31-Mar-2021

1) EUR/USD Rises Toward 1.1750 As Dollar Takes A Breather
2) NZD/USD Bounces Off Weekly Lows, Remains Below 0.7000 Mark
3) XAU/USD Consolidates Near Multi-Month Lows, Around $1,685 Area
4) AUD/USD Clings To Modest Gains Above 0.7600 Mark, Upside Seems Limited
5) GBP/USD Refreshes Session Tops Post-UK GDP, Lacks Follow-Through Buying

 

 

1) EUR/USD Rises Toward 1.1750 As Dollar Takes A Breather

EUR/USD has bounced toward 1.1750 as the dollar backs off its highs ahead of President Biden’s critical speech on infrastructure spending. Europe’s covid issues weigh on the euro while ECB’s Lagarde dared markets to test the bank. EZ CPI missed by 1.3%.  ADP figures are also eyed.

The four-hour chart continues showing a downtrend since the currency pair hit a high of 1.2250 in late February. Momentum remains to the downside and EUR/USD trades below the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index (RSI) climbed above the 30 levels, thus exiting oversold conditions and allowing for additional falls.

Critical support awaits at 1.17 – EUR/USD launch level in 1999 and a psychologically significant level. The pair nearly touched it. Further down, 1.1630 and 1.16 played key roles in November.

Some resistance is at the daily high of 1.1746, followed by 1.1805, followed by 1.1836, the previous March low. It is followed by 1.1910 and 1.1950.

One step up, now two steps down? Forex trading is never a one-way street and every trend includes setbacks – and EUR/USD’s recent bounce from 1.17 may be one of those, ahead of a downtrend.

US ten-year yields have retreated from their new cycle highs of 1.77% toward 1.70%, allowing the dollar to edge down from its highs. Some bargain-seekers have piled into Treasuries ahead of President Joe Biden’s critical speech. The Commander in Chief is set to present a massive infrastructure plan, which includes green investment and perhaps expenditure in “human infrastructure” in addition to roads and bridges.

The roughly $2 trillion plan is set to run for around eight years and may include tax hikes that would last even longer. It is unclear if Biden will aim for one large package or postpone part of the spending and also the tax hikes to a second phase. If the US funds its new spending only by issuing more debt, Treasuries may suffer a sell-off and the resulting higher yields would boost the dollar.

In any case, the greenback has other reasons to rise. The Conference Board’s Consumer Confidence gauge jumped to 109.7, far exceeding estimates. Americans seem content with improving prospects, especially after receiving stimulus checks as part of Biden’s covid relief program.

ADP’s private-sector jobs report is due out ahead of the president’s speech and is forecast to show an increase of over half a million positions. The payroll firm’s statistics are not well-correlated with the official Nonfarm Payrolls report but tend to move markets. Any beat would lift the dollar.

On the other side of the pond, another president is set to deliver a speech – which will likely have a different tone. French President Emmanuel Macron is set to announce new measures to curb the rising number of COVID-19 cases, which is threatening to overwhelm French hospitals. In Germany, authorities have banned the use of AstraZeneca’s vaccine for people under 60 after new cases of blood clots.

To add insult to injury, German unemployment figures disappointed with a minor drop of only 8,000, showing that the continent’s largest economy is still struggling. Eurozone inflation figures are due out later and are projected to show an increase in March – albeit due to base effects. Prices plunged in March 2020 as the pandemic paralyzed economic activity.

Some support for the euro has come from Christine Lagarde, President of the European Central Bank. In a TV interview, Lagarde said that “markets can test us as much as they want” – daring “vigilantes” to sell bonds, with the ECB there to step in. Her firm commitment to backing the recovery is providing some stability.

 

2) NZD/USD Bounces Off Weekly Lows, Remains Below 0.7000 Mark

The NZD/USD pair rallied around 30 pips from weekly lows, albeit lacked any follow-through buying and remained capped below the key 0.7000 psychological mark.

The pair managed to find some support near the 0.6965-60 region and stalled the previous day’s sharp retracement slide from one-week tops amid a modest US dollar pullback. Following the recent strong rally to four-month tops, slightly overbought conditions prompted traders to take some profits off their USD bullish positions. This, in turn, was seen as a key factor that extended some support to the NZD/USD pair.

Apart from this, the uptick lacked any obvious fundamental catalyst and runs the risk of fizzling out rather quickly. The impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan have been fueling expectations for a relatively faster US economic recovery from the pandemic. This, along with the prevalent cautious mood, might continue to underpin the USD and cap gains for the NZD/USD pair.

Even from a technical perspective, the overnight downfall confirmed a fresh bearish breakdown through a flag pattern on hourly charts. This further makes it prudent to wait for some strong follow-through buying before confirming that the NZD/USD pair has bottomed out in the near-term and positioning for any further appreciating move.

Market participants now look forward to the US economic docket, featuring the releases of the ADP report on private-sector employment, Chicago PMI, and Pending Home Sales data. The key focus, however, will remain on details about US President Joe Biden’s infrastructure spending plan of around $3 trillion to $4 trillion.

 

3) XAU/USD Consolidates Near Multi-Month Lows, Around $1,685 Area

Gold seesawed between tepid gains/minor losses through the early European session and consolidated the overnight slide back closer to YTD lows.

Following the recent strong runup to four-month tops, the US dollar witnessed some profit-taking and was seen as one of the key factors that benefitted the dollar-denominated commodity. Apart from this, a softer tone surrounding the equity markets further extended some support to the safe-haven XAU/USD, though the upbeat US economic outlook kept a lid on any meaningful recovery.

The impressive pace of vaccinations and US President Joe Biden’s spending plan have been fueling expectations about a relatively faster US economic recovery. In fact, Biden announced the opening of the COVID-19 vaccine program for 90% of American adults by April 19 and will outline details about his infrastructure spending plan of around $3 trillion to $4 trillion later this Wednesday.

This, along with a modest pickup in the US Treasury bond yields, should help limit the USD corrective slide and cap gains for the non-yielding yellow metal. This makes it prudent to wait for some strong follow-through buying before confirming that the XAU/USD has formed a strong base near the $1,677-76 region and positioning for any meaningful appreciating move in the near-term.

Market participants now look forward to the US economic docket, featuring the release of the ADP report on private-sector employment, Chicago PMI, and Pending Home Sales data later during the early North American session. Traders will also take cues from the US fiscal stimulus headlines, the US bond yields, and the USD price dynamics to grab some short-term opportunities around the XAU/USD.

 

4) AUD/USD Clings To Modest Gains Above 0.7600 Mark, Upside Seems Limited

The AUD/USD pair edged higher during the early European session and refreshed daily tops, around the 0.7615-20 region in the last hour, albeit lacked follow-through.

Having shown some resilience below the 0.7600 mark, the pair managed to gain some positive traction on Wednesday and for now seems to have stalled the overnight retracement slide from one-week tops. The US dollar witnessed some profit-taking and moved away from multi-month tops. This, in turn, was seen as a key factor that extended some support to the AUD/USD pair, though any meaningful recovery still seems elusive.

Investors remain optimistic about the outlook for the US economy amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan. In fact, Biden announced the opening of the US COVID-19 vaccine program for 90% of American adults by April 19 and will outline details about the first stage of his infrastructure spending plan of around $3 trillion to $4 trillion later this Wednesday.

This, along with a cautious mood around the equity markets, might continue to underpin the USD and keep a lid on any strong gains for the AUD/USD pair. Even from a technical perspective, the overnight slide back below the 100-hour SMA favors bearish traders. Hence, any subsequent positive move might still be seen as a selling opportunity.

Market participants now look forward to the US economic docket, featuring the release of the ADP report on private-sector employment, Chicago PMI, and Pending Home Sales data. Apart from this, the US fiscal stimulus headlines will influence the USD price dynamics and produce some short-term trading opportunities around the AUD/USD pair.

 

5) GBP/USD Refreshes Session Tops Post-UK GDP, Lacks Follow-Through Buying

The GBP/USD pair rallied around 35 pips in the last hour and refreshed session tops in reaction to an upbeat UK GDP report. The pair was last seen trading around mid-1.3700s, up 0.10% for the day.

Having defended the 1.3700 mark in the previous session, the pair attracted some dip-buying on Wednesday and was supported by a combination of factors. The British pound got a minor lift after the UK Office for National Statistics reported that the economy expanded by 1.3% during the fourth quarter of 2020. The reading was above the 1.0% growth estimated earlier and was accompanied by less bad than expected current account deficit figures.

Apart from this, a modest US dollar pullback from four-month tops provided an additional boost to the GBP/USD pair, though any meaningful upside still seems elusive. Investors remained hopeful that the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan will help the US economy lead a global recovery from the pandemic.

This, along with a modest pickup in the US Treasury bond yields, might continue to underpin the greenback and keep a lid on any strong gains for the GBP/USD pair. Hence, it will be prudent to wait for some strong follow-through buying before confirming that this week’s slide from the 1.3845 region has run its course and placing fresh bullish bets.

Market participants now look forward to the US economic docket, featuring the releases of the ADP report on private-sector employment, Chicago PMI, and Pending Home Sales data. The key focus, however, will remain on details about US President Joe Biden’s infrastructure spending plan of around $3 trillion to $4 trillion.