USD: Rising UST yields and diverging USD production

 The recent FX market behaviour mirrored the first step of the 2013 taper tantrum when low yielding currencies remained reasonably supported vs. the USD, while the downturn was concentrated in the emerging FX high yielding segment. Although stock markets have recently been down, this has been relatively moderate so far, with the increase in commodity prices underscoring the economic growth-led nature of rising bond yields rather than any imminent investor worries about the punch bowl being taken away by the Fed. We expect Fed Chair J. Powell to strike a balanced message on the latter between expressing confidence in the recovery and keeping tapering speculation muted. This should keep the USD in check and help cyclical FX on the upside. USD will only witness across-the-board intensity when the surge in US yields becomes more disorderly and spills violently into risk assets.
#XAUUSD #ANALYSIS
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Check out the news of the past 24 hours- 23rd February

  1️⃣ UK announced plans to reopen the economy

 UK Prime Minister Boris Johnson will reveal his plan to get rid of the blockade measures, reopening the UK economy.

 - He is expected to speak on that issue at the Parliament of this country at about 15:30 GMT, before going to Downing Street for an official press conference in the evening.

 - According to leaks from British media revealed that he would loosen the rules for meeting friends and family to compensate for the prolonged blockade affecting economic activities.

 - The plan is supposed to consist of four separate relaxation periods, with a deadline of several weeks between each phase.  According to The Guardian, the roadmap will be:

 - Loosen rules on March 8 for meeting two people in outdoor cafes;

 - Outdoor sports at schools and clubs will be allowed to resume when school is open;

 - Outdoor meeting between 6 people or two families will be allowed from Easter;

 - Sports activities such as tennis and soccer will be allowed from the end of March;

 2️⃣ The EU aims to vaccinate 70% of its adult population by summer

 - EU Economy Minister Paolo Gentiloni said the target to vaccinate 70% of the adult population in the summer is ambitious but achievable, he also commented on some of the economic stimulus measures that  Withdrawing the measures to support the economy too soon will be more dangerous than the delay.

 - However, it should be noted that this word "too early" is quite vague because the disbursement of the EU Recovery Fund will only take place and in the middle of this year - more than a year after the pandemic occurs.

 3️⃣ Notable facts and economic data today

 - tonight, Fed Chairman Powell attended the Senate Banking Committee hearing and delivered testimony on the semi-annual monetary policy report.  Investors should pay attention to the content of Powell's testimony.

23rd Feb

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Comment on Gold on February 23, 2021

‼ ️ At the end of yesterday's session, the world gold price had a day of increase when it bounced up from 1780 to 1812 ($ 32) closed the daily candle with a fairly strong increase at 1810. With the closing of the candle  On Gold's day with quite a strong boost like this, in my opinion, the ability to increase gold will continue today.

 - To get the next upside force, in my opinion, Gold will have a slight downside correction around, Here we can establish a short sell and the expectation zone of the correction.  This correction would be around 1795-1800 in my opinion.  This is also the nearest support zone pushing up the price of Gold during the day, here we will wait to establish a buy position with the precious metal Gold today.

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USD: Wrestling with the bond bear market

USD: Wrestling with the bond bear market

 Right now, the US bond market is the epicenter of global financial markets, and bond investors are eagerly awaiting Fed Chair Powell's semi-annual monetary policy testimony on Tuesday. His challenge would be to show confidence, but not too much confidence, in the recovery, so that the slide in the bond market turns into a crash. The Fed usually finds the right terms on these occasions, most likely downplaying the upcoming inflation increase to 2Q, so that the fall in the bond market will possibly remain orderly. In the week ahead, US data should be a small upward revision to the 4Q20 GDP figure and then personal income numbers on Friday, January. This is anticipated to hop on the back of stimulus cheques, but by now it should be priced in. We can also see the favored inflation indicator of the Fed, the core PCE deflator, predicted to be found in January around 1.4/1.5 percent YoY. Some progress on the US$1.9trn fiscal stimulus bill can also be made in the coming week, where a vote could go to the House floor on Friday. All in all, this indicates a tough week for bonds and probably some additional dollar help.

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Comment on Gold on February 22

 📕 Comment on Gold on February 22, 2021:

At the end of last trading week, the world gold price had a strong decrease week from 1826 to 1760 ($ 66) but the price has yet to break the important support at 1760, so in my opinion.  With the price zone of 1760 not being broken, the close of the weekly candle is still at 1783, equal to the last week of November 2020, the possibility that Gold will have a rally in early session this week.

 - Switching to a shorter time frame at H4, we can see that the nearest resistance zone for Gold is 1786-1793.  Around this price range Gold is still under bearish pressure and I expect Gold to drop to the test around the intraday support at 1775. Here I will establish a buy position with the precious metal gold and the nearest target will be.  below 1793, the further expectation is around the threshold of 1800. There will be liquidity orders waiting for the next trend of precious metals Gold.

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Checkout the past 24 hours news- Money life research

  1️⃣ Yesterday's main news

 - The Federal Reserve issues money policy reports for the first 2 quarters of the year.

 - Williams called rising US yields a positive sign.

 - The United States officially returned to the Paris Agreement.

 - Biden approved Texas as a "state of great disaster".

 - G7 is committed to continuing to provide fiscal stimulus.

 - Pfizer vaccine does not need refrigeration.

 2️⃣ Notable economic events and data this week

 - This week, Fed Chairman Powell will turn to two hearings in the Senate and the House of Representatives to deliver testimony on the next year's monetary policy report.  Several senior Fed officials, including Fed Vice Chairman Clarida, will also speak.  And European Central Bank President Lagarde will also deliver a speech.

 - The US House of Representatives is scheduled to vote on President Biden's $ 1.9 trillion stimulus plan on Feb. 26. If it can be passed, it will be submitted to the Senate for a vote.  The stimulus may be reduced to a certain extent, but it is expected that it will eventually be adopted.

 - On February 26-27, the finance ministers and central bank governors of the Group of 20 Countries (G20) will hold a video conference, expected to discuss the new pandemic,  possible global economic and collaborative methods.

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Overview on Gold by Money Life Research

📕 Comment on Gold on February 19, 2021:

 

 ‼ ️In yesterday's session, Gold price had a rally to 1789 in Asia session but then the uptrend was not maintained and then turned down again to close the day again with a bearish candle.  is the 6th consecutive day the world gold price has declined and in my opinion, with this weak recovery, it is very likely that the 176x price range will be broken in the near future.

 - Yesterday, after buying up to 1789, we were quite successful in selling back down from this price zone and the current price of Gold is still in strong support zone around 1765. Here we should wait for the turn.  price action.  If the gold price has a rebound here, we will wait to sell down around 1780. The safe target will remain above the strong support zone of 1760.

 - And if the price of Gold does not recover to the 1780 price range but goes down, the next destination of Gold will be around 175x.  Regardless of the plan, in general we will wait to sell down with the precious metal Gold in good resistance areas as outlined above.

        

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USD: This week, Wednesday will be the cornerstone for the dollar

Looking around global asset markets, it seems that trust in the global recovery is increasing. Commodity prices are starting to advance strongly and Brent is trading close to $64/bl. Equities are also doing well, with some Asian stock indices now up more than 10% year-to-date and outperforming the Nasdaq. And the steepening of the yield curve continues as investors return the inflation premium to the long end of the market, while the short end remains anchored. The opinion that the 2020 contraction was not as deep as feared was also backed by 4Q GDP from many parts of Asia overnight. Then the story seems to be moving on to the question of how nice things have to get before central banks eliminate the cheap liquidity punchbowl? On Wednesday, when the US publishes January retail sales, this issue will be in focus and we will also get to see the FOMC minutes for January. Until the event risk on Wednesday, the dollar will remain supported against the low-yielders of JPY and EUR, but our core position is that the Fed is prepared to let the economy run hot-the that's the whole point of Average Inflation Targeting-and that the dollar should remain widely offered. Indeed, as vaccine rollouts accelerate across the globe, we're looking for another large leg of the dollar decline in 2Q.

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USD: Minutes from FOMC can be the highlight of a slow week

 USD: Minutes from FOMC can be the highlight of a slow week

After a quiet start to the week, given the US public holiday on Monday and the New Year in China, the attention will return to US stimulus prospects and what the Fed is going to do about it. Before moving to a full voting week starting on 22 February, the stimulus package will still be in the committee process this coming week. The passing of the plan is seen as relatively smooth, implying that US equities remain supported by dips. As far as the Fed's response is concerned, Wednesday will see the publication of the FOMC minutes. There is a small risk of disturbance in the bond market if 'a few participants' wish to debate the acceptable timing of the removal of stimulus, but it seems obvious from Powell's statements that this is far too early to be addressed. January retail sales and industrial production should come on the strong side on the data front, maybe pushing the dollar to its highest levels from Wednesday to Thursday of the week. The frenzy of US retail investors should also come into view again. Thursday sees key GameStop volatility participants testify to the Financial Services Committee of the House.

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TODAY'S US DOLLAR OUTLOOK

US DOLLAR OUTLOOK: USD/JPY IN FOCUS HEADED INTO CONSUMER SENTIMENT REPORT RELEASE

• US Dollar traded broadly mixed across major currency pairs during Thursday’s session
• DXY Index continues to gravitate around its 50-day moving average as selling pauses
• USD/JPY price volatility could get a jolt from potentially high-impact sentiment data

The US Dollar lacked direction and traded broadly mixed on Thursday. USD price action strengthened modestly against the Pound and Yen but weakened against the Australian Dollar and Euro. On balance, the DXY Index finished roughly flat as US Dollar bears and bulls continue to battle for direction near the 50-day simple moving average.

This has given pause to the latest stretch of US Dollar selling pressure, which corresponded with a breakdown of the relative strength index and invalidation of the short-term bullish trend formed from the 06 January and 26 January lows. Failing to maintain altitude around the 50-day simple moving average could see a resumption of US Dollar weakness that steers the DXY Index down to its bottom Bollinger Band. A last ditch effort by US Dollar bulls to rekindle recent rebound efforts could see the 91.00-price level come into play as a potential topside objective.

US Dollar overnight implied volatility readings have cooled off quite a bit. USD/JPY has one of the lowest implied volatility readings at 4.0%, which ranks in the bottom 10th percentile of readings taken over the last 12-months and is also below its 20-day average of 4.8%. This brings to focus the monthly consumer sentiment report on deck for release tomorrow, 12 February at 15:00 GMT as a potential catalyst for volatility. That said, USD/JPY price action could ‘lead the way’ so to speak in terms of where the broader US Dollar heads next.

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XAU/USD Runs into Resistance, Will it Reverse Lower?

 GOLD PRICE FORECAST: XAU/USD RUNS INTO RESISTANCE, WILL IT REVERSE LOWER?

Gold volatility has been elevated in February with the precious metal bouncing between technical levels in quick succession. While losses suffered earlier in the month have largely been reclaimed, XAU/USD remains near the midpoint of the descending channel it has etched out since August. Despite the recent recovery, the yellow metal has encountered resistance overhead and appears vulnerable to a reversal lower.

While the fundamental argument for gold – one that was vital to the metal’s climb from March to August – remains intact, the gradual decline in price is undeniable. As a result, longer-term price trends have since become negative, evidenced by a “death cross” formation on the daily chart in early January 2021 and a break beneath the 200 exponential moving average. As it stands, XAU/USD trades beneath all three of these longer-term averages and there is little to suggest gold will suddenly reverse higher and snap the downtrend.

Resistance is also evident on the 4-hour chart as gold negotiates the $1850 area which has proved influential in the past. The area also coincides with the 200EMA. A potential MACD crossover above the 0 levels and beneath the 200EMA might hint gold could reverse lower in the coming days. That said, a bullish continuation is also possible and subsequent resistance might lie at the Fibonacci levels near $1883 and $1920.

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US Dollar Outlook: GBP/USD Breakout Eyed as Risk Rally Prevails

 

• US Dollar reflation trade looks to be back in full force
• DXY Index snapped sharply lower to probe its 50-day MA
• GBP/USD price action eyed for bullish breakout potential

The US Dollar swooned on Tuesday and now trades in negative territory month-to-date following sharp declines over the last three consecutive sessions. US Dollar selling pressure was broad-based, though weakness relative to the Pound and Yen stood out in particular. GBP/USD price action spiked higher by about 75-pips while USD/JPY sank 65-pips.

GBP/USD price action now looks like it could be in the early stages of a breakout higher with technical resistance around the 1.3750-mark in the rearview mirror. That said, it appears there might be some open runway for Pound-Dollar bulls to push toward the 1.4000-handle. GBP/USD is expected to be one of the most active major currency pairs on Wednesday judging by its implied move of 54-pips. US Dollar volatility has the potential to accelerate in response to commentary expected from Federal Reserve Chair Jerome Powell during his speech scheduled for Wednesday, 10 February at 19:00 GMT.

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Oil Overview by Money Life Research

 

MARKET VIEW

Weekly changes: XBRUSD +8.39%

Oil prices hit their highest level in a year and close in at 60 USD a barrel, supported by economic revival hopes and supply curbs by the OPEC producers group and its allies.

U.S. inventories are dropping to March 2020 lows last week.

KEY POINTS

XBRUSD (Brent) is approaching 60 USD on the back of a supply cut by the OPEC+. Another stimulus package also favours oil prices.

Aramco raised its official selling price of Arab Light for Northwest Europe for March by 1.40 USD per a barrel from the previous month, maintaining optimistic sentiment.

The rollout of COVID-19 vaccines has fed hopes of demand growth, but the OPEC does not expect oil consumption to return to pre-pandemic levels until 2022.

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Weekly Overview on Market

  1️⃣ The main news over the weekend

 Democrats pave the way for Biden's $ 1.9 trillion COVID-19 rescue plan.

 - Biden: It can take 10 years to fully restore employment to current rates and needs an emergency relief plan.

 - US Treasury Secretary Yellen: Without strong relief measures, the economic recovery will be long and slow.

 - Lower-than-expected "non-farm" data.  The unemployment rate dropped to a record low for nearly a year.

 The AstraZeneca vaccine has limited effectiveness against the new South African variant of the coronavirus.

 Nigeria, the world's second-largest bitcoin market, bans cryptocurrency trading.

 - Germany plans to expand the blockade.

 - Bank of England Governor Bailey: Expect a boom in consumption after the blockade is lifted.

 2️⃣ Notable facts and data this week

 This week investors should pay attention to the speeches of several central bank officials:

 * On Tuesday, the President of the European Central Bank Lagarde joined the European Parliament's debate over the European Central Bank's 2019 Annual Report.

 * On Wednesday, Lagarde took part in a webinar on news figures organized by The Economist.

 * On Thursday, Fed Chairman Powell delivered a speech at an online event hosted by the Economic Club of New York.

 * From Wednesday to Thursday, the three major organizations EIA, IEA, and OPEC will release their monthly reports, if the report shows that the oil market is optimistic it may boost oil prices further.

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EUR/USD Outlook Bleak as Traders Rush for US

• Traders have become addicted to the US Dollar as a high US vaccination rate, the prospect of a strong economic recovery, and the likelihood that the Federal Reserve will start to tighten monetary policy soon make it their currency of choice.
• That is bad news for EUR/USD, with the Eurozone seen as lagging behind on vaccinations, an economic recovery is seen as still far away and another interest rate cut still a possibility.
• 
  

EURO PRICE AT RISK OF FURTHER FALLS

Last Thursday’s drop in EUR/USD below 1.20 for the first time since December 1, 2020, was highly significant not just technically but also psychologically. It provided a stark reminder to traders that the Eurozone is lagging far behind the US (and the UK) in vaccinating its citizens against coronavirus and that any economic recovery will therefore likely lag behind too.

In recent months, the US Dollar has become the markets’ favorite safe haven but when the global economic recovery arrives it could well prove to be the leader on the way up too. As mentioned earlier, traders are confident that the currencies of countries that are ahead in vaccinating their citizens against the coronavirus, like the US and the UK, will be the first to recover economically from the slump caused by the pandemic.

That means central banks like the Federal Reserve and the Bank of England will also be the first to begin tightening monetary policy, perhaps while the European Central Bank is still considering a rate cut to boost activity.

This is all bad news for EUR/USD, which is now back to where the ECB would prefer it to be and could conceivably drop to the lows around 1.16 last seen in early November – though not, of course, in the short-term.

WEEK AHEAD: GERMAN INFLATION, TRADE, AND INDUSTRIAL PRODUCTION

Turning to the data in the week ahead, there is little market-moving on the agenda. The highlight could be Wednesday’s final German inflation data for January, expected to show a rise to 1.0% year/year after the previous 0.3% fall. Otherwise, German and Eurozone industrial production and German trade figures are on the calendar too.

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Gold Price Susceptible to Bearish Trend

The price of gold trades to a fresh yearly low ($1785) even though longer-dated US Treasury yields remain afloat, and the precious metal appears to be moving to the beat of its drum after failing to exhibit the bullish price action from 2020.

It seems as though the decline from the record high ($2075) is turning out to be a shift in market behavior rather than exhaustion in the broader trend as the low-interest-rate environment no longer provides a backstop for bullion, and the rebound from the November low ($1765) may continue to unravel as the price of gold snaps the January range.

It remains to be seen if the US Non-Farm Payrolls (NFP) report will influence the near-term outlook for bullion as the economy is expected to add 50K jobs in January, but the rebound in employment may keep key market themes in place as the Federal Reserve stays on track to “increase our holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month.”

In turn, the US Dollar may continue to reflect an inverse relationship with investor confidence as the Federal Open Market Committee (FOMC) retains the current course for monetary policy, and Chairman Jerome Powell and Co. may largely endorse a wait-and-see approach at the next interest rate decision on March 17 as the central bank plans to “achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time.”

At the same time, the Fed’s dovish forward guidance may keep global equity prices afloat as the Nasdaq 100 (NDX) stays inside the confines of the bull channel, but the price of gold may continue to move to the beat of its own drum as the low-interest-rate environment along with ballooning central bank balance sheets no longer provide a backstop for bullion.

With that said, the decline from the record high ($2075) may turn out to be a shift in market behavior rather than exhaustion in the broader trend as it continues to give back the rebound from the November low ($1765), and may indicate a further decline in gold prices if the oscillator crosses below 30 and pushes into oversold territory.

• Keep in mind, the price of gold pushed to fresh yearly highs throughout the first half 2020, with the bullish price action also taking shape in August as the precious metal tagged a new record high ($2075).
• However, the bullish behavior failed to materialize in September as the price of gold traded below the 50-Day SMA ($1854) for the first time since June, with developments in the Relative Strength Index (RSI) negating the wedge/triangle formation established in August as the oscillator slipped to its lowest level since March.
• The RSI dipped into an oversold territory in November for the first time since 2018, and the correction from the record high ($2075) indicates a potential shift in market behavior rather than exhaustion in the bullish trend as the price of gold continues to trade at its lowest level since July.
• In turn, the V-shape recovery that materialized ahead of the July low ($1758) may continue to unravel as the price of gold snaps the January range, and the RSI may indicate a further decline in gold prices if the oscillator crosses below 30 and pushes into oversold territory.
• Still need a close below the $1786 (38.2% expansion) region to bring the Fibonacci overlap around $1743 (23.6% expansion) to $1763 (50% retracement) on the radar, with the next area of interest coming in around $1690 (61.8% retracement) to $1695 (61.8% expansion).

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