The Dollar continues to weaken, and that has been a benefit to commodities such as crude oil. The Covid-19 vaccine is benefiting the crude oil because anticipation of a steady increase in general travelling.
The US dollar had a tough week. It fell against all the majors but the Swiss franc and Japanese yen. Like the dollar, they are often used to fund the purchases of higher-yielding or more volatile assets, giving a greater appearance of safe-haven when those other assets go south, which invariably they do. Sterling and the Australian dollar recorded new nearly three-year highs.
The greenback seemed to reverse higher on February 16. There was follow-through the next day, but it proved for naught, and the dollar finished the week near its lows. Higher US yields failed to offer lasting support. The US dollar fell when stocks rose and later when stocks fell. Intermarket correlations are far from stable, especially in the short run, even in the best of times. They seem particularly volatile now.
Looking forward to the week ahead we see US consumer confidence on shaky ground, despite more stimulus coming soon. Rising yields will also potentially have big implications for the markets. Elsewhere, New Zealand’s economy looks like its gaining strength ahead of the RBNZ rate statement, while Airbnb leads large caps reporting next week with its first earnings call as a publicly traded company.
EUR/USD
The momentum indicators are generating contradictory signals. Net-net, the euro is practically flat so far this month, having finished January around $1.2135.
FORECAST: NEUTRAL
Resistance: 1.2175, 1.2200, 1.2250
Support: 1.2100, 1.2050, 1.2000
AUD/USD
Last week, the Aussie rose almost 1.5% against the US dollar last week to bring its appreciation to about 12.5% since the end of last October. The MACD is moving higher, but the Slow Stochastic is looks poised to cross lower. A break below the $0.7700-$0.7725 warns of a false upside break out and raises the likelihood of a test on $0.7600.
FORECAST: LONG
Resistance: 0.7900, 0.7950, 0.8000
Support: 0.7850, 0.7800, 0.7750
GBP/USD
Lase week, Sterling’s advance continued. As we have seen, it is the strongest of the major currencies this year, appreciating about 2.5% against the dollar and around 1.7% against the euro. It gained almost 1.2% last week alone. The MACD continues to trend higher. The Slow Stochastic has been moving broadly sideways at elevated levels in recent days.
FORECAST: NEUTRAL
Resistance: 1.3250, 1.3300, 1.3350
Support: 1.3200, 1.3150, 1.3100
GOLD (XAU/USD)
The yellow metal is still under pressure struggling to get on top of 1800. The trend is expected to continue further down to 1700 this week.
FORECAST: SHORT
Resistance: 1800, 1850, 1900
Support: 1750, 1700, 1650
USD/CAD
The US dollar fell to CAD 1.2600 to test its lowest level since April 2018. After a few days of decline, the recovery in stocks, firm commodity prices, even if oil was a little softer, provided a constructive backdrop for the Canadian dollar.
FORECAST: NEUTAL/RANGE
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
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