The main headline last week was that the global market sentiment tilted heavier into a risk-on phase. Traders experienced growth in risky assets such as indices, cryptos, and riskier commodity currencies such as the Canadian dollar. Many global stock indices rose over the week.
The US dollar had a small drop over the past week, after performing strongly in recent weeks, despite a renewed increase in the 10-year U.S. Treasury yield to well beyond the benchmark 1.5% rate. The pace of the rise in yields over recent weeks has been faster than at any time in the previous 25 years, leading to concern about the re-introduction of inflation as a problem in developed economies. The major event last week affecting US markets was the enactment of a new $1.9 trillion coronavirus relief bill which will involve payments of $1,400 to most adult Americans and inject liquidity into the U.S. economy.
Last week saw monthly input from the European Central Bank and the Bank of Canada, both of which held rates steady. The ECB release was the more notable event as it pledged to increase the short-term pace of its QE bond purchasing program.
Also, last week saw the global number of confirmed new Covid-19 cases rise for the first time in over two months, driven mainly by a resurgence of the virus in Europe. However, the total number of global deaths fell again last week.
Many countries have begun vaccination programs, except some small nations. The fastest progress towards herd immunity has taken place in Israel which has administered 106 shots per 100 of its population, followed by the UAE with 66 shots. Both countries have seen their numbers of new cases fall dramatically over recent weeks.
This week will bring many important economic announcements impacting mostly the FX market, with the US FOMC statement and Retail Sales forecasts due, and in addition the monthly policy input from the Bank of Japan and the Bank of England.
EUR/USD
Last week, the EUR ended the week up by 0.32% to $1.1953.
This week is not heavy on announcements for the EU and is expected that a new spike in Covid-19 cases and new containment measures could test the EUR support early in the week.
Generally, the market looks likely to carry on seeing prices being choppy and in a range.
FORECAST: NEUTRAL
Resistance: 1.1950, 1.2000, 1.2050
Support: 1.1900, 1.1850, 1.1800
USD/CAD
The US Dollar tumbled against the Canadian Dollar during the course of the week. This was due not only to the huge bullish pressure that we have seen in the crude oil markets, but also because of the better-than-expected employment numbers coming out of Ottawa on Friday.
Therefore, we expect that this next week will continue to see the US dollar fall against the Canadian Dollar.
FORECAST: SHORT
Resistance: 1.2500, 1.2550, 1.2600
Support: 1.2450, 1.2400, 1.2350
GBP/USD
The Cable has rallied a bit during the week, but the new cycle and prices has been very noisy. It now looks as if the 1.3750 level underneath is massive in its importance and potential support, so if we were to break down below there it could send this market tumbling.
FORECAST: SHORT
Resistance: 1.3950, 1.4000, 1.4050
Support: 1.3900, 1.3850, 1.3800
AUD/USD
Last week, the Aussie ended the week up by 1.01% to $0.7764. It looks like another quiet week for the Australian Dollar and markets will have to wait until Thursday for February employment figures. With consumption key to the continued economic recovery, labour market conditions will need to continue improving to support growth.
FORECAST: NEUTRAL
Resistance: 0.7800, 0.7850, 0.7900
Support: 0.7750, 0.7700, 0.7850
USD/JPY
The USDJPY signalled a strong third consecutive bullish weekly candlestick which closed at the 6-month high price on Friday near the top of its weekly range. All these bullish signs, with the Japanese yen acting as a generally weak currency in recent weeks.
The pair looks likely to rise further, but may well find it hard, to get any higher once it begins to approach the major psychological round number at 110.00.
FORECAST: LONG
Resistance: 109.50, 110.00, 110.50
Support: 109.00, 108.50, 108.00
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