Market Focus

Markets were mildly risk-off on Monday as investors weighed strong economic data from China, US President-elect Joe Biden’s stimulus plans, and surging coronavirus trends.

Carrefour SA tumbled 6.9% after Canada’s Alimentation Couche-Tard Inc. abandoned talks on a $20 billion merger. The dollar gave up earlier gains, while SP 500 futures were little changed. US financial markets were closed Monday for the Martin Luther King holiday.

In Asia, chips stocks and Huawei Technologies Co. suppliers dropped after Reuters reported that the US is planning to revoke their licenses to work with the Chinese company. In Seoul, Samsung Electronics Co. fell 3.4%.

According to Ben Emons, managing director of global macro strategy at Medley Global Advisors, “Markets needed a breather or even a pullback to justify reflationary expectations.” After a strong start to the year, global stock markets are losing steam as investor focus shifts to the upcoming earnings season and the difficult negotiations facing Biden’s $1.9 trillion relief plan. His proposals could be watered down under congressional opposition, and there’s the possibility that some taxes could rise.

One bright spot in the global economy remains in China. The country’s economy roared back to the pre-pandemic growth rates, with gross domestic product climbing 6.5% in the fourth quarter from a year earlier. That leaves the world’s second-largest economy driving global growth and potentially passing US GDP sooner than previously expected.

Market Wrap

Main Pairs Movement

GBPUSD remains below 1.36, shrugging off the expansion of Britain’s vaccination campaign. Post-Brexit talks on financial services continue while tension is mounting ahead of US President-elect Biden’s inauguration. USDJPY’s correction is not done yet as the price chips away at the 10-EMA where is meets the 20-EMA in the vicinity of the 38.2% Fibonacci retracement of the daily bearish impulse. The American dollar keeps appreciating against high-yielding rivals, backed by a prevalent cautious stance. A scarce macroeconomic calendar keeps AUDUSD confined to tight intraday ranges.

DXY extends the march north and already trades at shouting distance from the 91.00 barriers. On the other hand, prices of WTI are up smalls at the beginning of the week, managing to regain ground lost following earlier lows in the $51.70 per barrel price zone.

Technical Analysis

USDCAD (4 Hour Chart)

The Loonie climbed back substantially from the lows around 1.2625 and is now trading at weekly highs above the support level around 1.2758. A combination of fundamental factors helped support the Loonie pair to rise. One factor centers around the potential economic fallout from the coronavirus pandemic and imposition of fresh lockdown measures, which would dampen prospects for a recovery in the fuel demand and undermine the commodity-linked currency CAD. The other factor is the recent build-up of risk-off sentiment across the global investors. Essentially, concerns regarding the continuous surge in new COVID-19 cases dented investors’ sentiment and, in turn, boosted the safe-haven USD. These factors collectively contributed to the runaway rally for the Loonie amid the absence of market-moving economic releases from the US and Canada. From a technical perspective, the 15-Day SMAVG is crossing above the 60-Day SMAVG, suggesting that the golden cross is staged and the upward momentum of USDCAD may extend. Nevertheless, it would be prudent to wait until the price tops the most immediate resistance around 1.2795 before bulls capping their gains.

Resistance: 1.2795, 1.2816, 1.2833

Support: 1.2756, 1.2726, 1.2661

EURUSD (4 Hour Chart)

After topping at the multi-year highs near 1.2350 about a week ago, the EURUSD pair has fallen extensively and is now consolidating between a monthly low range between 1.2081 and 1.2055. The retreat of the Fiber pair is driven by the strengthening demand for the safe-haven greenback amid cautious markets and uncertainty revolves around the Eurozone, such as the political crisis in Italy and depressing coronavirus picture. Technically speaking, the EURUSD is still under selloff pressure as the 60-Day SMAVG fluctuates above 15-Day SMAVG. Additionally, with a 30ish RSI, it is inferable that the bears are still overwhelming the bulls at the moment. If the decline of EURUSD continues, the next strong support can be seen around 1.1992. Conversely, if a rebound is staged, the first resistance would be 1.2081, then 1.2116, followed by 1.2170.

Resistance: 1.2081, 1.2116, 1.2170

Support: 1.2055, 1.1992

XAUUSD (4 Hour Chart)

While the Gold is still on the back foot, the yellow metal has successfully bounced back from the multi-month lows at $1804 and is now fluctuating slightly above its nearest resistance at $1838. XAUUSD traders should now be keeping an eye on the testimony of incoming US Treasury Secretary Janey Yellen and the inauguration of President Joe Biden on the upcoming Tuesday and Thursday respectively as those events would lay the key foundation for the markets’ demands of USD in a foreseeable future. From a technical perspective, the MACD is indicating a bullish momentum, at the same time, the RSI is also rising from the low 30s towards the 50 thresholds. Both phenomena suggest that the Gold has shrugged off the selloff pressure and has captured some positive traction at the time of writing. If the XAUUSD can post a strong, confirmative move above the $1838 resistance, the next resistance would be $1856 and $1863. On the flip side, if the Gold loses ground, then the most immediate support can be seen at $1823, $1814, and $1804.

Resistance: 1838, 1856, 1863

Support: 1823, 1814, 1804