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The US 10-year treasury yield SOARED to a one-year high of 1.545%,…

The US 10-year treasury yield SOARED to a one-year high of 1.545%, a jaw-dropping 10.56% in one day

20210226
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Market Focus

US equities plummeted whilst the selloff in global bonds deepened, the US 10-year treasury yield SOARED to a one-year high of 1.545%, a jaw-dropping 10.56% in one day. Technology stocks were leading the route, the Nasdaq 100 slumped about 3.6%. The recent Tesla-ARK synergy took a big hit today, Tesla Inc dropped 9.17% while ARK Innovation ETF down 6.7%. It was a blood bath in the S&P 500 Index as well, every sector ended up in the red, with Consumer Discretionary sector suffered the worst of 3.61%.

Several Federal Reserve presidents argued Thursday that rising Treasury yields reflect economic optimism for a solid recovery from the Covid-19 crisis and stressed that the central bank is not planning to tighten policy in the near term. St. Louis Fed president James Bullard told Bloomberg report that “rise in yields is probably a good sign so far because it does reflect the better outlook for US economic growth and inflation expectations which are closer to the committee’s inflation target.”

Coronavirus hospitalization rate dropped 72% in a month in the US as the vaccination push accelerated. Meanwhile, President Joe Biden said the federal government will distribute Johnson & Johnson’s vaccine as fast as the company can manufacture it, assuming the shot is approved by the FDA.

Market Wrap

Main Pairs Movement

Aussie staged a significant pullback upon touching the 0.8 hurdles, closed the day down 1.2%. This retreat is hardly any surprise since the pair has been overstretched since last week, probably plenty of profit-taking orders were triggered a bit north of 0.8. On the other hand, Kiwi was slightly behind its peer, dropped 0.86%.

Eurodollar ended where it started, albeit ramping up 0.64% during the European session. The dollar index is clinging to 90.25 near closing hours. US Core Durable Goods Orders for January doubled expectation to 1.4%, and Initial Jobless Claims printed 730,000, beating the forecast of 838,000.

Speculators were dumping Cable amid bond selloffs, erased 0.92% on Thursday. The pair is currently hovering above 1.401. US bond market was under pressure since investors were optimistic on the global economic outlook, thus betting on higher growth and inflation ahead. The safe-haven US greenback becomes attractive as investors worrisome in overvaluation in the stock market.

Another ugly day for Gold, which has been losing core value since this year as the market grew confident on economic recovery around the globe. The negative link between Gold and US Treasury yield continues to drag the precious metal lower and lower.

Technical Analysis

EURUSD (Daily Chart)

Eurodollar ramped up as much as 0.64% in an earlier session but pared most of its gain amid soaring US treasury yield. This pair was capped by a 1.22 hurdle, created a long upper wick on the daily chart. Nonetheless, the bullish bias is very much intact for now. It managed to stand above the short-term descending trendline and has validated that the breakthrough was indeed solid. If the price heads south, we expect the downward trendline to provide defense for the euro again. If broken, then the shared currency will find support upon meeting the long-standing ascending trendline. Conversely, it will have to find acceptance above 1.22 to boost bullish momentum. MACD on the daily chart points to a bullish trend.

Resistance: 1.22, 1.2327

Support: 1.193, 1.163

USDJPY (Daily Chart)

USDJPY has been on a textbook-like zig-zag uptrend, which was bolstered by the blue ascending line. The pair were heavily linked to the US treasury yield as the Japanese Yen is particularly vulnerable under surging yield. However, this pair somehow lagged behind Thursday’s soaring yield, only up 0.3% while the 10-year Treasury yield was up 9%. This could suggest exhausting bullish strength, and offer another chance for the bears to contest the ascending trendline, which intersects with 38.2% Fibonacci support near 105.4. The bulls should flourish in the long term, near resistance sits around 50% Fibonacci of 106.72.

Resistance: 106.72, 108

Support: 104.6, 103.8, 102.7

XAUUSD (Daily Chart)

Gold plunged another 1.51% on Thursday, it is on a three losing streak. The precious metal touched as low as 1765, which was the 50% Fibonacci support since last November. It was the second attempt to breach lower within a week, the more frequent support is under attack, the more fragile it becomes.

Moreover, the US 10Y treasury inflation-index security rate (aka 10Y real treasury yield) has been rapidly rising from the bottom, a higher real yield usually leads to the declining safe-haven gold price. SPDR and iShares Gold ETF continue to load off their holding amid plummeting gold price. However, investors should be alerted as we also witnessed quite some volatility in the equity market, which could draw attention to safe-haven sheltering assets.

Resistance: 1823, 1872

Support: 1765, 1691

20210226
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US 10-year yields touched 1.43%, the highest since Feb 2020

US 10-year yields touched 1.43%, the highest since Feb 2020

20210225
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Market Focus

US equities reversed losses and staged a rally as Federal Reserve Chairman Jerome Powell reaffirmed his view that the economy needs support. Government bond yields climbed along with oil prices.

Energy and industrial companies led gains in the S&P 500 Index, offsetting weakness for tech stocks. Banks advanced, sending an industry gauge to its highest since 2007, and small caps rallied more than 2% after U.S. regulators said Johnson & Johnson’s Covid 19 vaccine is safe and effective. Tesla Inc. gained after Ark investment Management’s Cathie Wood said she bought shares during this week’s selloff. US 10-year yields touched 1.43%, the highest since Feb 2020, before paring the increase.

Fed Chair Powell testified before lawmakers, saying the U.S. economy still had a long way to go to reach maximum employment and the Fed’s targeted inflation, a signal he wants to remain accommodative. Equity investors are weighing predictions for a post-pandemic surge in economic activity and corporate earnings with concerns that higher interest rates could dent the appeal of stocks.

While Europe Stoxx 600 climbed, the Asian stocks tumbled as Hong Kong officials announced its first stamp-duty increase on stock trades since 1993.

Market Wrap

Main Pairs Movement

US Treasury yields are back up, flirting with one-year highs and backing the dollar’s gains. EURUSD trades were seen near-daily lows in the 1.2130s area before Powell’s testimony and bounced back above 1.2160s afterward.

The Australian dollar is up against its American rival, trading above the 0.7960 price zone. Substantial gains in Wall Street underpin the commodity-linked currency.

The loonie remained depressed through the early European session and was last seen in 1.2510s, breaking below the 34-month lows set earlier this Wednesday.

DXY keeps the rangebound trading in the 90.00 regions. Front-month futures contracts for the WTI continue to advance to the upside on Wednesday and briefly even managed to rally above the $63.00 level for the first time since Jan 2020.

Technical Analysis

USDJPY (Four-hour Chart)

After a weak start for the week, USDJPY regained strong positive traction and posted its second consecutive wins today. A recovery in the investor’s sentiment across US equity markets undermines the safe-have JPY and the greenback reclaimed some momentum after the US yields peaked at 1.429%.

From a technical perspective, a recent golden cross between the pair’s 21-Day and 60-Day SMAVG indicates a bullish momentum has formed. The MACD histogram also supports the bulls. However, as the RSI approaches the mid-60s, the bulls might not have much room to advance further before a downward correction kicks in to adjust the price action. If USDJPY can find acceptance above the 106 price level, it can certainly open the doors for more gains. However, if the ongoing trend is reversed, we can expect to see USDJPY rest near 105.76 before dipping down towards 105.45, then 104.95.

Resistance: 106.23, 106.43

Support: 105.76, 105.45, 104.95

GBPUSD (Four-hour Chart)

Failure to extend further above the 1.4237 resistance, the Cable retreated modestly below the 1.41 level. A combination of the BoE pushing back on the need for negative rates and the Covid-19 vaccine rollouts attract investment back to sterling.

Technically speaking, the Cable is still on the upside as both 15-Day SMAVG and MACD histogram suggested. The ongoing retreat is largely due to the rising demand for the greenback on the day. If all things remained the same, the sterling still has the upper hand of being one of the first countries to reopen its economy. Thus, a consolidation above 1.42 will enhance the investors’ confidence in longing for the pair. Nevertheless, upcoming UK politics and Brexit-related issues still pose some threats to the sustainability of the UK economy. In all, investors can expect a bullish Cable in the short- to mid-term, but looking ahead, uncertainty surrounding UK politics requires investors to stay cautious on the potential deterioration of the sterling’s outlook.

Resistance: 1.4182, 1.4237

Support: 1.4089, 1.4059, 1.3977

XAUUSD (Four-hour Chart)

Although the Gold has made quite a few attempts to break above resistance levels at $1817, $1855, and $1875, the overall trend for the precious metal seems to be confined substantially on the back foot since the pair topped around $1960 in early Jan. The overall improved risk-on sentiment and the ongoing rising US 10-year Yields both crushed the XAUUSD bulls’ hopes to reclaim $1900.

From a technical perspective, the 60-Day SMAVG supports the bearish momentum. The 48ish RSI indicates that investors are indecisive at the moment. If XAUUSD can find acceptance above $1804, the precious metal can be trapped between $1804 and $1817. On the flip side, a price action that dragged XAUUSD below $1800 can leave the market under pressure. The XAUUSD bears are eyeing $1767 if the yellow metal bulls failed to keep the pair above $1788.

Resistance: 1804, 1817, 1825

Support: 1788, 1774, 1767

20210225
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Bitcoin relentlessly plunged as much as 17% on Tuesday, reached the lowest…

Bitcoin relentlessly plunged as much as 17% on Tuesday, reached the lowest price in three weeks, closed the day down 11%

20210224
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Market Focus

US equity market took a hit at its opening on Tuesday ahead of Powell testimony, the S&P 500 Index declined as much as 1.8% whereas the Nasdaq 100 plunge reached 3.5%. These losses were mostly pared after reassuring comments from the Fed chairman Jerome Powell on inflation and the growth outlook. Energy stocks and Media stocks were leading the gains, while Food & Staples Retailing and Auto sectors lagged in the S&P 500 Index.

President Joe Biden on Tuesday indicated the congressional vote for the proposed $1.9 trillion stimulus package will be close. The House Budget Committee pushed Biden’s pandemic-relief legislation, setting it up to pass the lower chamber by the end of this week. Even Biden seems to be quite confident in finalizing a bipartisan deal, but Senator Susan Collins told reporters she doesn’t see a single GOP vote the President’s pandemic relief bill.

Bloomberg’s key takeaways from Federal Reserve Chairman Jerome Powell’s testimony before the US Senate Banking Committee:

  • The US still has a long way to go in recovering, and the Fed will be patient to keep its supportive tools in place for some time.
  • Economic activity should bounce back strongly, especially in the second half of the year, and that economy may grow 6% in 2021.
  • Powell is not concerned about outsize price increases and if prices spike somewhat later this year amid stronger economic activity, the gains won’t be large or persistent.
  • Asset price increases due to a better economic outlook are a healthy sign.
  • The Fed is evaluating its temporary change to the supplementary leverage ratio, which expires at the end of March.

Market Wrap

Main Pairs Movement

Eurodollar recovery stalled albeit Powell was pouring cold water on the US greenback, the pair dipped 0.08% on Tuesday. Meanwhile, the dollar index gained 0.14% to 90.13.

The Sterling outperformed the US dollar amid upbeat employment data, rallied 0.37%. According to the official release, the ILO unemployment rate hit 5.1%, as expected, in the three months to December. Average Earnings Including Bonus in the same quarter were up 4.7%, beating the 4.2% expected. Also, the number of unemployed people decreased by 20K in January, much better than the 35K increase anticipated.

The European safe-haven Swiss Frac was the worst performer among its G-10 peers against the US dollar, USDCHF soared 1.03%. This move somewhat resembles the recent rally in USDJPY. The surging US 10-year treasury yield paused on Tuesday, it is currently hovering above 1.34%. As long as the yield is hanging high, then investors will shift their attention away from safe-haven currencies.

Bitcoin relentlessly plunged as much as 17% on Tuesday, reached the lowest price in three weeks, closed the day down 11%. Meanwhile, Ethereum was more volatile, plummeted as much as 24%, and pared half of its loss near the end of the day.

Technical Analysis

EURCHF (Daily Chart)

EURCHF refreshed new highs since November 2019, currently trading around 1.0983. The pair is on a six-winning streak after trapping between 1.089 and 1.0742 for four months and is looking to contest resistance of 1.1057. It is well-bolstered by an ascending trendline, but the recent spike seems to be running ahead of itself, RSI of 79 may prompt some pullbacks before it could resume its bullish run. The sudden surge was powered by rising 10-year European bond yields as indicated in the yellow curve. This pair could be exposed to potential downside risk since higher Euro could draw ECB’s attention to intervene.

Resistance: 1.1057, 1.1187

Support: 1.089, 1.0742, 1.0672

GBPUSD (Weekly Chart)

The Cable continued to capitalize on its gain, taken down multiple hurdles along the way. The bulls seem to be invincible as strong fundamentals act as a backdrop for the Pound. It has been edging higher and higher while staying well within the upper Bollinger band since last July. That being said, it will soon run into 1.416 resistance, combined with an overextended RSI of 72.3 on the weekly chart, we could finally see some retreats triggered by profit-taking orders. However, the bullish bias for Sterling will be here to stay throughout 2021. On the downside, the 1.38 handle would be a nice cushion to fall on.

Resistance: 1.416, 1.4377

Support: 1.38, 1.338

XAUUSD (Daily Chart)

Gold recovered some ground after failing its second attempt to breach below the support line of $1765. Currently, it is retracing back towards $1823, which it spent quite some effort to penetrate. This former support would likely turn into a strong resistance for the yellow metal to overcome given its recent bearish bias. We have seen consistent unloading from a few of the largest Gold ETFs such as the SPDR Gold ETF and iShares Gold Trust. If our theory is on point, then the bears will be threatening to breakthrough 50% Fibonacci of $1765, followed by $1691.

Resistance: 1823, 1872

Support: 1765, 1691

20210224
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