The US stock markets painted a very individual picture yesterday with the US 500 and Russell Indices near flat but slightly down, the WS 30 Index higher and the NAS100 Index down substantially. The divergence between the indices in the US is telling with a large sector rotation taking place. Large technology companies are seeing their share prices drop while value stocks are rising in price. Bitcoin has been the subject of a large liquidation in price over the last couple of trading sessions with a high of $58,000 on Sunday being retraced and the crypto now trading at $50,000. Market volatility is beginning to increase again and FX prices have led the race with key breakouts taking place in 2021. Bonds are also a key battleground between bulls and bears and the rise in yields is triggering rebalancing across other asset classes. The pace of the rise in yields has unnerved markets somewhat and this will be a key factor in assessing volatility in the days and weeks ahead. With commodity prices also rising there is also a widespread and growing fear that inflation is about to take off. Markets are relatively calm this morning outside of Bitcoin. Good news has come from Johnson and Johnson who say that they can deliver 100 million vaccines by the end of H1. The FDA is expected to grant their vaccine candidate approval as early as the coming weekend. The vaccine is 66 percent effective against the virus overall, but showed just 57 percent efficacy in a trial in South Africa, where a problematic strain, B.1.315, has spread widely. That strain has been reported in 10 U.S. states. The total deaths from Covid-19 in the US exceeded half a million yesterday. The UK released its timeline for re-opening schools yesterday which are expected to open on 8 March. The stay at home order is expected to be lifted on 29 March while non-essential shops and hospitality are expected to be allowed to reopen on 12 April. People are being asked to work from home until 21 June. The Japanese 225 is closed today. The Hang Seng is trading up 1.19% while the Shanghai Composite is trading down -0.17%. Gold is trading at 1810.00. USDJPY is trading at 105.110.
This morning Eurozone Final CPI is expected to come in at 0.9% versus a previous 0.9%. Eurozone Core CPI is expected to remain at 1.4% from 1.4%. This afternoon, US HPI is expected to remain at 1.0%. US FED Chair Powell is due to testify on the Semi-annual Monetary Policy Report before the Senate Banking Committee, via satellite during the US session.
The GBPUSD pair is currently trading at the 1.4085 level and is testing yesterday’s high as resistance. The pair has been moving higher in an uptrend since it located support at the 1.2676 level in September. The pair had moved back up through the 1.3266 level of support, which was the high for 2020 and pushed higher to the resistance around 1.3624, which will now be a key level of support. Support is also in play at 1.3862 and 1.3778/1.3760. The September high at 1.3480 may be used as support. A break higher above the current level may seek to engage the 1.4100 area. From there the 1.4145 area may slow an advance on the 1.4200 round number area. A breakout above this level may see price attempt to test 1.42500 as the trend continues.
Support may appear around the 1.4000 round number or the 1.3957 level followed by 1.3900. The 1.3860 area may also be used as support followed by 1.3750 and 1.3660. Below this the 1.3630 area may offer support ahead of 1.3600. The 1.3566 level was used as support and is now an important higher low. From there the 1.3540 and 1.3500 levels may be of interest while a loss of 1.3450 opens the way to 1.3400 followed by 1.3355. Below these levels, the 1.3300 area comes into play. A loss of this area may trigger selling into potential supports at 1.3270, 1.3200 and 1.3100. Price broke back up through the 1.3000 round number earlier this month and has found support at 1.3092 and 1.3118, straddling the key 1.3100 area. This zone along with the 1.3000 area may be crucial support going forward. A loss of this area may lead to tests on 1.2925 and 1.2900. The price may then test 1.2800 and 1.2780, with a move back down through the 1.2730 area opening the way to potential support at 1.2500 followed by 1.2487, with further support around 1.2255/1.2230. The pair rallied from the 1.2335 area, after breaking support at 1.2387.
UK 100 Index chart
The UK 100 Index is trading around the 6630.0 area at present after creating a lower high at 6800.00. The index broke out of a bullish falling wedge pattern in November. A move through resistance at 6000.00 and the falling trend line, confirmed the false breakdown and led to a breakout of the bullish pattern, leading to a test on the June highs. The market is now trading around the 6630.00 area after finding resistance so far at 6960.00. There may be resistance at 6700.00 followed by 6750.00 and 6800.00. The 6820.00/6850.00 area may provide resistance followed by 6900.00 and 6960.00 as last month’s high. The 7000.00 area has been used as resistance and support previously and is followed by 7136.00. The previous high at 7733.00 may also be a potential source of resistance to any advance. Beyond this level, the 7800.00 area may become a target in the medium term.
The index is using the 6315.00/6300.00 area as support and this created a bounce and short squeeze in price early this month. This is the major supporting area on the chart. In the short term, support may form at 6600.00. The 6520.00 level has also been used as resistance and support is in play around 6480.00. Further support may be seen at 6470.00, 6430.00 and 6400.00. A move down through this support may unravel the current rally, breaking the sequence of higher lows. Support at 6370.00 is followed by the important 6315.00 level and the 6304.00/6300.00 area with further support at 6260.00/6250.00. There is also potential support forming at 6200.00, 6105.00 and 6000.00 which may be retested. The trend line is tracking below the 6000.00 area at present and for now at least bulls appear to be in control. Below this, the 5850.00 area may be used as support, along with 5770.00 which followed by 5700.00. The low of 5500.00 created a new lower low but price rallied from that support in what was a bullish move for risk assets. The 5700.00 area has potentially become a key support zone, with a higher low at 5660.00. The index created a prior higher low at 5575.00 which may also be used as support. A breakdown of this level may open the possibility of a move down to 5350.00 followed by 5210.00 and the 5000.00 area. A loss of this support zone may open the way to the low around 4800.00. Price may selloff for a test on the zone between 4500.00 and 4250.00 and there may be a considerable reaction if this zone is broken, opening the way for a move towards 4000.00.