In yesterday’s testimony, Federal Reserve Chair Jerome Powell signalled that the Fed was not worried about inflation or the increased borrowing. Nor is the Fed decreasing its support for the pandemic-damaged US economy. He voiced expectations for a return to a more normal and improved activity later this year but told the Senate Banking Committee that the economy is a long way from Fed’s employment and inflation goals and that it will take time for substantial further progress to be achieved. The current pace of asset purchases is $120 billion per month. Powell has promised to keep this pace up until “substantial further progress” has been made to achieve Fed’s inflation and employment targets. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.
US equity indices rallied strongly when the New York Session started and closed near their daily highs. The best performers in the DJIA were Disney (2.78%), Visa (1.82%) and Chevron (1.26%) while the list of the best blue-chip performers in the S&P 500 included Mastercard (2.87%), Netflix (2.32%) and Facebook (2.12%).
In the FX market, the money in yesterday’s trading flowed into the commodity currencies and GBPUSD while CHF lost ground against (all comparisons against the USD). With the ongoing boom in commodities markets, it seems that there is less demand for safe have currencies like CHF. The New Zealand cash rate was confirmed at 0.25%, just as the analyst consensus had expected. There was increased volatility in NZDUSD as there were indications of the RBNZ cash rate might turn higher from December this year.
In addition to Powell’s speech, there were a couple of encouraging data points yesterday. The new unemployment claims release from the UK was a pleasant surprise as the number had decreased by 20K, while analyst had expected to see an increase of almost 14k. The Conference Board consumer confidence from the US was also better than consensus expectation and was confirmed at 91.3 vs. 90.2 expected. Today’s schedule includes UK Monetary Policy Report Hearings and Crude Oil Inventories. Powell testifies again today at 3 pm GMT. For details on macroeconomic releases see our economic calendar.
We highlighted yesterday how USDJPY had retraced all the way down to the 61.8% Fibonacci level and the 20-day SMA. The pair had bounced higher from the proximity of the bullish channel low and now the up move has continued. The key support and resistance levels are 104.40, 104.85 and 106.22. The 50-week SMA is currently at 105.84. The current momentum in the daily timeframe is to the upside as the pair is making higher highs and higher lows. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.
The three weekly low values above the rising trendline keep EURUSD in the bullish category but yesterday’s rejection candle at 1.2169 resistance indicates a lack of upside momentum in the short-term. The key levels in EURUSD are the supports at 1.1952 and 1.2023 and the December high at 1.2344. A break above 1.2189 would open a way to levels near the December high while a failure to stay above 1.2023 would make a test of the rising trendline likely. The trendline is currently at 1.1952. Together with the 23.6% retracement level at 1.1946 and 1.1952 support level, it creates an important technical support area.
The strong rally in the S&P 500 from the 50-day SMA indicates that the bulls are still looking to buy the dips. Therefore, the uptrend is still alive and well. The promise from the Fed to keep the QE tabs open surely helps as well. DJIA and Nasdaq are ranging above 31250 and 12750 supports respectively and if the supports hold the S&P 500 staying above the rising trendline is more than likely. If DJIA and Nasdaq, however, fall further then the story is likely to be quite different and we need to prepare for more downside also in the S&P 500. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.
FTSE 100 index is sitting at an interesting level. This is the level that resisted price advances in the first half of February and coincides with the 20-day SMA and 50% Fibonacci retracement level. Currently, the support is at 6544.60 A break below this level would likely bring the 6302 support into play while the emergence of buyers at current levels could take the index to 6730 – 6800 region. The lower reactionary high at 6800 (compared to January 7th high at 6955) indicates weakness which could manifest either as supports breaking now or rallies being sold below the 6800 level.
Recent macroeconomic data releases
- UK Flash Manufacturing PMI 54.9, 53.1 expected
- Canadian Core Retail Sales -4.1%, -2.4% expected
- Canadian Retail Sales -3.4%, -2.5% expected
- US Manufacturing PMI 58.5, 58.4 expected
- German ifo Business Climate 92.4, 90.5 expected
- New Zealand Retail Sales -2.7%, -0.5% expected
- UK Claimant Count Change -20.0K, 13.8K expected
- US CB Consumer Confidence 91.3, 90.2 expected
Important macroeconomic data releases today
- RBNZ Official Cash Rate 0.25%, 0.25% expected
- UK Monetary Policy Report Hearings
- Fed Chair Jerome Powell Testifies
- Crude Oil Inventories -6.5M expected
- RBNZ Gov Orr Speech
You may access the times and dates in the economic calendar here.
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Chief Market Analyst
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