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The US dollar is on the rise on Monday after the Senate passed a modified version of the stimulus package and Friday’s robust Nonfarm Payrolls figures. Rising yields and the bump in oil prices are eyed.
US ten-year Treasury yields are hovering near 1.60% and continue supporting the dollar.
EUR/USD has dipped below 1.19, a new 2021 trough, pushed down also by the disappointing 2.5% drop in German industrial output. The Sentix Investor Confidence figures and the European Central Bank’s weekly bond-buying figures are eyed.
GBP/USD is trading closer to 1.38, on the first day of the UK reopening ahead of a speech by Bank of England Governor Andrew Bailey later in the day.
Gold has been fighting over $1,700, benefiting from stimulus funds and shrugging off the increase in yields.
Jobs: The sell-off in US bonds comes after America recorded 379,000 jobs gained in February, double the early expectations. The robust labor figures raise growth prospects, yet the Federal Reserve is still concerned by the fact that some 9.5 million Americans remain out of work due to the pandemic.
Stimulus: The US Senate passed a modified version of President Joe Biden’s $1.9 trillion coronavirus relief bill, ceding some ground to moderate Democrats. The legislation now returns to the House, where more liberal members of the president’s party will likely support the upper chamber’s version. Biden aims to sign it by the end of the week.
Oil: An attack on a critical Saudi oil export facility has failed, but boosted oil prices, sending Brent above $70 and WTI over $67. Petrol prices were propelled by the OPEC+ decision to extend production cuts.
Bitcoin has been fluctuating around $50,000, extending the battle. Ethereum trades around $1,700 and XRP is hovering around $0.45.
24-hour view: “We highlighted last Friday ‘there is room for USD to test the major resistance near 108.15’. We added, ‘a sustained rise above this level is unlikely’. While our view for a higher USD is correct, we did not expect the ease by which USD cracked 108.15 and surged to 108.63. The strong surge appears to be overdone but there is room for USD to retest the 108.60/65 level before a more sustained pullback can be expected. Overbought conditions suggest the resistance at 109.00 is unlikely to come into the picture. On the downside, a break of 108.00 would indicate the current upward pressure has eased.”
Next 1-3 weeks: “We have expected USD to move higher for more than a week now. In our latest narrative from last Friday (08 Mar, spot at 107.85), we highlighted that ‘strong boost in momentum is likely to lead to further USD strength to 108.15’. We added, ‘the next resistance above this level is at 108.60’. While our view is correct, the pace of the advance was faster than expected as USD surged to 108.63 during NY hours on Friday. Further USD strength still appears likely but overbought shorter-term conditions suggest 109.00 may not come into the picture so soon. Overall, the current positive outlook is deemed intact as long as USD does not move below 107.35 (‘strong support’ level was at 106.95 last Friday).”
EUR/USD managed to settle below the support at 1.1925 and is testing the next support level at 1.1900
EUR/USD is currently trying to settle below the support level at 1.1900. RSI is close to the oversold territory but there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
If EUR/USD settles below the support at 1.1900, it will head towards the next support level at 1.1880. A move below this level will push EUR/USD towards the next support at 1.1850. In case EUR/USD declines below the support at 1.1850, it will head towards the support at 1.1830.
On the upside, EUR/USD needs to stay above 1.1900 to have a chance to gain upside momentum in the near term. The next resistance level for EUR/USD is located at 1.1925.
If EUR/USD gets above the resistance at 1.1925, it will head towards the next resistance level at 1.1965. A move above this level will open the way to the test of the resistance at 1.2000.
Gold (XAU/USD) fails to find acceptance at higher levels, as the ongoing rally in the US Treasury yields continues to underpin the US dollar, capping the upside attempts.
The resumption in the Treasury yields rally comes on the heels of a stronger US NFP report and Senate’s passage of the $1.9 trillion stimulus bill, which boosted the reflation theme.
Amid a data-light US docket, gold traders will continue to take cue from the bond markets and action in the yields for fresh trading impetus.
From a technical perspective, sellers seemed to have returned following a rejection near the downward-sloping 21-simple moving average (SMA), now at $1709.
The XAU bears look to test the falling trendline support at $1679, as the Relative Strength Index (RSI) has also turned south, suggesting more room to the downside.
Ahead of that level, the nine-month lows of $1687 could be tested.
Alternatively, a sustained move above the 21-SMA hurdle could trigger a run towards the bearish 50-SMA at $1736.
Note that the price wavers within a falling wedge formation, with acceptance above the latter could validate the pattern. The near-term bearish bias could negate thereafter.
At the press time, gold trades modestly flat at $1698.80, near-daily lows.
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