February 10, 2021

Daily Market Analysis

Market Focus

US stocks halted a six-day winning streak as investors debated whether commitments by the Federal Reserve and the Biden administration to let the economy run hot will spark destabilizing inflation. The S&P 500 Index edged lower from an all-time high after a 5.4% surge this month fueled by signs the Biden administration intends to pass a sizable aid bill while the central bank promises to keep rates pinned near zero. The Nas100 eked out a gain, while small caps notched the longest rally since Dec 2019. Treasuries advanced and the dollar fell for a third straight session.

Stretched valuations are giving investors pause as they cheer advancing vaccination efforts, rising stimulus prospects and a slowdown in coronavirus infections across the globe. With inflation expectations near the highest since 2013, questions have also begun to be raised about when the so-called reflation trade in bonds could start to threaten equities.

According to Saira Malik, Nuveen head of global equities, “We are getting to the point where we have to start worrying about the risk of how we pull back on that stimulus, will it cause the economy to overheat, are these valuations becoming too expensive. That is something we are going to be grappling with as the year goes on.”

Elsewhere, Brent oil hovered around $60 a barrel on signs the global market is tightening, and demand is improving. Bitcoin pared an earlier jump to a record after Tesla Inc. bought $1.5 billion of the cryptocurrency.

Market Wrap

Main Pairs Movement

GBPUSD advances towards 1.3800, sitting at the highest levels since April 2018 ahead of the London open. The Cable rises as broad US dollar weakness supersedes uncertainty over Brexit and the UK Covid vaccine news.

Retreating US Treasury yields weigh on the American currency. The macroeconomic calendar will remain scarce, having no impact on currencies. USDJPY is in a corrective decline, the bearish trend could gain momentum.

The USDCAD pair climbed to a daily high of 1.2766 in the early trading hours of the American session but reversed its course amid broad selling pressure surrounding the greenback.

DXY accelerates the downside and navigates multi-day lows in the 90.50 zone on turnaround Tuesday. WTI has reversed earlier decline to as low as the $57.25 per barrel to trade back above the $58.00 level and is back in the green, setting the crude oil contract up for a seventh day of successive gains.

Technical Analysis:

EURUSD (Four-hour Chart)

The EURUSD extends its Monday gains and posts another bullish day on Tuesday, at the moment of writing, the Fiber pair is flirting with the 1.2120 resistance. Given that there is no specific theme or story affecting the EUR on the day, the major driver that boosted the EURUSD is the weakening USD. Technically speaking, as the 15-Day SMAVG is staging a golden cross with the 60-Day SMAVG, it is reasonable to assume that the EURUSD is going to extend its bullish momentum. This bullish trend is also supported by the MACD histogram. Nevertheless, given that the RSI has now reached the overbought region, a downward correction might prevent the pair from further advancing.

Resistance: 1.2120, 1.2145, 1.2163

Support: 1.2078, 1.2060, 1.2017

AUDUSD (Four-hour Chart)

The Aussie is posting its three consecutive day win on Tuesday, but is currently struggling to extend above the 0.7736 resistance zone. The board-based greenback weakness drives Aussie’s Tuesday gains. Given that the Australia Business Confidence index rose to 10 from 4 and that the NAB’s capacity utilization rose to 81.0% in January, those positive numbers also gave some lift for the pair’s recent rise. From a technical perspective, the Aussie’s surge is supported by the 15-Day SMAVG and MACD histogram. However, with the 69 RSI, it is likely that the Aussie might not find acceptance above the most immediate resistance at 0.7736. A break above the 0.7736 zone could open the door for an acceleration of the recent appreciation.

Resistance: 0.7736, 0.7766, 0.7798

Support: 0.7703, 0.7678, 0.7642

XAUUSD (Four-hour Chart)

The gold traders experienced a roller-coaster type of day on Tuesday. After breaking key resistance levels at $1840 in the later European session, the yellow metal has now retreated back to $1837. Despite the broad-based USD weakness, the failure to find a further acceptance above the $1846 zone still weighed down on the precious metal extensively. The market’s undecisive sentiment on the greenback would continue to play a significant part in XAUUSD price action. From a technical perspective, the gold is still under bearish pressure. However, the 50s RSI is suggesting that the pair still has some room to extend Tuesday’s positive traction. On the upside, the yellow metal must first move above $1846 to reclaim its $1850 territory. On the flipside, the most immediate cushion for the pair can be found at $1829 and $1818.

Resistance: 1846, 1856, 1864

Support: 1829, 1818

Economic Data