Commodities continue to find buyers as equities soften

Momentum has started to fade as US equities were slowed by the tech sector and 10yr treasury yields and the dollar is being boosted by positive US retail sales figures. 

US equities got weighed down by the Tech sector and US10Y yields taking a breather dropping back below 1.30%.  We expect this slowing of enthusiasm to be reflected in trading through the day. 

The FOMC meeting minutes showed that the central bank is upbeat on America's growth prospects in 2021, and it is not worried about higher inflation for now.

The upbeat surprise in US economic data from Retail Sales to PPI boosted the greenback as it registered back-to-back gains, which in turn sent gold towards 1870, with the death cross now confirmed on the daily chart.

USDJPY printed a double-top formation although upside intraday bias in USD/JPY remains on the upside at this point.

Confirmation that the UK hit its vaccine target - vaccinating 15 million people by the 15th of February has helped support the pound.  GBPUSD is still relatively strong despite US dollar rise and we expect uptrend to continue.

Mining stocks tracked a jump in commodity prices, however European markets are now lower following a series of disappointing earnings reports from companies including Airbus and Orange.

Oil supply fears as unprecedented cold blast pushed WTI Crude above $62.

On the economic data front today, US Weekly initial jobless claims are expected to be around 765,000, which would be down from the 793,000 reported the previous week, while housing starts for January are forecast to be 1.66 million, slightly lower than the previous month.

Our overview and outlook of the key trading pairs and indices is as follows

EURUSD – The euro retreated towards 1.2023 yesterday after much stronger than expected US Retail Sales triggered a dollar rush. Additionally, markets seem worried about the negative impact of coronavirus lockdown restrictions on the Eurozone's economy, weighing on the shared currency. However, the Fed's meeting minutes showed that the central bank is upbeat on America's growth prospects in 2021, and it is not worried about higher inflation. Therefore, the greenback will remain under pressure in the big picture supporting higher prints on the single currency.

GBPUSD – The pound found support at the 50-SMA as USD pulls back following the US bond yields, giving the pair further room to breathe. The downside remains limited for now as price holds above 1.3830. If the bullish momentum persists, we could see price retesting 1.39 today and higher.

USDJPY – Intraday bias in USD/JPY remains on the upside at this point, as sellers have so far failed to breach the near-term support at ¥105.60/70. However, further rise has also been capped by the double-top formation at ¥106.20 and by the end of the win streak in stocks, as concerns mount over the rising US treasury yields. A break of the ¥106.20 resistance is needed for the strong momentum higher to resume.

FTSE 100 – London’s FTSE100 index is seen opening slightly lower today, following a lower close on Wednesday, despite confirmation that the UK hit its vaccine target - vaccinating 15 million people by the 15th of February. FTSE futures are pointing lower, as the index is currently testing the 6700 support which if breached may trigger accelerated selling towards the key 6650 support. Moreover, annual results by Barclays earlier, showed a 38% slide in net profits for 2020, which may contribute to the ongoing pessimism today.

DOW JONES – The Dow Jones Industrial Average closed up 0.3% yesterday, as the strong upward momentum seems to be taking a breather, after the Fed noted that the pace of the economic recovery had moderated in recent months and that the path ahead will depend significantly on the course of the virus and vaccine roll-out. After failing to retest the 31720 high, the index is likely to pull back and test the 31470-support coinciding with the 200-period moving average. US initial jobless claims at 1330 GMT are scheduled to be released later today.

DAX 30 – Second consecutive close in the red for the German index, hitting our support target at 13900 in yesterday’s session, retesting that level in early trade today while still holding above it. Asian markets in the red, with the Dax 30 sectors, excluding industrials, printing lower, with an hourly close below 13900 support to favor lower prints with 13800 as closest support target. Eurozone Consumer Confidence expected today with consensus at -15.

GOLD – Stronger than expected economic data out of the US, with Retail Sales (MoM) coming in at 5.30% (consensus: 1.10%, previous: -0.70%) and PPI (excluding food and energy) at 1.20% (consensus: 0.20%, previous: 0.1%) sent the greenback towards the 91 mark, as the yellow metal hit our support targets at 1780 and 1770. All eyes on Initial Jobless Claims data today with analysts’ median estimate standing at 770k. An hourly close below 1780 to refresh bearish momentum, favouring a retest to previous lows and 1760 in extension.

USOIL – WTI Crude oil hit our resistance target, printing highs of $62.25pbl, as US oil production slumped by a record 40%, around 4Mbpd of production now offline, on the back of the unprecedented cold blast hitting Texas. Output in America’s biggest oil field, the Permian basin, is down between 65% to 80% with some analysts expecting losses to last for longer. A surprise drawdown in API inventories helped lift prices above the $62 handle with technical indicators signalling overbought conditions, favouring a pullback towards $61 support.