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The US dollar is paring its gains as US traders return from a long weekend, pushing stock futures higher. Treasury Secretary nominee Yellen testifies later, setting the case for fiscal stimulus. Coronavirus continues raging with Germany considering more restrictions and Britain pushing vaccines.
Stocks are moving higher after a somewhat “blue” Monday amid a bank holiday in the day. The better market mood is weighing on the dollar, reversing its gains. Former Federal Reserve Chair Janet Yellen testifies in Congress as part of her confirmation hearings for Treasury Secretary. In her prepared remarks, Yellen stated that now is the time to spend.
President-elect Joe Biden prepares for the inauguration on Wednesday. Apart from passing the $1.9 trillion stimulus package, there is high uncertainty about his first Executive Orders. One such move would be canceling the Keystone XL pipeline leading oil from Canada, resulting in the loonie’s slide. Outgoing President Donald Trump is set to offer pardons before leaving office but is unlikely to make market-moving announcements. Fears of violence are shrugged off by markets.
EUR/USD is edging higher, despite concerns that Germany will not only extend the lockdown but also tighten. The German ZEW Economic Sentiment is set to reflect optimism about the future but a dire situation at the moment. it.
In Italy, Prime Minister Giuseppe Conte survived a confidence vote in the lower chamber, and now faces one in the Senate. Immunization in Europe is advancing at a slow pace.
GBP/USD is holding above 1.36 as Britain has already 6.65% of its population and continues at full speed. A recent drop in cases is encouraging.
EUR/USD has clawed its way up from the one-month lows amid a better market mood. According to FXStreet’s Analyst Yohay Elam, the testimony from Janet Yellen, in her confirmation hearings for Treasury Secretary, can turn the dead cat bounce into a roaring rally.
“Biden already said that ‘everybody should pay their fair share’ and signaled closing loopholes and hiking taxes on the very rich. While such moves would not hurt the majority of Americans, Wall Street would shudder and stocks could reverse their gains. In such a rick-off scenario, the safe-haven US dollar would gain and the recent bounce in EUR/USD would prove a dead cat bounce – only a minimal upward move followed by a fresh free-fall.”
“Spending is necessary due to the current situation and is made easier by cheap borrowing costs. If the former Fed Chair points to low yields when asked about funding the stimulus, markets may interpret it as a sign that no new taxes are coming – positive for risk.”
“Moreover, some may interpret any leaning on cheap funding as a hint that Yellen is already working with Powell – that perhaps she knows of an upcoming expansion in the bank’s bond-buying scheme.”
“Coronavirus continues raging on both sides of the Atlantic. German Chancellor Angela Merkel is contemplating not only extending the lockdown but also tightening it. Italy’s Prime Minister Giuseppe Conte is facing a crucial vote of no-confidence in the Senate after surviving one in the lower chamber.”
“Bears have the upper hand. For bulls to recover, EUR/USD needs to recapture 1.2125, a former triple-bottom. It is followed by 1.2175, which was a swing high last week. Support is at the one-month low around 1.2050, followed by the round 1.20 level and then by 1.1960.”
USD/CAD tried to settle above the resistance at 1.2800 but failed to develop sufficient upside momentum.
USD to CAD faced strong resistance at 1.2800 and pulled back. Currently, USD to CAD needs to settle back above 1.2775 to have a chance to get to the test of the resistance at 1.2800.
If USD to CAD manages to settle above 1.2800, it will move towards the next resistance level which is located near the 50 EMA at 1.2835. A move above this level will push USD to CAD towards the resistance at 1.2860.
On the support side, the nearest support level for USD to CAD is located at the 20 EMA at 1.2750. If USD to CAD declines below this level, it will head towards the next support level at 1.2720. In case USD to CAD manages to settle below the support at 1.2720, it will get to the test of the next support level which is located at 1.2700.
Having tested the $1800 level, Gold (XAU/USD) extends Monday’s swift recovery ahead of the much-awaited Treasury Secretary nominee Janet Yellen’s Senate hearings. Yellen is set to endorse a bigger coronavirus relief package.
Meanwhile, President-elect Biden will push for the $1.9 trillion stimulus plan once he takes the office on January 20. Expectations of additional fiscal support to fight the pandemic recession continue to bode well for the inflation-hedge, gold. Let’s take a look at how the metal is positioned on the charts.
Gold Price Chart: Key resistances and supports
The Technical Confluences Indicator shows that gold sees healthy support levels, with the immediate cushion seen at $1836, which is the confluence of the SMA5 four-hour, Fibonacci 38.2% one-week and Bollinger Band one-hour Middle.
The next major support awaits at the Fibonacci 23.6% one-week at $1828, below which $1826 could challenge the bears’ commitment. At that level, the Fibonacci 61.8% one-month coincides with the Fibonacci 38.2% one-day.
Further south, the intersection of the previous week low and Fibonacci 61.8% one-day at $1818 will guard the downside before testing the $1816 cap – pivot point one-month S1.
Alternatively, the bulls need to crack the Fibonacci 61.8% one-week at $1846 to extend the recovery momentum from over one-month lows of $1803.
The next significant resistance is aligned at $1854, the pivot point one-week R1. A break above the latter could expose $1858, which is the convergence of the Fibonacci 38.2% one-month and and SMA50 four-hour.
The SMA50 one-day at $1860 is the level to beat for the XAU bulls.
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