Market Focus

US stocks retreated as several Federal Reserve officials maintained their transitory inflation narrative, and dims the possibility of an early tapering. The three big-equity indices were essentially unchanged for the day. Within the S&P 500 index, Utilities and Energy sectors are the worst performing sector while Consumer Discretionary and Real Estate sectors led the gain.

Iran continues its negotiation with World powerful nations in an attempt to lift sanctions on oil export for the cost of abandoning the country’s nuclear program. But at least Iran has China’s support, for now, top leaders from both nations agreed to deepen trade and energy links once a return to the 2015 accord is finalized.

Moderna says its COVID-19 vaccine is 100% effective in teens age from 12 to 17. The company said it will be asking FDA for grant approval for the emergency use early next month. No significant safety concerns have been identified so far.

Main Pairs Movement

The dollar was on the back foot against most rivals in the G7 group with the dollar index fell to the lowest point since January, and was trading around 89.66 near closing time. Euro was the best performer among all, rising 0.3%. Upbeat German Business sentiment and improving vaccine campaign are underpinning the shared currency. Meanwhile, Federal Reserve Vice Chair Richard Clarida reiterated in a Yahoo! Finance interview that any discussions of scaling back the pace of asset purchases will “depend on the flow of data that we get.”

Gold rose 1% on Tuesday to the $1900 handle, gradually recovering its losses in 2021. The yellow metal is gaining traction amid weakening dollar and lower treasury yields. Concerns of a high inflation period ahead also redirect money back to the old convention tool to store value. We are also seeing Gold ETF holdings turning north in the past few weeks.

USDCAD rebounded further north, up 0.17%. The strong oil price has been supporting the Canadian dollar recently, especially with the expectations of surging oil demand in forthcoming summer vacation and traveling months. However, there are concerns that Iran would start selling oil soon if it can strike an agreement with the UN to lift sanctions on crude exports, therefore dragging down oil prices.

Technical Analysis

USDJPY (Daily Chart)

Dollar Yen has been moving sideways in the past week. The pair is slipping away from the ascending trendline started in January, threatening to contest the 108 support. It is somewhat odd to see the muted reaction from the Japanese Yen given falling US 10-year treasury yields, currently trading at 1.576%. Perhaps there are simply too many variants that stop traders to step in, the possibility of upcoming early tapering talks from the Fed, and rising infections in Japan may postpone the Olympics. We are also seeing some divergence movement in JPY and CHF peers, suggesting risk sentiment in the forex space is rather erratic.

Resistance: 109.7, 112.1

Support: 108, 106

NZDUSD (Daily Chart)

Kiwi is still trapped within an impossible tight range between 0.7265 and 0.7113. This pair attempted to break through this region some weeks ago, but now we are back to square one. It is approaching the end of a descending triangle, and traders should be expecting some form of another breakout soon. Given China’s call to clamp down commodity prices, the fundamentals are favoring the bears. On the south, the nearest horizontal support is at 0.7113, followed by the big 0.7 psychological level. Traders need to watch out for RBNZ’s policy announcement on Wednesday as to whether they would unexpectedly engage in taper talks.

Resistance: 0.7266,0.7467

Support: 0.7141, 0.7, 0.694

GBPUSD (Daily Chart)

Cable recedes from daily highest price of 1.42, closed the day with little change. The intraday zig-zag movement has constructed a Doji pattern, which traditionally points to a trend reversal, and it would be a bearish one in our case. The pair struggled to find solid demand to crack that 1.42 hurdle and bears are back in the driver’s seat. Price has not been visiting 1.4 handles since the last breakthrough, perhaps it is time to consolidate this support level before the bulls are ready for another leg up. Any plummets below 1.4 are highly doubtful given UK’s strong fundamentals.

Resistance: 1.42, 1.436

Support: 1.4, 1.3685, 1.3518