US equities edged higher amid improving investor’s confidence in the economic outlook in 2021. The S&P 500 index climbed 0.67% with financials and industrials stocks led the gain. US 10-year yields held steady after today’s seven-year notes auction.
Evergreen’s ‘Ever Given’ massive container ship blocked the Suez Canal for a third day, forcing other vessels to reroute around Africa. The incident will send ripples in global trade, most likely boosting shipment costs and delay countless arrivals. Oil price also buoyed around the situation, plunged 4.07%.
Federal Reserve said dividend restraints can be removed for US banks that pass the upcoming stress tests with sufficient capital. The restriction started last June when banks were prohibited to raise dividends, the act ensures lenders have enough capacity to sustain economic pain triggered by the COVID-19 pandemic.
During Thursday’s press conference, President Biden expressed he will run again in 2024 with Kamal Harris. The ambitious gentleman also boldly stated “China wouldn’t overtake the US in clout under his watch”, and emphasized technology and medicals are critical in battling with China. Finally, he doubled his vaccination goal to 200 million shots in his first 100 days in office.
Eurodollar dipped 0.32% amid sluggish vaccination campaign. The European Council kicked off a two-day summit today, with the vaccination program being top priority on the list. However, the market seemed to be quite pessimistic on any meaningful outcome from these meetings. Rubbing salt into the wound, ECB Vice President Luis de Guindos noted “Eurozone economy is likely to shrink in the first half of 2021.”
Sterling was surprisingly well-performed among the G-7 space, appreciated 0.35% against the dollar. The rally snapped its fifth losing streak. Given the lack of impetus on Thursday, the upside move could be viewed as a correction rather than a reversal.Safe-haven duos like the Japanese Yen and Swiss Franc were on the back-foot once again, dropped 0.38% and 0.45% against the greenback. These two currencies remained unmotivated as upward bond yield momentum is back in action.
Gold looks to surrender all of its gains from yesterday’s session, currently trading around $1727. The precious metal is confined in a $20 trading range, and the fight between bulls and bears is intensifying, one should expect a breakout soon. The constantly higher bond yields and strong US dollar keep Gold’s demand subdued, whereas concerns on infection resurgence in the Euro Zone eke out the yellow metal.
EURUSD (Daily Chart)
Eurodollar is extending its decline to 1.1778, a soft support level last seen in November. The overstretching downtrend is the last leg of a double-top pattern. Given solid close in the last two days, we suspect the selloff may be more robust than we’ve expected, thus this pair may look to contest 1.163 during next week. As we noted in the previous analysis, this pair will exit the current consolidation phase, and the bears will reclaim the driver seat. It is unsurprising to see a retaining selling bias given the breakout from an ascending trend. We are also seeing a bear revival from the MACD.
Resistance: 1.19, 1.195, 1.2215
Support: 1.1778, 1.163
USDJPY (Daily Chart)
Dollar Yen struggled to find firm direction as the pair zig-zagged between 109.1 and 108.6. Gains from yesterday and today completely wipe out the seller’s effort to bring down the overheated price, the daily RSI figure remains outside of its comfort zone. The dollar greenback continues to gain traction amid recovering bond yield. The 10-year Treasury yield looks to snap a three-consecutive loss, overall expectation for inflation in the US resumes upward. This pair will march toward 109.67, a major resistance not seen since last June. We expect at least some profit takings around this level.
Support: 108, 106.7, 104.9
XAUUSD (Daily Chart)
Gold is still clinging to the descending trendline, along with the mid-line of Bollinger Band. Bidders managed to launch an attack on $1745 during Thursday’s session, but the gain was quickly erased. The fact that we are seeing bounce-offs from the frequently visited $1727 soft support, any decisive upward drift could encourage bulls to pile in. Price may still trap inside a tight trading range as bulls and bears resume the tug-of-war, investors should be prudent to wait for a clear breakout from either side.
Resistance: 1765, 1839, 1872
Support: 1727, 1691, 1680