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market review 01 March 21

01 March 21

Manufacturing Sector PMIs Put the EUR and the Greenback in Focus

It’s a busy day ahead, with manufacturing sector PMI figures in focus. Disappointing PMIs from China failed to weigh on risk sentiment, with optimism overshadowing weaker headline numbers.

The Day Ahead:

For the EUR
It’s a busy day ahead on the economic calendar. Manufacturing PMI figures for Italy and Spain are due out later this morning, along with finalized numbers for France, Germany, and the Eurozone.
Barring marked revisions to French and German PMI numbers, Italy and the Eurozone’s PMIs will likely have the greatest impact.
Prelim February inflation figures from Italy and Germany will also draw attention as reinflationary fears linger.
At the time of writing, the EUR was up by 0.07% to $1.2083.

For the Pound
It’s a relatively quiet day ahead on the economic calendar. Finalized manufacturing PMI figures for February are due out later today.
Barring a material shift from prelim figures, however, the PMI should have a relatively muted impact on the Pound.
With economic data on the lighter side, the Pound will be in the hands of market risk sentiment on the day.
We continue to see the downside limited, however, with plans to ease lockdown measures positive.
At the time of writing, the Pound was up by 0.37% to $1.3984.

For the USD
It’s a relatively busy day ahead on the economic calendar. February’s ISM Manufacturing PMI numbers are due out later today along with finalized Market manufacturing PMI figures.
Expect the ISM numbers to draw the greatest interest.
Away from the economic calendar, chatter from Capitol Hill will also influence. From the weekend, the House of Representatives passed Biden’s $1.9 trillion relief package through to leave it in the hands of the Senate.
The key date for Biden and for the Democrats is 14th March, when existing unemployment benefits expire.
On the geopolitical risk front, there is also Iran in focus

EUR/USD Forecast: Euro suffers below resistance, ECB’s reluctance and US data may keep it down

New month, new gains for EUR/USD? Not so fast. Apart from the technical confluence, the euro may find it hard to take advantage of the dollar’s decline. First, while the EU is trying to ramp up its vaccination campaign, it is far behind America’s accelerated pace – with Johnson and Johnson’s single-shot solution added to its arsenal.
Another factor that could keep the common currency lower is the slow-moving European Central Bank. Officials at the Frankfurt-based institution expressed concerns about rising bond yields in the old continent, but are they willing to act?
Weekly purchase data from the ECB is due out later in the day and it will likely show the bank remains on the sidelines – contrary to the Reserve Bank of Australia which showed determination in depressing any speculation against the land down under’s bonds. Higher returns on long-term debt may undermine the old continent’s recovery.
On the other side of the EUR/USD equation, the slide in the dollar may also prove temporary. The new month has brought some calm, with US Treasuries finding some fresh demand and equities rising, thus pushing the safe-haven greenback lower. However, upbeat US data may turn things around.
The ISM Manufacturing Purchasing Managers’ Index will likely show robust growth in the industrial sector, which has been less affected by the pandemic. The forward-looking survey also serves as a hint toward Friday’s Nonfarm Payrolls and hopes for a pick-up in employment could revive concerns about overheating of the economy. A consequent sell-off in bonds could boost the greenback.
According to reports, the ruling party is ready to sacrifice the increase in the minimum wage, after attempts to find workarounds failed to make headway. If conservative Democrats such as Joe Manchin III halt pay rises, they could accept other measures and perhaps pass the vast majority of the package. In that case, prospects of robust expenditure would weigh on bonds, boosting yields and the dollar.
All in all, the greenback has room to recover and the euro may fail to make headway – a win-win for the bears.

EUR/USD Technical Analysis

Euro/dollar has been suffering from downside momentum on the four-hour chart and trades below the 50, 100 and 200 Simple Moving Averages. Critical resistance awaits at 1.2110, which is the confluence of the 50 and 100 SMAs and also a swing low seen last week.
Beyond 1.2110, the next cap to watch is 1.2150, which held EUR/USD down in mid-February. It is followed by 1.2180, a resistance line from last week, and then by 1.2220.
Support awaits at the daily low of 1.2060, followed by 1.2020, a trough in mid-Febraury. Further down, 1.20 and 1.1950 await the currency pair.

GBP/USD Daily Forecast – U.S. Dollar Pulls Back

GBP/USD gained upside momentum and is trying to get above the resistance at 1.3980.
GBP/USD is currently testing the nearest resistance level at 1.3980. If this test is successful, GBP/USD will move towards the next resistance at 1.4000. RSI declined back into the moderate territory after the recent sell-off so there is plenty of room to gain upside momentum in case the right catalysts emerge.
If GBP/USD settles above the resistance at 1.4000, it will head towards the next resistance level at 1.4030. A move above this level will open the way to the test of the resistance at 1.4050. In case GBP/USD gets above the resistance at 1.4050, it will move towards the resistance at 1.4080.
On the support side, the nearest support level for GBP/USD is located at 1.3950. If GBP/USD declines below this level, it will move towards the next support at the 20 EMA at 1.3930. In case GBP/USD settles below the 20 EMA, it will gain additional downside momentum and head towards the support at 1.3900.

Gold Price Analysis: Key resistances for XAU/USD are located at $1,780 and $1,800

“Investors are likely to remain focused on developments surrounding US Treasury bond yields. The 10-year US T-bond yield gained more than 35% in February alone and it’s up nearly 50% since the beginning of the year but a significant hurdle is located around 1.5% level. A deep correction in yields could put the USD under heavy selling pressure and trigger a strong rebound in XAU/USD and vice versa.”
“Unless XAU/USD manages to make a daily close above the descending trend line coming from January 6, currently located around $1,780, sellers could look to remain in control. Above $1,780, next resistance is located $1,800 (psychological level/20-day SMA) ahead of $1,820 (static level).”
“The initial support could be seen at $1,717 (February 26 low) before $1,700 (psychological level). Below those levels, $1,680, which acted as strong support in April, May and June of 2020, is the next target.”

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