The options market is bearish on EUR/USD. 

The one-month risk reversal, which measures the spread between prices of calls and puts, is now seen at -0.30 versus -0.04 a week ago. 

The decline from near-zero level indicates a strengthening of demand for the put options or bearish bets, which give the holder the right but not the obligation to sell the underlying asset at a predetermined price on or before a specific date. 

  • GBP/USD drops for the second consecutive day while fading bounces off 1.3650.
  • EU demands UK covid vaccines from AstraZeneca to make up for slack at home.
  • Imperial College London hints virus infection stable or falling slightly off-late.
  • US GDP is less likely to reverse Fed-led losses but surprises can’t be denied.

GBP/USD is currently offered around 1.3660, down 0.10% intraday, during early Thursday. The Cable refreshed the 32-month peak on Wednesday before declining to 1.3659 on broad US dollar strength, led by the ECB and Fed comments. Adding to the quote’s weakness were the latest comments from the European Union (EU) suggesting further tension between the bloc and the UK, this time over the vaccine. Moving on, the US GDP and the risk catalysts are likely to keep the driver’s seat.

With the coronavirus (COVID-19) vaccine shortage at home, the EU is demanding Britain to make-up for the shortfall due to the British drugmaker AstraZeneca. “The EU has said AstraZeneca must take coronavirus vaccines from UK factories to make up a shortfall in supplies to its member states, a demand that could unleash an explosive post-Brexit political fight,” mentioned the Financial Times (FT).

Following the news, UK PM Johnson said, per BBC Political Editor Laura Kuenssberg, that the issues are a matter for our EU friends and companies concerned.

On a positive side, research by the Imperial College London mentioned, per the Financial Times (FT), “There are tentative signs that the lockdown in England is beginning to curb coronavirus transmission, according to a closely watched study, although stubbornly high infection rates will continue to strain the overstretched healthcare system.”

Elsewhere, new that the US Treasury has postponed ban on American investments in companies with an alleged connection to the Chinese military seemed to have favored the risks off-late. The move could also have taken clues from the US Federal Reserve Chairman Jerome Powell’s cautious optimism.

Against this backdrop, S&P 500 Futures lick its wounds while stocks in Asia-Pacific follow Wall Street benchmarks’ heavy losses.

Looking forward, the tension between Brussels and London can keep the GBP/USD depressed ahead of the key US GDP figures, expected 3.9% versus 33.4% prior. As investors eye for a downbeat US growth, any positive surprises won’t be taken lightly. It’s worth mentioning that the covid, vaccine and US stimulus news are important too.

Technical analysis

Strong RSI conditions and successful trading beyond 10-day SMA, currently around 1.3665, favors the GBP/USD buyers to challenge the May 2018 high of 1.3772. Alternatively, the pair’s declines below the 10-day SMA level of 1.3665 need to break a confluence of the short-term ascending support line and 21-day SMA, currently around 1.3640-35, to convince GBP/USD sellers. Following that, the monthly low near 1.3450 should gain the market’s attention.

 

  • GBP/USD drops for the second consecutive day while fading bounces off 1.3650.
  • EU demands UK covid vaccines from AstraZeneca to make up for slack at home.
  • Imperial College London hints virus infection stable or falling slightly off-late.
  • US GDP is less likely to reverse Fed-led losses but surprises can’t be denied.

GBP/USD is currently offered around 1.3660, down 0.10% intraday, during early Thursday. The Cable refreshed the 32-month peak on Wednesday before declining to 1.3659 on broad US dollar strength, led by the ECB and Fed comments. Adding to the quote’s weakness were the latest comments from the European Union (EU) suggesting further tension between the bloc and the UK, this time over the vaccine. Moving on, the US GDP and the risk catalysts are likely to keep the driver’s seat.

With the coronavirus (COVID-19) vaccine shortage at home, the EU is demanding Britain to make-up for the shortfall due to the British drugmaker AstraZeneca. “The EU has said AstraZeneca must take coronavirus vaccines from UK factories to make up a shortfall in supplies to its member states, a demand that could unleash an explosive post-Brexit political fight,” mentioned the Financial Times (FT).

Following the news, UK PM Johnson said, per BBC Political Editor Laura Kuenssberg, that the issues are a matter for our EU friends and companies concerned.

On a positive side, research by the Imperial College London mentioned, per the Financial Times (FT), “There are tentative signs that the lockdown in England is beginning to curb coronavirus transmission, according to a closely watched study, although stubbornly high infection rates will continue to strain the overstretched healthcare system.”

Elsewhere, new that the US Treasury has postponed ban on American investments in companies with an alleged connection to the Chinese military seemed to have favored the risks off-late. The move could also have taken clues from the US Federal Reserve Chairman Jerome Powell’s cautious optimism.

Against this backdrop, S&P 500 Futures lick its wounds while stocks in Asia-Pacific follow Wall Street benchmarks’ heavy losses.

Looking forward, the tension between Brussels and London can keep the GBP/USD depressed ahead of the key US GDP figures, expected 3.9% versus 33.4% prior. As investors eye for a downbeat US growth, any positive surprises won’t be taken lightly. It’s worth mentioning that the covid, vaccine and US stimulus news are important too.

Technical analysis

Strong RSI conditions and successful trading beyond 10-day SMA, currently around 1.3665, favors the GBP/USD buyers to challenge the May 2018 high of 1.3772. Alternatively, the pair’s declines below the 10-day SMA level of 1.3665 need to break a confluence of the short-term ascending support line and 21-day SMA, currently around 1.3640-35, to convince GBP/USD sellers. Following that, the monthly low near 1.3450 should gain the market’s attention.

 

“It would take significant further euro strength for the cost-benefit analysis to shift towards a [an ECB] rate cut,” strategists at ABN Amro said, according to MNI’s Anthony Barton. 

On Wednesday, the European Central Bank (ECB) Governing Council Member Klaas Knot, a renowned hawk, hinted that the central bank could cut interest rates to stem EUR/USD’s rise. 

Further, Bloomberg cited ECB sources as saying that markets are underpricing prospects of an interest rate cut. 

The ECB’s main refinancing operations, marginal lending facility, and deposit facility are 0.00%, 0.25%, and -0.50%, respectively.

“It would take significant further euro strength for the cost-benefit analysis to shift towards a [an ECB] rate cut,” strategists at ABN Amro said, according to MNI’s Anthony Barton. 

On Wednesday, the European Central Bank (ECB) Governing Council Member Klaas Knot, a renowned hawk, hinted that the central bank could cut interest rates to stem EUR/USD’s rise. 

Further, Bloomberg cited ECB sources as saying that markets are underpricing prospects of an interest rate cut. 

The ECB’s main refinancing operations, marginal lending facility, and deposit facility are 0.00%, 0.25%, and -0.50%, respectively.

Gold (XAU/USD) wavers below $1850, consolidating the Fed-led downside, as traders await the US Q4 advance GDP release for a fresh direction.

Gold lost ground once again on Wednesday after the Fed left its key rates unchanged while maintaining the current bond-buying at $120 billion per month. Benign Fed and mounting tensions over the covid surge knocked-of the stocks and boosted the safe-haven demand for the US dollar.

Let’s take a look at the key technical levels for trading gold in the day ahead.

Gold Price Chart: Key resistances and supports

The Technical Confluences Indicator shows that gold is challenging immediate support at $1836, which is the confluence of the previous low one-hour and Fibonacci 23.6% one-day.  

The bears need acceptance below the critical $1831 cushion, where the previous low one-day, Fibonacci 61.8% one-week and pivot point one-day S1.

The next downside target is seen at the Fibonacci 61.8% one-month at $1827. A sharp sell-off below the latter cannot be ruled out, exposing powerful support at $1817, the pivot point one-month S1.

Alternatively, the bulls face a dense cluster of resistance levels around $1842, above which the Fibonacci 61.8% one-day at $1845 guards the upside.

Further up, it is likely to be an uphill task for the XAU bulls until the Fibonacci 38.2% one-month at $1857 is scaled on a sustained basis.

Here is how it looks on the tool

fxsoriginal

About Confluence Detector

The TCI (Technical Confluences Indicator) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.

Gold (XAU/USD) wavers below $1850, consolidating the Fed-led downside, as traders await the US Q4 advance GDP release for a fresh direction.

Gold lost ground once again on Wednesday after the Fed left its key rates unchanged while maintaining the current bond-buying at $120 billion per month. Benign Fed and mounting tensions over the covid surge knocked-of the stocks and boosted the safe-haven demand for the US dollar.

Let’s take a look at the key technical levels for trading gold in the day ahead.

Gold Price Chart: Key resistances and supports

The Technical Confluences Indicator shows that gold is challenging immediate support at $1836, which is the confluence of the previous low one-hour and Fibonacci 23.6% one-day.  

The bears need acceptance below the critical $1831 cushion, where the previous low one-day, Fibonacci 61.8% one-week and pivot point one-day S1.

The next downside target is seen at the Fibonacci 61.8% one-month at $1827. A sharp sell-off below the latter cannot be ruled out, exposing powerful support at $1817, the pivot point one-month S1.

Alternatively, the bulls face a dense cluster of resistance levels around $1842, above which the Fibonacci 61.8% one-day at $1845 guards the upside.

Further up, it is likely to be an uphill task for the XAU bulls until the Fibonacci 38.2% one-month at $1857 is scaled on a sustained basis.

Here is how it looks on the tool

fxsoriginal

About Confluence Detector

The TCI (Technical Confluences Indicator) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.

The People’s Bank of China (PBOC) is sucking out liquidity from the financial system in a bid to rein in leverage. 

The central bank drained a net 150 billion yuan ($23 billion) on Thursday – the largest amount since October – and has withdrawn a total of $23 billion from the system, according to Bloomberg. 

As a result, the spread between China’s 10-year government bond yield and the overnight rate has now narrowed to 16 basis points versus 263 basis points in late December. 

 

A mixed set of news coming in from Australia, with zero local cases reported for the 11th straight day in the most populous state of New South Wales (NSW), prompting the state premier to mull lifting of the border restrictions.

On the other hand, coronavirus vaccinations look like it’s going to get delayed in the OZ nation compared to the Western countries getting vaccinations already.

Reuters reports that Queensland state is considering border reopening with NSW while Victoria state also hinted at relaxing travel with Sydney.

On the covid vaccine front, Pfizer said it expects the first doses to arrive in Australia by the end of February. The American pharma giant Pfizer, however, has not provided any further specifics on the timeline beyond that vagueness. 

Separately, Australia’s Health Official announced that it extends ‘travel bubble’ suspension with New Zealand for further 72 hours until Sunday.

Market reaction

AUD/USD remains under pressure near-monthly lows of 0.7623, stalling a bounce just above the 0.7650 level.

A broadly bid US dollar and virus concerns weigh heavily on the higher-yielding aussie.

The dollar index, which tracks the greenback’s value against major currencies, has carved out an inverse head-and-shoulders pattern on the daily chart. 

Tne neckline resistance is currently seen at 90.92. A close higher would confirm a breakout or bearish-to-bullish trend change, creating room for a rally to at least 92.63 (target as per the measured move method). 

On the downside, the low of the right shoulder – 90.045 – is the level to beat for the sellers. 

At press time, the DXY is trading moderately higher on the day near 90.75. 

Daily chart

Trend: Bullish above 90.92

Technical levels