Daily Market Report
04 Mar 2021

EURUSD

The EUR/USD pair edged lower after hitting an intraday high of 1.2112, as US government bond yields resumed their advances ahead of Wall Street’s opening.  The pair bottomed at 1.2042 during US trading hours, as government bond-yields resumed their advances while equities fell. However, Wall Street bounced off lows, which in turn lifted the dollar’s rivals.  Meanwhile, the European Central Bank reportedly sees no need for drastic action to curb recent developments in the bond market, according to officials familiar with discussions. Yields rallied after such a headline.

Markit published the February final Services PMIs for the euro area, which showed that output in the sector remained in contraction territory, declining for the sixth consecutive month. The German index was downwardly revised to 45.7, although the final EU figure printed at 45.7, slightly better than previously estimated. The US figure beat expectations, as it printed at 59.8 from 58.9 in January.  The official US ISM Services PMI disappointed as the index contracted to 55.3 from 58.7, while the ADP survey showed that the private sector added 117K in February, missing the market’s expectations.

On Thursday, the EU will publish January Retail Sales, seen down by 1.1% MoM and declining by 1.2% in the year-on-year comparison. The US will publish employment-related data ahead of the Nonfarm Payroll report to be out on Friday.

The EUR/USD pair is hovering around 1.2060, struggling for direction. In the near-term, the risk skews to the downside, although the pair needs now to fell below the 1.2015 support to confirm another leg south. In the 4-hour chart, the pair met sellers around converging 100 and 200 SMAs, now around a bearish 20 SMA. In the meantime, technical indicators lack directional strength within neutral levels. An advance beyond 1.2120 could favor a short-term advance towards the critical 1.2170 resistance.

Support levels: 1.2015 1.1970 1.1925

Resistance levels: 1.2120 1.2170 1.2215

USDJPY

The USD/JPY pair hit 107.14 during US trading hours, boosted by Treasury yields. US government bond yields soared ahead of Wall Street’s opening, with the yield on the benchmark 10-year note flirting with 1.50%, to finish the day around 1.47%. Stocks rose in Asia and Europe, but Wall Street was unable to follow the lead, with US indexes ending the day mixed.

Japan published the February Jibun Bank Services PMI, which improved to 46.3 from 46.1. This Thursday, the country will release the February Consumer Confidence Index, foreseen at 30.6 from 29.6 in the previous month.

The USD/JPY pair retreated from the daily high, ending the day a few pips below the 107.00 threshold, maintaining its bullish stance. The pair is neutral-to-bullish, according to the 4-hour chart, as a bullish 20 SMA keeps providing intraday support and leading the way higher. However, technical indicators keep lacking directional strength but developing within positive levels.

Support levels: 106.50 106.15 105.70

Resistance levels: 107.30 107.65 108.00

GBPUSD

The GBP/USD pair is ending the day as it started it, in the 1.3960/70 price zone. The pair surged to 1.4005 from where it fell to 1.3920 during US trading hours, as the dollar gathered some temporal attention on rising yields. Weighing on the pound, the February Markit Services PMI came in at 49.5, below the expected 49.7, as a result of the national lockdown affecting travel and hospitality.

UK Chancellor Rishi Sunak presented the 2021 budget, which included further support for companies and citizens and a plan to increase taxes in the near future to bankroll the pandemic-related spending. The furlough scheme will be extended until the end of September. The government expects the economy to return to pre-coronavirus GDP levels by mid-2022. This Thursday, Markit will present the February UK Construction PMI, foreseen at 51 from 49.2 in January.

The GBP/USD pair is neutral in the near-term, but the risk remains skewed to the upside. In the 4-hour chart, it is developing above all of its moving averages, although the 20 and 100 SMA converge at 1.3940, with modest directional strength. The Momentum indicator is flat just above its 100 level, while the RSI heads modestly lower around 48. Dips will likely continue to attract buyers.

Support levels: 1.3930 1.3880 1.3830  

Resistance levels: 1.4000 1.4045 1.4090

AUDUSD

The AUD/USD pair trades around the 0.7800 level ahead of the Asian opening, little changed on a daily basis. During US trading hours, the pair fell to 0.7770 as the greenback got an intraday boost from rising US Treasury yields, while the aussie fell alongside equities, as Wall Street fell at the opening, later recovering and providing support to the pair.

The pair show little reaction to upbeat Australian growth figures, as the Q4 Gross Domestic Product came in at 3.1% QoQ, better than the 2.5% expected. The February Commonwealth Bank Services PMI printed at 53.4, down from 54.1 in the previous month, while the AIG Performance of Construction Index came in at 57.4 from 57.6 previously. During the upcoming Asian session, Australia will publish the final version of January Retail Sales and the Trade Balance for the same month.

The AUD/USD pair is struggling to extend gains beyond the 0.7800 threshold, neutral in the near-term. The 4-hour chart shows that it´s trading between directionless moving averages, while the Momentum indicator retreats within positive levels and the RSI consolidates around 47. Further gains are to be expected on a break above 0.7837, the weekly high.

Support levels: 0.7770 0.7730 0.7690

Resistance levels:  0.7840 0.7880 0.7920

SILVER

Silver lost its shine on Wednesday, losing over 2% into Wall Street’s last hour. The white metal fell from a high of $26.8290 to a low of $25.8379.

The commodities markets were underwater in general with the CRB index sitting heavy on recent support and weighed from 190.76 to a low of 189.35. The market is caught between deafening calls for a supercycle, combined with widespread reflationary bets and a surging appetite for inflation-hedging. Precious metals, in particular, however, are also supported on prospects of the need for a safe haven and store of value. 

So, either way, silver, for its industrial qualities as well, stands to benefit, potentially more so than gold given the current trajectory of the gold and silver price ratio. The ratio has tumbled from the mid-March 2020 peak, reversing over 62% of the 2011 uptrend, pressuring the July 2016 horizontal support which could give way to a 78.6% Fibonacci retracement all the way down to 52. The ratio is currently priced at 65.

Silver, from a technical standpoint, is testing a dynamic bullish weekly trend line. However, a break of which opens prospects of lower levels. However, the current lows also have a confluence with prior weekly resistance, which reinforces the prospects of an upside extension given the price has already retraced over 62% of the prior bullish weekly impulse. From a 4-hour perspective, the bulls need to get above 26.80 resistance and the 21 EMA.

Support: 25.7470 24.8530 23.5650

Resistance: 27.0340 27.9280 29.2160

DOW JONES

US stocks were poised to close down on Wednesday as bond yields climbed again while tech stocks retreated. The Dow Jones Industrial Average declined 0.2% to 31,299.07, the S&P 500 dipped 1.2% to 3,824.73 and the Nasdaq Composite fell 2.5% to 13,019.94.

It was another poor day for the high flying tech stocks as investors dumped technology and pivoted to sectors that would be expected to benefit from an economic recovery due to the fiscal stimulus and vaccination programs. 

Microsoft Corp MSFT, Apple Inc AAPL and Amazon.com Inc AMZN fell more than 1% each, weighing more than any other stocks on the Dow. Energy SPN, financial SPF and industrial stocks gained between 0.8% and almost 3%, all reaching intraday record highs. Most other sectors declined. Still, all three indexes are sitting not too far from the record levels struck last month. Dow's top three performers were Boeing, American Express and JPMorgan Chase.

Technically, the price is on the verge of a downside extension of the recent bearish leg on the daily chart has corrected to old support now turned resistance in a 62% retracement. A downside extension could come in to meet 30,700 which coincides with a 61.8% Fibonacci retracement of the 2021 rally. Beyond that, there are even prospects of a correction to as low as the 30400s. On the other hand, on a break above the March 1 highs, bulls will be back in control to target record highs.

Support: 30559 30186 29461

Resistance: 31284 31657 32382

GOLD X

Gold failed to extend beyond $1,740 and printed a fresh low to $1,702 as the US dollar and yields came up for air. Market attention was once again concentrated on fixed income which sold off sharply. The yield on the US 10-year note was 8bps higher at 1.47% at the time of writing, however below the highs of the day at 1.496% and well below last week’s high near 1.61%. 

Gold was trading in the final hour of Wall Street down some 1.3% at $1,715, slightly off the lows for the day as investors weighed US economic fundamentals, torn between the idea that there will be strong growth relative to other regions and data that continues to disappoint, such as in Wednesday's Service PMI.

Meanwhile, Fed speaker’s, such as Evans who spoke late in the day, are not thinking about yield curve control. Instead, they are putting down the rise in rates to prospects of stronger economic growth. The market, on the other hand, questions whether higher prices and borrowing costs will lead to stronger than tolerable inflation. In this context, all eyes will be on the Fed Chair's speech on Thursday. In the last week of fedspeak before the March meeting, markets will want to see whether Powell addresses the steepening. If he does, this could add to fears of an early taper.

Technically, the price is no longer showing signs of an immediate advance back to test $1,760 and instead, a break of $1,702 opens prospects of $1,685 as a measured Fibonacci retracement target of the range between $1,760 and Wednesday’s low of $1,702. From a 4-hour perspective, the price is resisted by the 10 EMA in a decline from the 61.8% Fibonacci of the latest 4-hour correction of the prior bearish impulse. However, there are signs of consolidation while closing above prior 4-hour support closes. 

Support: $1,694 $1,656 $1,595

Resistance: $1,755 $1,793 $1,854

OIL WT

Oil prices bounced back on Wednesday, with WTI trading 3% into the Wall Street close. WTI rallied from a low of $59.27 to a high of $61.97 on the day as US fuel stocks dropped and the market weighs OPEC+ and the implications of a deal rollover. 

It was a huge drop in US fuel inventories that sparked things off. US gasoline stocks fell last week by the most in its history of reporting while refining output dropped to a record low as a consequence of the deep freeze in Texas that shut production. Gasoline inventories also dropped, falling to 243.5 million barrels. Distillate stockpiles also fell by the most since 2003 to 143 million barrels.

Meanwhile, the expectations OPEC+ producers might decide against increasing output when they meet this week. Russia is also considering rolling over production cuts from March into April rather than raising output. The group had previously been widely expected to ease the production cuts on Thursday. 

Another booster came from US President Joe Biden when he said that the United States would have enough COVID-19 vaccines for every American adult by the end of May. This followed news from Merck & Co that agreed to team up with rival Johnson & Johnson to help Biden accelerate shots. 

Technically, the price is in the throes of making a daily head and shoulders formation on the charts. Rejection from this juncture and downside extension of the latest bearish impulse could fall into the region of the 57/ 58 support structure. In doing so, forming a topping pattern and putting the focus firmly on the downside. This would align with prospects of an overdue correction on the monthly chart, with the 52 areas falling in as a 38.2% Fibonacci correction. 

Support: $58.99 $56.46 $54.06

Resistance: $61.39 $63.93 $66.33

MACROECONOMIC EVENTS