38 level as the dollar benefits from the risk-off mood in markets. Concerns about falling UK exports to the EU after Brexit are weighing on sterling, contrasting optimism about Britain’s reopening.

Given the RSI staying firm around 45.00, the quote’s run-up targeting 50-day SMA, near 1.3840, can’t be ruled out. However, a clear break above this will have to cross a one-month-long resistance line, at 1.3887 by the press time, to recall the GBP/USD bulls. Alternatively, a confluence of the stated support line and 50% Fibonacci retracement level of run-up from December 11, 2020, to February 24, 2021, near 1.3685-80 becomes a tough nut to crack for the bears.

Talking about Brexit, the Bank of England (BOE) recently asked lenders to seek approval from the “Old Lady”, before relocating UK jobs or operations to the EU. The Financial Times (FT) cites European regulators’ push for more to move than is necessary for financial stability after Brexit as the reason for the BOE’s action. It should be noted that the EU and the UK have recently concluded to hold a bi-annual forum-based approach towards tackling the issue of financial services regulation. It should be noted that a survey from the UK’s Federation of Small Businesses (FSB) suggests Quarter of small exporters give up on the EU due to red tape.

Amid these plays, stock futures are offered and the US 10-year Treasury yield takes offers around 1.66%.

Given the lack of major data/events, GBP/USD moves should rely on the risk barometers wherein headlines concerning vaccine and China could gain major attention.

2) EUR/USD Suffers From Risk-Off Mood, European Covid Concerns

EUR/USD is trading below 1.18, falling as the safe-haven dollar rises in the fallout of a hedge fund liquidation which may have further ripple effects on markets. Rising coronavirus cases in France and Germany are weighing on the euro.

Euro/dollar is trending lower, with minor bounces after hitting new lows. Momentum on the four-hour chart is to the downside the Relative Strength Index is above 30 – outside oversold conditions. All in all, bears are in the lead.

The daily low of 1.1772 is the first support line, and it is followed by 1.1760, which is the 2021 trough. Further down, 1.1745 and 1.1695 date back to November and may come into play.

Some resistance is at 1.1805, which was a high point on Friday. It is followed by 1.1836, the previous yearly bottom, and then by 1.1875.

Taking over – German Chancellor Angela Merkel has been losing patience with attempts to curb the spread of COVID-19 and may centralize powers. The veteran leader is frustrated with Germany’s states’ actions and is reportedly considering a night-time curfew-like in parts of neighboring France.

In the meantime, Paris is contemplating slapping its own new restrictions as infections advance at an alarming pace and threaten to overwhelm hospitals. The issues of Europe’s largest countries come as the EU is struggling to ramp up its vaccination campaign. Late last week, the EU’s leaders authorized Brussels to impose export bans on vaccines but seem hesitant to use them.

On the other side of the pond, the US immunization campaign continues accelerating, with some speculating that the US may soon have a glut of jabs. Investors are also awaiting President Joe Biden’s speech on the economy due on Wednesday and potentially encouraging jobs figures due out on Good Friday.

On Monday, the dollar benefits not from America’s recovery but rather from safe-haven flows. The liquidation of Archegos Capital, a leveraged hedge fund, is set to cause significant losses to several banks. A late sell-off in stocks that the firm held may be followed by additional jitters as trades were leveraged and may still have ripple effects.

EUR/USD bulls may find solace in the uncorking of the Suez Canal. Authorities in Egypt have been able to refloat the Ever Given, whose blockage paralyzed the critical waterway. Some 12% of global trade passes through Suez and its closure for six days resulted in the amassing of 450 vessels.

3) NZD/USD Trades With Modest Losses, Remains Below 0.7000 Mark

The NZD/USD pair remained depressed through the early European session and was last seen hovering near the lower end of its daily trading range, around the 0.6975 region.

The pair struggled to capitalize on the previous session’s goodish rebound of over 50 pips from four-month tops and faced rejection near the key 0.7000 psychological mark. The US equity futures kicked off the new week on a downbeat note, which drove some haven flows towards the US dollar and weighed on the perceived riskier kiwi.

The greenback was further supported by the upbeat US economic outlook, bolstered by the impressive pace of coronavirus vaccinations and the passage of a massive stimulus package. Adding to the optimism, US President Joe Biden on Thursday made an ambitious pledge of administering 200 million vaccine shots in 100 days.

Further supporting the prospects for a relatively faster US economic recovery from the pandemic were speculations for an additional $3.0 trillion infrastructure plan from the US. This comes after the New Zealand government last week announced a series of measures to cool the housing market and eased pressure on the RBNZ to raise rates.

This was seen as another factor that weighed on the New Zealand dollar and supports prospects for a further near-term depreciating move for the NZD/USD pair. Hence, a subsequent slide back towards challenging multi-month lows, around the 0.6945-40 region, looks a distinct possibility amid absent relevant market moving economic releases.

4) USD/CAD Clings To Gains Above 1.2600 Mark Amid Stronger USD, Sliding Oil Prices

The USD/CAD pair maintained its bid tone through the early European session and was last seen hovering near the top end of its daily trading range, comfortably above the 1.2600 mark.

A combination of factors assisted the pair to regain positive traction on the first day of a new trading week and inch back closer to the two-week tops touched last Thursday. Against the backdrop of the upbeat US economic outlook, a softer risk tone helped revive demand for the safe-haven US dollar. Apart from this, a fresh leg down in crude oil prices undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair.

Investors remained optimistic about the prospects for a relatively faster US economic recovery amid the impressive pace of COVID-19 vaccinations and the passage of a massive stimulus package. The US President Joe Biden – in his first formal news conference on Thursday – made an ambitious pledge of administering 200 million vaccine shots in 100 days. Adding to this, investors have been speculating for another $3.0 trillion infrastructure plan from the US.

Meanwhile, news from the Suez Canal that the stranded container ship Ever Given has almost been completely floated sent crude oil prices sharply lower. In fact, WTI futures were down nearly 2.50% for the day, which was seen as another factor that drove the USD/CAD pair higher through the first half of the trading action on Monday. That said, the lack of any strong follow-through buying warrants some caution before positioning for any further appreciating move.

Investors might now refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of Friday’s release of the closely-watched US monthly jobs report (NFP). In the meantime, the broader market risk sentiment might influence the USD. This, along with oil price dynamics, will be looked upon for some short-term trading opportunities around the USD/CAD pair.