February 11, 2021

Daily Market Analysis

Market Focus

US equities declined as technology stocks were leading the retreat, the Nasdaq Index dipped 0.52%. Twitter Inc. and Lyft Inc. turned up again the tide, Twitter Inc. surged after reporting a jump in revenue, meanwhile Lyft Inc. co-founder said the company will absolutely turn a quarterly profit this year.

The Senate approved to proceed with former President Donald Trumps’ second impeachment trial. Trump was impeached by the House on a single article accusing him of incitement of an insurrection by provoking the mob that stormed the US Capitol last month.

Across the Atlantic, German Chancellor Angela Merkel is set to announce an extension of lockdown until March 14 amid new virus strain emergence. Current restriction is set expire on Feb.14, but some fears the new contagious variants of coronavirus could hamper the already slow vaccination rollouts. The longer vaccination rollouts take, the more prolonged the economic damage of lockdowns are expected to be. Germany’s economy contracted by 5% in 2020, according to full-year GDP data released in January.

BoC Deputy Governor Time Lane called the soaring price in cryptocurrency as purely speculative mania, and said such assets don’t have the qualities to become the money of the future. He opposes Tesla’s plan to use Bitcoin as a method of payment in the future, said costly verification methods and unstable purchasing power makes cryptocurrencies like Bitcoin a “flawed” method of payment.

Market Wrap

Main Pairs Movement

Euro-dollar pared half of its gain, closed the day up 0.1%, after ECB President Christine Lagarde said it will be a while before the central bank needs to deal with unwanted inflation, and that the euro region needs fiscal support at least through the end of the year. Weak US inflation figure also helped non-US currencies to climb on Wednesday, January core inflation fell 0.1% from previous month. US 10-year treasury yield also dropped 2.6bps to 1.135% after having topped 2% on Monday. Gold once hit $1855, the highest price in two weeks, but failed to capitalize its gain, closed the day around $1843.

Traditional safe-haven currencies like the Japanese Yen and Swiss Franc performed differently against the US greenback, Yen dipped 0.07% while Franc gained 0.27%. BoJ officials are considering ways to communicate that the bank can cut its interest rate further in the negative territory if needed while considering the side effect of such move.

Cable climbed to the highest level since April 2018, rallied 0.23% on Wednesday. The British Sterling was underpinned by BoE Governor Andrew Bailey’s speech, who said it’s not in the UK’s interest to dramatically ease banking rules following Brexit.

The antipodean pairs underperformed in the G-10 space; Aussie dollar dropped 0.14% whilst Kiwi retreated 0.4%. The decline is probably attributed to thin liquidity ahead of Chinese New Year holiday, rather than a fundamental one.

Technical Analysis:

EURUSD (Daily Chart)

Euro dollar has managed to reclaim 1.206 support, and is currently kissing the short term descending trendline. The yellow upward trendline has previously proven itself to be worthy for defending, now the bulls are in charge of another attack. However, there have been several layers of defense line set up the bears, the first being the blue descending trendline, next to horizontal resistance of 1.2173, then the January’s high of 1.2333. On the south, near support sits around 1.206, followed 1.193. MACD on the daily chart is printing a bullish reversal picture. However, it would be prudent to wait for a clear breakout as neither side has the dominance over the other.

Resistance: 1.2173, 1.2333

Support: 1.206, 1.193

GBPUSD (Weekly Chart)

Cable is well placed in an upward trending tunnel since last April, this pair continues to gain traction as BoE Bailey lifted concerns of negative interest rate. It came on top of 1.38 hurdle from March 2018, but we still have two more trading days to confirm whether if it can firmly stand above this level. It is hardly any surprises to see the Pound clinging to the Bollinger upper band in the longer term since it was severely subdued from Brexit shock. However, a retreat from here seems plausible since weekly RSI figure is one step away from overheating, currently hovers around 67.

Resistance: 1.416, 1.4625

Support: 1.38, 1.338, 1.2769

AUDUSD (Daily Chart)

Aussie dollar was unable to complete the breakout of the descending trendline given the lack of trading volume ahead of Chinese New Year holiday. Nonetheless, the bulls are here to stay amid resurgence of the reflation narrative, which should bolster commodity linked Aussie and Kiwi throughout 2021. This pair spent the last month consolidating after a huge ramp up in late 2020, and now investors are waiting for a fresh impetus to move forward. That being said, approval on Biden’s $1.9 trillion stimulus package should give risky currencies a big boost. But investors should always keep an eye on US yield curve since rising yields will hinder non-US currencies strength. MACD on the daily chart is undergoing a bullish reversal.

Resistance: 0.78, 0.7982

Support: 0.758, 0.7414

Economic Data