FBS : Daily Market Analysis

GBP/USD still enjoys Brexit deal but for how long?

Ichimoku Kinko Hyo

GBP/JPY: The pair is trading above the cloud. An upward pressure would lead the pair to exit further the cloud, confirming a bullish outlook.

Fibonacci Levels

XAU/USD: Gold is trading above the 23.6% retracement area. Bullish trend remains weak.

US Market View
US stocks are seen opening higher Tuesday, rebounding from the previous session’s losses with investors looking for additional fiscal stimulus amid continued political turmoil. The United States lost more than 22 000 lives to Covid-19 last week, a second straight weekly record. The overall death toll is now 375 000. The current surge, and the associated economic damage, prompted President-elect Joe Biden to promise further economic stimulus “in the trillions of dollars” late last week. More details are expected to follow in a formal announcement on Thursday, something that is supporting markets at their current elevated level.

USA Key Point

• Gold gains 1% on the day as buyers keep a defense of key support level
• German chancellor Merkel expects lockdown to last until early April
• The GBP is the strongest and the USD is the weakest
• European equities pare gains as sentiment stays rather mixed on the session

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Donald Trump has literally a week before his official term ends in the US Capitol. Nevertheless, threatened by a possibility of impeachment, his seat is shaking. So does the USD.

Ichimoku Kinko Hyo
CAD/JPY: The pair is trading below the cloud. A downward pressure would lead the pair to exit further the cloud, confirming a bearish outlook.

Fibonacci Levels
XAG/USD: Silver breaks down many support levels and stands just above 23.6% retracement area.

EU Market View
Asian equity markets began the week cautiously after Friday’s losses on Wall St. Mixed Chinese GDP added to the tentative mood for stocks. European stock markets are seen opening marginally lower Monday, starting the week on a downbeat note given Covid-related concerns, and not reassured by healthy-looking Chinese economic growth. China reported Monday that its economy grew 2.3% last year, as its gross domestic product rose by 6.5% in the fourth quarter from a year ago. Today's calendar sees a lack of tier 1 releases. US markets are closed for Martin Luther King Day.

EU Key Point

• UK vaccine deployment minister: Everyone will be offered a vaccine by September
• Japan's Nishimura says economy to return to pre-pandemic levels this coming fiscal year
• Germany reports 7,141 new coronavirus cases in latest update today

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Market sentiment is not very distinctive. On the one hand, there were good GDP growth figures from China. On the other hand, coronavirus cases are still spreading. In this environment, technical analysis provides us with trade ideas.

Fundamentals

US unemployment claims rose more than was expected. Philly Fed Manufacturing Index turned out worse than the forecasts as well. Analysts believe the dire economic data will press US officials to unveil the stimulus package faster. “We are in an environment now where bad news is good news because it means more stimulus,” said ANZ Research. Once the stimulus package is delivered, the riskier assets will surge. Today the US dollar regains yesterday’s losses.

The Bank of Japan held a meeting early in the morning. The central bank kept its monetary policy unchanged and extended the Covid-19 aid program by six months. The Japanese yen dropped, pushing USD/JPY higher.

The Bank of England made a report yesterday, where it maintained the status quo. The reaction of the pound was modest. As for the Brexit front, EU-UK sides keep negotiating. Market participants await the soon breakthrough in talks as one of the sticking points has been resolved. GBP/USD dropped at the start of the day due to the strong USD.

What happened?

EUR/USD has started the week on the negative footing as

• the market sentiment turned to risk-off amid vaccine delays and rising cases in Eurozone,
• markets await the ECB meeting on Thursday, which is unsatisfied with too high EUR,
• the EUR has a historical tendency to drop after US inaugurations,
• and bearish technical signals.

Forecasts

Most analysts foresee that EUR/USD will inevitably dip to 1.2000 over the coming days. However, it should be just a short corrective pullback ahead the pair continues further rallying upwards.

ING: “Wrapping up, ongoing Italian political uncertainty and a steadier dollar could briefly see EUR/$ trade 1.1980”.

Nordea Markets: “More often than not (9 out of 12 times), EUR/USD drops in the aftermath of a presidential inauguration. We are less gullible buyers of risk for now, but would consider using levels around 1.1950 in EUR/USD to go long again”.

Technical outlook

• The divergence between RSI and price may warn of the market reversal. When the new high of the price is not confirmed by the new high in the RSI, it’s a bearish divergence, which is a negative signal.
• The bearish divergence will be also confirmed if we look at the MACD indicator. Elsewhere, MACD has approached the zero line. Once it crosses it, it will be e bearish signal as well.
• The key support area is 1.1950-1.2000. If the pair drops to this level, it shouldn’t fall further. The reverse to the upside will be expected.

FBS Analytics

Ichimoku Kinko Hyo
USD/JPY: The pair is trading above the cloud. A upward buying pressure would lead the pair to accelerate further above the cloud, confirming a bullish outlook.

Fibonacci Levels
XAU/USD: Silver curently is gaining some momentum with buyers to keep price break above 23.6% retracement area. .

US Market View

Global stocks were mostly lower on Monday, following the weakness on Wall Street on Friday that stemmed from the weaker-than-expected retail sales report for December. President-elect Joe Biden will issue a flurry of executive orders in his first days as president with the explicit aim of reversing as much as possible of his predecessor’s agenda. Crude oil prices fell but industrial metals rose as China’s GDP data painted a picture of robust near-term demand.

USA Key Point

• EU reportedly to seek extension to ratify Brexit trade deal
• Gold remains in a precarious spot to start the new week
• Pound retreats as EUR/GBP rebounds from key technical support level

Ichimoku Kinko Hyo view on EURUSD 30min chart update.

For now level 1.21440 (senkou Span B) becomes the near term resistance. If EURUSD open and trade above this level we can expect more buying power for uptrend.

On March 21st, the "Foggy Albion" is scheduled to publish a lot of statistics. Investors should pay attention to the industrial Production report for January, which may lose 3.3% y/y. Another indicator, the Construction Output, is expected to plummeted by 3.9% over the same period of time.

The weaker the numbers, the more obvious that the second quarter mayb not demonstrate a quick economic recovery. The recovery is exactly what financial marhets were hoping for and that was the reason why GBP had been rising recently despite rather mixed statistics. The more neutral the numbers, the better for the national currency. However, chances are high that the statistics may turn out to be worse than expected, thus pushing GBPUSD towards 1.38000.

Gold jumped after Fed. What's next?

What happened?

Gold prices rose to an over two-week high on Wednesday after the Federal Reserve’s decision. The Fed pledged to keep near-zero rates at least through 2023. Besides, the bank left asset purchases unchanged at $120 billion a month. The decision was made despite inflation worries in financial markets. The Fed raised forecasts for economic growth and the labor market: GDP from 4.2% to 6.5% and unemployment to 4.5% this year.

Why?

Gold has been falling recently because of the rising US Treasury yields. When yields increase, investors tend to favor the USD with higher returns than the non-yielding gold. After the Fed’s meeting, 10-year yields moved higher but were well below intraday highs. It’s known that the higher the inflation, the higher the yields will rise. When the Fed said the inflation rise is temporary, gold bulls priced in. Another explanation is that the Fed’s message triggered the risk-on response, which pressed down the USD. And as we all know, the weakened USD drives gold up.

What’s next?

According to HDFC Securities, gold will move sideways between support $1730 and resistance at $1760. Reuters said that "if the dollar continues its weakening track and yields continue to be calmed by Fed language, then this can set gold up for a test of $1800".

Technical analysis
Long term

The long-term trend is bearish: XAU/USD has been trading in a descending channel since mid-summer of the last year. However, gold has been rising for the last two weeks. If it manages to break above the 23.6% Fibonacci retracement level of $1770, the doors will be open to the 38.2% Fibo level of $1830. On the flip side, the move below the March low of $1700 will drive it to $1675.

Short term

If we look at the 4-hour chart, we’ll notice the price is moving in ascending channel. Thus, it shouldn’t go lower the intersection of the 50-period moving average and the lower trend line of $1722. Thus, we might expect the pullback up soon. Resistance levels are 1755 and 1770.


USD/TRY dropped, but reverse is close

What happened?

The Central Bank of the Republic of Turkey (CBRT) raised its cash rate, surprising investors. It was a necessary action for Turkey to meet the bank's target of lowering inflation to 9.4% by year-end to approach the longer-term target of 5% in 2023.

"It is crucial that the lira offers a sufficiently attractive carry trade to appreciate in the coming months, or at the bare minimum to be relatively stable against the dollar," says Rabobank.

Market reaction

USD/TRY plunged as the Turkish lira rose against the US dollar after the Turkish bank’s decision. In fact, the TRY was one of the few currencies, that have managed to strengthen against the greenback on an intraday basis.

Technical analysis

USD/TRY dropped to the 200-period moving average at 7.2400, which also lies on the lower line of Bollinger Bands. The RSI indicator went below the 30.00 level, indicating the pair is oversold. Thus, the pullback should happen soon. The move above yesterday’s high of 7.3500 will drive the pair to the 100-period moving average of 7.4500. Just in case, support levels are 7.2400 and 7.1400.


Nike dropped on poor sales

What happened?

Nike shares are falling on Friday after the company reported better-than-expected earnings: a profit of 90 cents a share vs the projected 76 cents. However, the sales came out much worse than anticipated. Sales were $10.4 billion, which is below analysts’ estimates of $11 billion. In Europe, revenues dropped as many stores remain closed due to the Covid-19 pandemic.

Supply chain problems

Besides, there are some serious problems with the supply chain. A huge part of Nike’s sneakers just weren’t delivered to North America, its biggest market. As a result, in North America, revenue dropped 10% year over year. For comparison, in China, where the virus has been taken under control a long time ago, sales rose by 51%!

E-commerce boom

By the way, while Covid-19 was devastating for street shops, online shopping has hugely improved. E-commerce has helped Nike to increase online orders, which sales climbed 59% last quarter.

What does it mean?

The whole effect was negative, so Nike can continue dipping today. It may reach the 50-day moving average of $140.00, which it will struggle to cross on the first try. If it crosses it, the way to the low of March 9 at $135.00 will be open. We shouldn’t forget that after the fall always goes the rise. So, when the price bounces off the dips and crosses the resistance zone of $145.00-147.00, the way up to the key psychological mark of $150.00 will be open. The good news for FBS traders is that they can make both buy and sell trades by using MetaTrader 5 apps.

What do you need to know on Friday?

• Disney has published mixed financial results: earnings were well above the forecasts, but revenue was slightly worse. Besides, growth in streaming subscribers was poor.
• Alibaba has revealed worse-than-expected earnings results yesterday. As a result, the stock price dropped to $204.00, the low unseen for almost a year.
• US jobless claims came out slightly less than forecast, which is good for the USA.
• Bitcoin has reversed up on Friday after the enormous drop yesterday, triggered by Musk’s tweet.
• Coinbase dropped by 6.5% in pre-hours trading today, after reporting that revenue and earnings came out slightly worse than expected.

Technical tips

EUR/USD has bounced off the 100-day moving average of 1.2050 and started edging higher. It may rise to the upper trend line of 1.2175, which the pair should fail to cross on the first try. On the flip side, if it drops below the 1.2050 support, it may fall to the low of May 5 at 1.2000.




Oil is trying to recover from yesterday’s losses. XBR/USD (UK Brent oil) has bounced off the lower trend line several times already, that’s why we would expect it to reverse from this lower trend line. On the way up, the oil will meet resistance levels at the 50-period moving average of $68.30 and the psychological mark of $70.00. However, if it drops below the 200-period moving average of $65.60, it may fall to late-April lows.




Gold has reversed up from the 50-period moving average of $1815. The way up is clear to the recent highs of $1840, but this level lies at the 50-week moving average (to see ait switch to the weekly chart). Thus, gold may struggle to cross it. Support levels are $1815 and $1800.