• Gold prices mark corrective pullback from June 2020 lows tested on Friday.
  • US FDA’s approval to J&J’s one-shot vaccine, chatters over UK/US fiscal relief measures favor short-term buyers.
  • S&P 500 Futures snap two-day downtrend with 0.50% intraday gains, US 10-year Treasury yields halt further downside.
  • Month-start PMIs, stimulus news and yields are the key catalysts.

Gold consolidates Friday’s heavy losses, the biggest in a month, while picking up bids near $1,735-40 during the initial Asian session on Monday. The yellow metal dropped to a fresh low since June 2020 as the US dollar regained its strength. It should, however, be noted that the weekend developments gave fresh life to the risk barometers and seem to favor the bullion’s latest moves.

Are risk-on moves suggesting march in March?

The US Food and Drug Administration (FDA) approved Johnson and Johnson’s one-shot coronavirus (COVID-19) vaccines for emergency use during the weekend. The vaccine news gains extra attention as it also has an above 90% effective rate and the US is up for distributing 3.9 million doses in the week.

Also on the risk-positive side are the news suggesting UK Chancellor Rishi Sunak’s readiness to help the British businesses with nearly five billion pounds worth of another stimulus in this week’s budget. During the last week, the US policymakers pushed President Joe Biden’s $1.9 trillion covid stimulus through the House to the Senate.

On the contrary, downbeat PMIs from China and New Zealand’s fresh lockdown are minor negatives that couldn’t derail investor sentiment in the early hours of trading.

Against this backdrop, S&P 500 Futures gain 0.57% while the US 10-year Treasury yields manage to avoid further downside after Friday’s U-turn from the one-year top. It’s worth mentioning that the US dollar index (DXY) marked the heaviest run-up since May 2020 the previous day and weighed on the greenback.

Looking forward, gold traders will keep their eyes on the risk factors like stimulus and vaccines, coupled with China’s Caixin Manufacturing PMI, for fresh direction. Meanwhile, the US dollar moves and the Treasury yields are crucial to observe.

Technical analysis

Unless bouncing back beyond the November 2020 lows near $1,765, gold prices are likely declining towards a descending trend line support from August 2020, currently around $1,683.

 

  • Silver is in the hands of the bulls for the open.
  • Bulls can target the neckline of the daily M-formation’s neckline. 

The daily chart has formed a bullish M-formation from which bulls can exploit from an hourly vantage point for bullish conditions and an optimal entry. 

Daily chart

From an hourly perspective, the immediate resistance would be expected to come under pressure, bringing the price in line with the 21-moving average bringing MACd into positive territory and opening the prospects of a continuation to the 61.8% Fibonacci retracement of the bearish impulse.

Hourly chart

  • GBP/USD wavers around one-week low amid bearish MACD.
  • UK Chancellor Sunak is up for five billion pound help to British businesses.
  • Immediate EMA, multiple support lines test two-day downtrend.

GBP/USD sellers catch a breather around 1.3935-40 amid the initial Asian session trading on Monday. In doing so, the cable pair snaps a two-day downside while cheering the news suggesting British Chancellor Rishi Sunak’s readiness to offer five billion worth of extra stimulus to the UK business during this week’s annual budget.

It should, however, be noted that the MACD prints the heaviest bearish sign in a month and hence challenges to the immediate support, namely the 21-day EMA level of 1.3900, can’t be ruled out. Though, any further weakness will be questioned by an upward sloping trend line from December, respectively around 1.3860 and 1.3775.

Also acting as a downside filter is the 50-day EMA level of 1.3740 that holds the key to the GBP/USD slump towards February’s low near 1.3565.

Meanwhile, a corrective pullback from the short-term key EMA can eye to regain the 1.4000 threshold whereas 1.4085-90 comprising late-February levels, could challenge the buyers afterward.

In a case where GBP/USD manages to cross 1.4090, it needs to pierce the 1.4100 round-figure before targeting the previous month’s peak surrounding 1.4245.

Overall, GBP/USD has multiple downside barriers and the stimulus chatters that keep buyers hopeful.

GBP/USD daily chart

Trend: Further recovery expected

 

  • NZD/USD bears catch a breather around one-week low after the heaviest drop in a year.
  • Auckland moves back to Alert Level 3, with the rest of New Zealand to Level 2, amid covid resurgence.
  • RBNZ’s clarification on remit, intact support to status-quo couldn’t placate bulls.
  • China’s Caixin Manufacturing PMI, New Zealand COVID-19 numbers and US dollar moves should be watched carefully.

NZD/USD wavers around 0.7235-40 after the week-start uptick during Monday’s Asian session. The kiwi pair dropped the biggest since March 2020 on Friday as RBNZ’s Orr couldn’t placate bears while the US dollar strength exerted additional downside on the quote. Even so, the recent vaccine news from the US seems to dim the impact of Auckland’s fresh lockdown and a nine-month low of China’s NBS Manufacturing PMI, unveiled during the weekend.

Vaccine optimism battles bears…

RBNZ Governor Adrian Orr struggled to defy hopes of any monetary policy tightening on Friday after the Kiwi central bank was pushed to care for housing and government policies the previous day. The RBNZ Chief Orr clarified the central bank’s readiness to keep the policies unchanged for a longer period.

Even so, the markets seemed unconvinced as the US flashed multiple upbeat figures backing reflation fears and propelled the US dollar index to mark the biggest jump in over six months. Also favoring the greenback could be its safe-haven allure and hopes of a $1.9 trillion covid stimulus to be passed by March 14.

It should, however, be noted that the US Food and Drug Administration’s (FDA) approval of Johnson and Johnson’s one-shot coronavirus (COVID-19) vaccines for emergency use offered a ray of hope of the markets off-late. The reason could be traced from New Zealand’s fresh lockdown announcement during the weekend. As per the latest release, Auckland is back in Alert Level 3 for the next seven days from Sunday whereas the rest of New Zealand will also witness Level 2 activity restrictions. Also negative for the NZD/USD prices, which was also ignored, could be China’s NBS Manufacturing PMI for February that dropped to the lowest in nine months to 50.6 versus 51.1 forecast and 51.3 prior.

Looking forward, the Reserve Bank of Australia’s (RBA) surprise bond purchase and virus conditions at home can weigh on the quote while waiting for China’s Caixin Manufacturing PMI, expected to reprint 51.5 level. However, the US dollar moves and Treasury yields should be watched closely for fresh impulse.

Technical analysis

While a downside break below 21-day EMA, at 0.7255 now, directs NZD/USD to the south, a confluence of 50-day EMA and an ascending trend line from December 21 near 0.7190 will be a tough nut to break for the bears.

 

The Johnson & Johnson one-shot vaccine has been approved by the US FDA this weekend which now makes it the third approved vaccine for the US, risk-on news for the open this week when vaccinations will begin.

And for the first time since early November, fewer than 50,000 patients are hospitalized with Covid-19. Also, there’s been a decrease in new cases and deaths since the abysmal January surge.

Market implications

A lifeline will have been thrown to Us equities on the developments, albeit much of which is already priced in as the markets presume the best.

The week ahead will also be focussed on progress in the relief package and US economic data, including Nonfar, Payrolls. 

 

 

  • AUD/USD wavers around three-week low flashed on Friday.
  • RBA’s surprise bond purchase, upbeat US data portrayed heaviest decline since March 18, 2020.
  • China’s NBS Manufacturing PMI eased in February, Caixin PMI awaited.
  • Treasury yields, US stimulus headlines and month-start activity numbers will be the key.

AUD/USD gyrates near a three-week low, currently around 0.7710, as Asian traders prepare for the month-start moves during Monday. The aussie pair portrayed the heaviest daily slump since March 2020 on Friday as the RBA’s unscheduled bond purchases joined the US dollar’s notable strength on upbeat data and stimulus news.

In doing so, the AUD/USD prices pay a little to the recent data releases at home and abroad. Australia’s February month AiG Performance of Mfg Index rose from 55.3 to 58.8 whereas China’s NBS Manufacturing PMI for the said month, published Sunday, eased below 51.3 prior to 50.6, the lowest in nine months.

Bears keep the reins on RBA action, greenback rally…

Although the early Friday RBA bond purchases initially had a sober reaction, the movement joined the US dollar strength afterwards to drag the AUD/USD to a three-week low. As the Aussie central bank was the first to surprise markets, global traders fear major central banks to copy the moves amid reflation fears.

Also weighing on the quote is the US dollar strength. The greenback gauge, US dollar index (DXY), marked the strongest run-up since May 2020 after the better-than-expected data at home propelled fears of the further run-up in inflation. On the same line was the passage of US President Joe Biden’s $1.9 trillion covid relief stimulus by the House. The much-awaited relief bill is likely to pass through the Senate by March 14 and could offer extra strength to the greenback.

In addition to the data, central bank moves and stimulus update, the AUD/USD pair also reacted to the market’s fears and the slump in the US Treasury yields and risk-off mood.

Against this backdrop, the Wall Street benchmarks offered mixed closing by the end of February.

Looking forward, China’s Caixin Manufacturing PMI and Australia’s TD Securities Inflation for February will decorate the calendar in Asia. Though, major attention will be given to the stimulus news and treasury yields.

Technical analysis

Despite breaking a four-month-old support line, AUD/USD is yet to validate further downside by clearing 50-day EMA support near 0.7690. During the corrective pullback, the support-turned-resistance line near 0.7720 and 21-day EMA level of 0.7775 should be watched closely.

 

 

The watchlist for the week ahead consists of a couple of compelling day trading opportunities for the open as well as plenty of action down the line following the higher volatility and sharp moves of last week. 

We have GBP/JPY, and GBP/CHF (correlated pairs) for which are priorities of the list for the open, while swing trading opportunities are located in EUR/USD, AUD/USD, CHF/JPY, GBP/CHF, GBP/AUD and EUR/AUD.

GBP/JPY hourly chart

The price made a higher high only to pull back to test old resistance turned support. Bulls could well re-engage at this juncture. 

A -272% Fibonacci measurement of correction offers 140.40 as an upside target.

15-min chart

Conditions on the 15-min chart are mixed with MACD in positive territory while the price is below the 21 moving average and resistance. If price moves higher in the open and breaks resistance, there are high probabilities of a higher-high for the sessions ahead, as there are for GBP/CHF:

GBP/CHF hourly chart

15-min chart

EUR/USD daily chart

The M-formation is a bullish pattern where the price would be expected to revert back to test the neckline and prior support, or, to at least the 38.2% Fibonacci level. 

EUR/USD hourly chart

There is some work to do yet while the price is below the 21-moving average. However, a period of consolidation and a gradual grind to the upside would be expected to draw in the MA and offer more favourably bullish technical conditions. 

We have a similar situation in AUD/USD:

CHF/JPY daily chart

The price has been rejected at the neckline of the M-formation and would be now expected to deteriorate in a fresh daily impulse to the downside. 

4-hour chart

In clearing support, the price would be expected to restest the structure and the commitments of the bears at the 21-moving average. 

EUR/AUD, daily chart 

With the price meeting resistance, there is a high probability that the bears will retest the bull’s commitments at old resistance which has a confluence with the 62% Fibonacci retracement. 

The hourly chart can be monitored for bearish technical conditions 

AUD/CAD daily chart

15-min chart

The price action will determine bullish conditions on a break of the current resistance from which bulls can begin to look for a bullish structure to form for an optimal entry point to target old support and the neckline of the M-formation. 

The reverse can be said of GBP/AUD:

GBP/AUD daily chart

GBP/AUD hourly chart