The markets stated out the new week with a slight risk on move but the sentiment has turned lower during the Asian session. Commodity prices are surging alongside bonds, while weekend trade saw another substantial move higher in crypto-currencies. The markets are worried that bond yields will move higher quickly and this will put pressure on stocks and debt. Leverage players will be forced to take action in such an environment and this can exacerbate any moves that take place, a lot like the moves in GameStop earlier this month. In the US, the White House is said to be considering the merits of a financial transaction tax following the GameStop short squeeze. A White House spokesperson has said, “the potential impact of a financial transaction tax on GameStop-like trading deserves additional study and can be part of a greater evaluation of such a tax for revenue and market stability”. Also in the US President Biden said that there will be enough vaccines for the public by the end of July with an average of 1.7 million Americans being vaccinated every day. Relations between the US and China are also a focal point at present with a Senior Chinese Official saying that the root cause of the strain between the two was the previous administration. Chinese diplomat Wang Yi said that the US and China should take care of their own business while working together for humanity. And added that the previous administration took measures to suppress and contain China which have caused immeasurable damage to bilateral relations. He also called for an end to unreasonable tariffs on Chinese goods and said that China stands ready to work with the US on Covid, Climate and the Worlds economic recovery. Media outlets in the UK have reported that the UK’s Health Secretary has said that the Government is considering having Facebook pay for news content. Also in the UK, Prime Minister Johnson is expected to outline the Governments Lockdown exit strategy later today. The expectation is that he will announce schools will reopen on 8 March. The Japanese 225 Index closed higher by 0.46% today. The Shanghai Composite is trading down -1.45% while the Hang Seng is trading down -1.04%. USDJPY is trading at 105.785 while Gold trading at 1794.00 currently. European Futures are trading lower by -0.4%.
Today the calendar is very light on data releases. German Ifo Business Climate is expected to show a rise to 90.5 from 90.1. The German Buba Monthly report will also be released. In the afternoon, the US CB Leading Index data will be released.
The EURUSD pair is now testing support around 1.2100 after finding resistance at 1.2350 last month. The pair found support at the 1.1602 level in September and at the 1.1615 level in November creating an important support zone. The 1.2100 area is acting as initial support followed by the 1.2040 and the 1.2012/1.2000 area which formed a low last week. Below this, the 1.1966 and the 1.1920 level may provide support ahead of 1.1900. Support has been seen around the 1.1850 and 1.1800 levels followed by the 1.1740 area. Below 1.1700 the 1.1650/1.1640 area failed support to the pair. Below the current level support may be seen at 1.1600 and 1.1550 ahead of the 1.1500/1.1495 area. The 1.1422 lower high may offer support above 1.1367. Further support may be seen at 1.1300 and 1.1240 followed by 1.1200. Any break down below these levels may lead to a move towards 1.1150 and the 1.1145 level. Below this level of 1.1150 area, support potentially comes into play at the 1.1120 level ahead of 1.1100. Further support may arise at the 1.1020 area and the November 2019 low at 1.0981. The 1.0900 level and the 1.0870 area may provide some support but the 1.0700 round number may be used if the selloff breaks the low area around 1.0800. Price action has found support around the February low of 1.0777, using this area to build a base and creating further support at 1.0727.
The breakout higher from the 1.1900 in December, resulted in price action testing up to the 1.2350 area in January. Price is trading around 1.2135 and may use 1.2150 as potential resistance and 1.2169 as last week’s high. Above this level, the 1.2190/1.2200 area may offer resistance to a push higher. A push back up to this area may find it resistive followed by 1.2250. A move back higher from there may see some resistance at 1.2270. Beyond this, the 1.2280 area may be resistive. The 1.2300 level is followed by potential resistances at 1.2330 and 1.2350. Above these the 1.2375 level comes in play followed by 1.2400, 1.2450 and 1.2500.
German 30 Index
The German 30 Index sold off from the 14135.00 all-time highs and is now trading back at that level at the 13860.00 level. Price has surged higher to start the month and pushed above the previous all-time high but ran into resistance and declined. A continuation of the bullish trend would require buyers to firmly break the resistance around the 14100.00 level and push price higher above the 14150.00 area. The price would then look to find potential support and push on to test towards 14250.00 and 14500.00. Beyond this level, the 14750.00/14800.00 may offer further resistance ahead of 15000.00. With the focus drifting towards silver, buyers may be given some room to attempt a run back higher as equities trade close to their all-time highs.
The market is moving lower today and 13820.00 may be supportive in the short term. The 13675.00 level may also provide support followed by the 13500.00 level and 13460.00. Below this level 13420.00 may be supportive on the trend line after it was tested at 13277.00 a week ago. Support at 13200.00, 13000.00 and 12920.00 may be used followed by 12650.00 in the event that price sells off. A build-up of support from 12500.00 to 12300.00, may be used by market. A confirmed loss of the 12340.00 area opens the way to 12000.00 followed by 11500.00. Below this the 11340.00 area comes into play followed by 11000.00. The 10850.00 region has been used as support and resistance on the chart and may be engaged by traders. Below this level, the 10135.00/10000.00 area may also provide support but a loss of this area may open the way for a retest on the 9375.00 zone followed by the 9000.00 support area. A breakdown from this area may engage the supporting lows at 8917.00 and 8436.00, with a loss of this support potentially opening the way to test the 8000.00 level followed by the 7700.00 area.