Gold’s fall from 1959.16 resumed by break through 1810.07 support and hit as low as 1784.67. But a temporary bottom was formed there and gold recovered. Some sideway trading could be seen but upside should be limited well below 1875.59 resistance to bring fall resumption. Below 1784.67 will target 1764.31 next.
Overall, the corrective fall from 2075.18 is still in progress and could extend to 38.2% retracement of 1160.17 to 2075.18 at 1725.64 before completion.
Nikkei rose 2.21%, or 609.31 pts, to close at 29388.50 today, highest level in 30 years. The up trend from 16358.19 has just resumed. The index was contained well above rising 55 day EMA in the prior pull back, suggesting that some upside acceleration could be seen. Focus will be on whether daily MACD could break through the trend line resistance in next move, as well as the reaction to medium term channel resistance.
But in any case, outlook will stay bullish for now as long as 27619.80 support holds. 30k psychological level is the next target. But real obstacle is 100% projection of 6994.89 to 24129.34 from 16358.19.
Eurozone Sentix Investor Confidence dropped to -0.2 in February, down from 1.3, missed expectation of 4.1. Current situation index dropped slightly to -27.4, down from -26.5. Expectations index dropped to 31.5, down from 33.5.
Sentix said, “the EU order debacle and the resulting slower pace of vaccination are weighing on the mind and exposing the bureaucratic deficits in Euroland. As a result, the EU economy is losing touch with the other regions of the world, which are continuing their recovery course in the month of February.”
It also warned, “a permanent prolongation of the lockdown could become a problem because the difference between expectation and the current situation (the so-called expectation gap) is extremely high! There is a potential for a temporary disillusionment here. Fatal would be in any case a repeated demolition of the expectation component. The consequence would be a renewed recession.”
CAD/JPY continued it’s uptrend, on the back on strong oil price and risk-on sentiments. 81.91 key medium term resistance is finally considered firmly taken out, while rise from 72.80 resumed. The solid support from rising 55 day EMA is clearly bullish. At the same time, daily MACD also suggests that the cross is building up side momentum for some acceleration.
Next short to medium term target is 100% projection of 74.76 to 91.91 from 77.91 at 85.06. Also, note that the down trend from 91.62 (2017 high) should have completed at 73.80. Sustained break of 84.74 structural resistance could open up long term rise towards 91.62.
WTI crude oil’s up trend continues and hits as high as 57.37 so far. Oil is now back at pre-pandemic level, partly supported by Saudi Arabia’s move on extra supply cuts in February and March. Traders are also betting on a strong recovery ahead with mass vaccine rolls out.
WTI is on track to 100% projection of 47.24 to 53.92 from 51.58 at 58.26. Reaction to this projection level will indicate the underlying momentum for further upside acceleration. Sustained break would likely bring even quicker rally to 161.8% projection at 62.38.
Break of 56.38 minor support will bring some consolidations. But wouldn’t be any change in the up trend as long as 53.92 resistance turned support holds.
Fitch affirmed Japan’s sovereign credit rating at “A”, with a “negative outlook”. The rating agency said that “balance the strengths of an advanced and wealthy economy, with correspondingly robust governance standards and public institutions, against weak medium-term growth prospects and very high public debt.”
On the one hand, “strong external finances are underpinned by a persistent current account surplus, a large net external creditor position, and the yen’s reserve currency status.” But the negative outlook was retained, “given continued downside risks to the macroeconomic and fiscal outlook from the coronavirus shock.”
Also, Fitch expected BoJ to maintain the currency monetary policy stance over the coming year. “The BOJ’s policies entail longer-term risks to the central bank’s balance sheet, particularly the purchase of ETFs and fluctuations in underlying equity prices,” it added.
US Treasury Secretary Janet Yellen told said over the weekend the job market is “stalling”. “We’re in a deep hole with respect to the job market and a long way to dig out,” she added. It could take until 2025 for the US market to recovery without adequate support. But the administration’s USD 1.9T stimulus “will generate will create demand for workers.”
“As Treasury secretary, I have to worry about all of the risks to the economy,” Yellen added. “And the most important risk is that we leave workers and communities scarred by the pandemic and the economic toll that it’s taken, that we don’t do enough to address the pandemic and the public health issues, that we don’t get our kids back to school.”
Canada employment dropped -213k, or -2.12% in January, much worse than expectation of -43.5k. “Losses were entirely in part-time work and were concentrated in the Quebec and Ontario retail trade sectors.”
Unemployment rate surged to 9.4%, well above expectation of 8.9%. That’s also the higest level since August 2020.
US non-farm payroll employment rose only 49k in January, well below expectation of 85k. “Notable job gains in professional and business services and in both public and private education were offset by losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing.”
However, unemployment rate dropped to 6.3%, down from 6.7%, much better than expectation of 6.7%. Number of unemployed persons dropped to 10.1 million. Participation rate was about unchanged at 61.4%. Average hourly earnings rose 0.2% mom, below expectation of 0.3% mom.
BoE Deputy Governor Ben Broadbent said the strong economic growth this year will be a “function of lower starting point last year”. Recovery will be linked to vaccine rollout and how cautious people are going forward. Nevertheless, unemployment rate will very like go out when furlough scheme ends. Also, tight international borders would be negative for both the supply and demand side of the economy.
He also noted that it’s not unusual for banks to need time to prepare for negative interest rates. ECB had similar preparation time for negative rates, even though the UK is in a difference place to ECB in 2014 regarding inflation.
Dollar is currently trading as the strongest one for the week and stays firm, as focus turns to non-farm payrolls report from the US. Markets are expecting 85k job growth in January, while unemployment rate would stay at 6.7%.
Looking at some employment related data, ADP private job growth surprised well to the upside with 174k. ISM manufacturing employment rose modestly from 51.7 to 52.6. ISM services employment, however, staged an impressive turn around, rose form 48.7 to 55.2. Four-week moving average of initial jobless claims, on the other hand rose 11k to 848k. All in all, there is prospect of some upside surprise in today’s NFP report.
Dollar index’s rally this week confirmed short term bottoming at 89.20. Immediate focus is now on 91.74 support turned resistance. Decisive break there will indicate that rise from 89.20 is at least a correction to the down trend form 102.99. In this case, we’d likely see some more upside acceleration in DXY towards 38.2% retracement of 102.99 to 89.20 at 94.46 next.
Australia AiG Performance of Services rose to 54.2 in February, up from 52.9, highest since November 2019. Ai Group Chief Executive, Innes Willox, said: “With a considerable way to go before a full recovery can be claimed, the more convincing lift in new orders is an encouraging pointer to continuing recovery over coming months. Sales also grew strongly – in part reflecting a release of pent-up demand and higher levels of confidence and employment as the sector continued to recover.”
RBA Governor Philip Lowe told a parliamentary committee that the central bank was committed to do “everything it reasonably can” to to push the unemployment rate lower and drive wages growth higher. However, even in the most optimistic scenario, inflation won’t be back to its target band before 2023.
“The cash rate will be maintained at 10 basis points for as long as is necessary,” Lowe added. “Interest rates are going to be low for quite a while yet.”
Kansas Fed President Esther George said yesterday that the central bank was still “far away” from meeting its objectives. It’s “too soon to try to speculate about” scaling back the asset purchase program. “Until we see the path to getting past this virus, it will be difficult to make any prognosis about when that time might come.” she added.
Separately, Atlanta Fed President Raphael Bostic said, based on his modal economic forecasts, “that’s not my expectation” for Fed to start tapering the asset purchases at the end of this year. “But I will be open to any possibility,” he added. “And that can go in either direction. I think that’s the most important message to come out of this.”
US initial jobless claims dropped -33k to 779k in the week ending January 30, better than expectation of 850k. Four-week moving average of initial claims dropped -1.25k to 848.3k.
Continuing claims dropped -193k to 4592k in the week ending January 23. Four-week moving average of continuing claims dropped -120k to 4882k.
Sterling jumps as in the BoE minutes noted, ” the Committee was clear that it did not wish to send any signal that it intended to set a negative Bank Rate at some point in the future”.
Though, on balance, “it would be appropriate to start the preparations to provide the capability to do so if necessary in the future,””
“The MPC therefore agreed to request that the PRA should engage with PRA-regulated firms to ensure they commence preparations in order to be ready to implement a negative Bank Rate at any point after six months,” the minutes added.
GBP/CHF resumes recent rise after BoE and hits as high as 1.2318 so far. Further rally is expected as long as 1.2232 minor support holds. Current rise is seen as resuming whole medium term rebound from 1.1102, as consolidation from 1.2259 has completed at 1.1583. Next target is 61.8% projection of 1.1102 to 1.2259 from 1.1683 at 1.2398. Firm break there would bring upside acceleration to 100% projection at 1.2840.
In BoE’s economic projections, based on assumption of constant interest rate at 0.1%, GDP is seen as growing 5% in 2021 (revised down from November forecast of 7.25%), 7.25% in 2022 (revised up from 6.25%), and 1.25% in 2023 (revised down from 1.75%.
Unemployment rate was forecast to be at 6.5% in 2021 (revised down from 6.34%), 5% in 2022 (unchanged) and 4.50% in 2023 (revised up from 4.25%).
CPI inflation was projected to be 2 2% in 2021 (unchanged), 2.25% in 2022 (revised up from 2%), and 2% in 2023 (unchanged).
BoE kept monetary policy unchanged as widely expected. Bate Rate is held at 0.10%. Total target stock of asset purchases also stayed at GBP 895B. Both decisions were made with unanimous votes.
The central bank pledged that, “if the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.”
Also, “the Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”
BoE expected GDP to “recover rapidly towards pre-Covid levels over 2021”. As for inflation, CPI is projected “to be close to 2% over the second and third years of the forecast period”.
Outlook for the economy remains “unusually uncertain”, depending on the “evolution of the pandemic, measures taken to protect public health, and how households, businesses and financial markets respond to these developments.”
Eurozone retail sales rose 2.0% mom in December, above expectation of 1.3% mom. The volume of retail trade increased by 5.1% mom for automotive fuels, by 1.9% mom for food, drinks and tobacco and by 1.5% mom for non-food products (within this category textile, clothing and footwear increased by 12.4% mom).
EU retail sales rose 1.4% mom. Among Member States for which data are available, the highest increases in the total retail trade volume were observed in France (22.3% mom), Belgium (15.9% mom) and Ireland (11.4% mom). The largest decreases were registered in the Netherlands (-10.9% mom), Germany (-9.6% mom) and Denmark (-8.0% mom).
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Bitcoin hits record on Tesla news, targeting 53618 next?
Bitcoin surges to new record high after Tesla disclosed that it has acquired USD 1.5B in bitcoin Additionally, the company said it may accept bitcoin as a form of payment in the future.
Following up on a previous post, while the upside breakout was delayed by a deep retreat, it did finally happened as expected. 61.8% projection of 17629 to 41964 from 29283 at 44322 is already met.
Based on current upside momentum, the rally should be finished yet. Outlook will stay bullish as long as 38699 resistance turned support holds. Sustained trading above 44322 will target 100% projection at 53618.