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The dollar began the week firmly and within a whisker of milestone peaks against the euro and yen on Monday, as U.S. economic strength and a vaccine rollout proceeding much more quickly than in Europe drew investors into the greenback.
The euro sat at $1.1788, not far above last week’s four-and-a-half-month trough of $1.1762 and well below its 200-day moving average of about $1.1866.
The common currency is heading for its worst month since mid-2019 as Europe’s faltering vaccination program runs into a wave of new infections, a bearish signal as positioning data shows investors remain heavily long euros.
The yen stood just shy of strong resistance and Friday’s 10-month low of 109.85 per dollar to trade at 109.77 early in the Asia session.
The yen is sensitive to gaps in returns on U.S. and Japanese government debt.
This year’s 76-basis-point rise in 10-year Treasury yields – as the U.S. economy rebounds – has opened the gap to its widest since last February. That has drawn Japanese investment, which has in turn helped push the yen down nearly 6% for the quarter.
The U.S. dollar index rose 0.8% to 92.773 and the dollar steadied against the risk-sensitive Aussie, kiwi and sterling, having fallen late on Friday with the positive mood.
Over the quarter the dollar has posted a 0.8% loss on the pound, which has been supported by Britain’s speedy vaccination rollout, a 0.8% gain on the Australian dollar and a 2.7% gain against the kiwi, which has been hit by housing market reforms.
The Aussie was last down 0.1% at $0.7631 on Monday and the New Zealand dollar fell by the same margin to $0.6989, while sterling <GBP=> slipped 0.1% as well to $1.3784.
“The U.S. is also being helped on its own by some pretty good economic data, fantastic rollout of vaccines, good pace of vaccination and (positive) stock markets,” said Westpac currency analyst Imre Speizer.
“The domestic economy is doing better than expected and likely to be the case for the next few months, so that might hold the U.S. dollar up and that’s what’s caused the Aussie, kiwi and emerging-market currencies to pullback in March.”
U.S. jobless claims fell to a one-year low last week and President Joe Biden said he would double his vaccination goal, after surpassing 100 million shots 42 days ahead of schedule.
The recovery attempts in EUR/USD remain capped below 1.1800, as the traders remain on the defensive starting out a holiday-shortened US payrolls week.
EUR/USD: Technical levels
“The pair is consolidating losses, with an immediate resistance near the 1.1850 level. There is also a major bearish trend line forming with resistance near 1.1850 on the same chart. The trend line is close to the 50% Fib retracement level of the recent decline from the 1.1946 high to 1.1761 low. On the downside, the pair might find bids near 1.1760 and 1.1750. Any more losses could lead EUR/USD towards the 1.1680 support zone,” Aayush Jindal at TitanFX explains.
GBP/USD holds lower ground near 1.3780, down 0.06% intraday, while heading into the London open on Monday. Alike other majors, the cable also bears the burden of the US dollar strength. However, a battle of Brexit woes and the vaccine optimism in Britain seems to placate the sellers amid a quiet session.
Following the US Trade Representative (USTR) Katherine Tai’s rejection of any immediate tariff relief for China, the dragon nation criticized the Western alliance including the US, the UK, Canada and the European Union (EU) to destabilize China. Elsewhere, German Chancellor Angela Merkel pushed for Federal law amid the need for a lockdown to tame the covid. Also, French doctors warn over the highest virus-infected patients in the Intensive Care Unit (ICU) in 2021.
On the other hand, mixed signals flash over the UK’s alleged vaccine offer to Ireland after it has successfully jabbed 57% of all adults.
Talking about Brexit, the Bank of England (BOE) recently asked lenders to seek approval from the “Old Lady”, before relocating UK jobs or operations to the EU. The Financial Times (FT) cites European regulators’ push for more to move than is necessary for financial stability after Brexit as the reason for the BOE’s action. It should be noted that the EU and the UK have recently concluded to hold a bi-annual forum-based approach towards tackling the issue of financial services regulation. It should be noted that a survey from the UK’s Federation of Small Businesses (FSB) suggests Quarter of small exporters give up on the EU due to red tape.
Given the RSI staying firm around 45.00, the quote’s run-up targeting 50-day SMA, near 1.3840, can’t be ruled out. However, a clear break above this will have to cross a one-month-long resistance line, at 1.3887 by the press time, to recall the GBP/USD bulls. Alternatively, a confluence of the stated support line and 50% Fibonacci retracement level of run-up from December 11, 2020, to February 24, 2021, near 1.3685-80 becomes a tough nut to crack for the bears.
Gold Price Chart: Key resistance and support levels
The Technical Confluences Detector shows that gold is likely to face a tough time on its road to recovery, as a dense cluster of resistance levels is aligned around $1735.
That area is the confluence of the SMA200 one-hour, Fibonacci 23.6% one-day and previous high four-hour.
The next hurdle is seen at $1737, the convergence of the Fibonacci 61.8% one-week and previous day high.
The XAU buyers would then target the $1745 barrier, where the pivot point one-day R2 and pivot point one-week R1.
Alternatively, a failure to resist above the powerful support at $1730 could prompt the sellers to resume the downtrend.
The level is the meeting point of the SMA5 four-hour, Fibonacci 38.2% one-day and one-week.
The next relevant cushion is seen at $1727, where the Fibonacci 61.8% one-day coincides with the Fibonacci 23.6% one-week.
Further south, the pivot point one-day S1 at $1724 could be back in play.
The previous month low at $1717 could be the line in the sand for the gold buyers.
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