The euro gained on improved risk sentiment, as well as corporate and options demand after several billion euros in higher struck options expired

20 January 2021, 03:36

Market Focus

U.S. stocks rose, led by gains in tech shares and small caps, with Wall Street parsing the latest earnings ahead of a flood of reports this week.

The S&P 500 Index rebounded from Friday’s selloff after a three-day weekend that brought little through fresh macro news. Ten-year Treasury yields climbed back toward 1.1% and the dollar weakened. Crude oil and emerging markets also advanced. Goldman Sachs Group Inc. turned lower even after reporting that profit more than doubled. Bank of America Corp. shares edged higher after its results. General Motors Co. rose to a record after Microsoft Corp. invested in its self-driving car startup. Netflix Inc. reports results after markets close.

Janet Yellen encountered early Republican resistance to President-elect Joe Biden’s $1.9 trillion Covid-19 relief plan in her confirmation hearing to become Treasury secretary. Donald Trump is in the final hours of his term, with Biden to be sworn in at noon Wednesday in Washington.

Hong Kong Stocks at 20-Month High as Record China Cash Floods In. The market moves on Tuesday to show that investors are coming back to the reflation trade, betting that the incoming U.S. administration will use its legislative firepower to propel economic growth. Biden’s stimulus package includes measures like a minimum-wage hike and substantial expansion in family and medical leave — programs that have already triggered Republican opposition.

Market Wrap

Main Pairs Movement

The greenback held modest losses for a second session amid light turnover after U.S. Treasury Secretary nominee Janet Yellen noted a preference toward a market-driven approach to American currency policy. The loonie gained ahead of the Bank of Canada’s monetary policy meeting on Wednesday.

The euro gained on improved risk sentiment, as well as corporate and options demand after several billion euros in higher struck options expired. The pound ticked higher after Bank of England Chief Economist Andrew Haldane said the bounce back from Covid may be sharper than the financial crisis. The Canadian dollar gained for the first time in three days.

USD/JPY is +0.2% after climbing as much as 0.4% to 104.09. The yen fell amid cross demand against the euro and Australian dollar, according to multiple Asia-based FX traders.

Technical Analysis

GBPUSD (4 Hour Chart)

Sterling is edging above 1.36 as of market eagerly Treasury Secretary nominee Janet Yellen’s testimony. The U.K. parliament is set to process the Brexit deal as Britain ramps up its vaccination campaign.

For the technical aspect, the MACD indicator is retreating from the negative mire and spiraling the momentum at 0 levels. RSI gives another strong signal, the indicator continues pick-up from neutral level to 55 as of writing, suggesting a positive phenomenon. As price action, sterling has been through a “v shape pattern” reverse from the last lowest level at 1.3618. For short-term, combing evidence that probably would give it an upward momentum. However, in the bigger picture, the consolidation range is still trapping sterling price momentum in nearly 2 months. Therefore, we expect 1.37 level remain a powerful resistance at top of consolidation, before that, barricade be an eye on 1.3678. In contrast, the first pivot of support is the shoulder of the “v shape pattern” at 1.3618 and 1.3541 is following behind.

Resistance: 1.3678, 1.37

Support: 1.3618, 1.354, 1.3448

USDJPY (4 Hour Chart)

The yen retreated consecutive from 104 and fell to 103.84, the lowest level since the Asian session. It is moving with a bearish bias, still positive for the day but off highs. A decline in U.S. yields and a correction in shares prices weakened the pair.

From a technical perspective, the RSI indicator remained above 50 then hold at 53 girds, suggesting a bullish trend further. On the other hand, the Moving Average indicator gives a divergently signal for further movement. Short-term indicator ongoing flat momentum, but long-term indicator holds ascending trend that death cross at the current stage. Therefore, we expect the yen would still lack price momentum as mixed guidance from indicators. So, according to price action, the first resistance would be 104 level, piling by price densely area, the next strong resistance would be 104.25. On the slid way, the first resistance would be 103.65, confirmative strong price densely area.

Resistance: 104, 104.25

Support: 103.65, 103.54

XAUUSD (4 Hour Chart)

Gold tepid around 1838 as markets looking forward to Biden inauguration and “American Rescue Plan” ahead. In other words, the market is lack of momentum trigger before releasing any practical contents of the rescue plan. On the other hand, 10 years Treasuries yield move slightly then close at 1.09% without any heralded sign.

From a technical perspective, short and long-term SMAVG indicators still tamp down, but the short one is getting flat at the moment which gives a sputter market guideline. On the RSI side, indicator beneath 50 thresholds then closes around 47, suggesting a bearish sign. Therefore, combing contrast suggestions from the aforementioned technical indicator, we expect gold would haggle at the current stage. On the slid way, the 1823 level be strong support from the longstanding picture.

Resistance: 1844.27, 1856, 1863.44

Support: 1823.4, 1815.08, 1804.15