The past week was gloomy for global stock markets but taking a closer look it looks like it seemed more parallel to the forces driving changing portfolio allocations and a rotation out of growth and into value stocks. The Dow Jones Industrial Average climbed about 1.75 percent over the past 5 trading days and the S&P 500 was up roughly up 0.75 but the technology index Nasdaq 100 fell over 2%.
Central bank official’s commentary last week looked to suggest that higher longer-term rates are not quite yet of a worry. Treasury yields extended gains after Fed Chair Jerome Powell spoke this past week. ECB’s Vice President Luis de Guindos said that the central bank is not in the game of yield curve control. Although, Bank of Japan’s Governor Haruhiko Kuroda expressed the importance to keep long-term rates stably low.
In the EU, member after member of the European Central Bank’s Governing Council was warning last week that the ECB would have to respond to the recent surge in sovereign bond yields around the world as traders reacted to fears of higher inflation when the global economy recovers from the slump caused by the Covid-19 pandemic.
In general, it is a good time to be trading markets right now, as there are some legitimate and strong long-term trends in favour of the U.S. dollar and against some other traditional safe havens such as gold, the Swiss franc and the Japanese yen.
Turning to the economic data, the figures due this coming week are second tier. Both fourth-quarter Eurozone GDP Tuesday and February German inflation Friday are revised numbers, while January industrial production data for Germany Monday and the Eurozone Thursday are largely historic.
EUR/USD
Last week, we saw a strong, relatively large bearish candlestick in this currency pair, closing near the low of its range. This is the lowest weekly close in over 3 months. The price getting established below the 1.1950 area is technically significant for bears.
FORECAST: SHORT
Resistance: 1.1950, 1.2000, 1.2050
Support: 1.1900, 1.1850, 1.1800
USD/CAD
During the previous couple of weeks, the US dollar has bounced significantly from the 1.2500 level, and now we have seen the market attempt to fall again only to turn around and form another hammer. The market is likely to continue going higher, perhaps reaching towards the 1.29 level, possibly even the 1.30 level. If we were to break down below there, the bottom will fall out of this market.
FORECAST: LONG
Resistance: 1.2700, 1.2750, 1.2800
Support: 1.2600, 1.2550, 1.2500
GBP/USD
GBP/USD sustained a second straight losing week, as the pair fell below the 1.39 line. The upcoming week has four releases, including monthly GDP. Due to the strength of the US Dollar, we remain bearish.
FORECAST: SHORT
Resistance: 1.3850, 1.3900, 1.3950
Support: 1.3800, 1.3750, 1.3700
GOLD (XAU/USD)
Yellow metal prices fell again considerably last week going to a low of 1687. This week due to the oversold indicators and the strength of the US Dolla we expect that Gold will fluctuate in a range or bounce back.
FORECAST: NEUTRAL
Resistance: 1700, 1750, 1800
Support: 1650, 1600, 1550
USD/JPY
This major currency pair printed a strongly bullish weekly candlestick which closed at a 6-month high price on Friday near at the top of its weekly range. These are bullish signs, with the Japanese yen also acting as a generally weak currency in recent weeks. This Forex currency pair looks somewhat likely to rise further but may well struggle to get any higher once it begins to approach the major psychological round number at 110.00.
FORECAST: LONG
Resistance: 108.50, 109.00, 109.50
Support: 108.00, 107.50, 107.00
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