US Stockmarkets Have Losses As Yields Rise

Mar 04 21, 11:58 GMT

The USD rose somewhat yesterday against a number of its counterparts, while US stockmarkets suffered some losses as US yields tended to rise. Nevertheless, it should be noted that it’s the second day of a rather subdued FX market with low volatility providing maybe the chance for other currencies to take hesitantly the initiative. Attention is now turned to Fed Chairman Powell for his comments on the US economy before a virtual Wall Street Journal Jobs Summit. We expect the Fed’s Chairman to reiterate the worries of the bank for the US employment market and generally retain a rather dovish tone, which may weaken USD somewhat and provide some support for US stockmarkets. On the other hand, the market may also be eager to hear any comments he may have on the rising yields and how the Fed plans to deal with them. As for financial releases we highlight today the initial jobless claims figure for the last week of February as the market may start positioning itself ahead of the release of February’s employment report tomorrow. It should be noted that the ADP employment report for February disappointed the markets as did also the ISM non-manufacturing PMI for the same month, as both indicators underperformed market expectations at their release yesterday.

Nasdaq tumbled yesterday, breaking consecutively all of our support levels, now turned to resistance and stopped just short of the 12680 (S1) support line. We maintain a bearish outlook for the index, as long as the price action remains below the downward trendline which characterized yesterday’s movement. However we must note that the index reversed its downward direction at the 12680 (S1) support line on the 26th of February, highlighting its importance. Currently the RSI indicator below our 1-hour chart is below the reading of 30, hence it may be considered oversold by some traders. Should the bears actually maintain control over Nasdaq’s direction, we may see the index’s price action breaking the 12680 (S1) support line and aim for the 12520 (S2) line and should that be also broken the way is paved for the 12370 (S3) support barrier. Should the bulls take over, we may see the index breaking the prementioned downward trendline aim if not break the 12845 (R1) resistance line and continue higher aiming for the 12975 (R2) resistance level.

Pound gains after Sunak’s speech but not against the USD

The pound tended to resist the strengthening of the USD and at the same time gained against the EUR, CHF and JPY yesterday. On UK fundamentals, the Chancellor of the Ex-Chequers Sunak delayed any steps of fiscal tightening, to provide further relief for the UK economy. Increased spending and easing taxation could add further £73 billion in the UK economy until 2023 which are to be retrieved at a later stage by increasing taxation to its highest since the 60’s as reported by media. On the other hand, the EU said it will take legal action against the U.K. for breaching their Brexit deal, as tensions between the two sides escalated and we expect further headlines on the issue today. We expect fundamentals to continue to play a key role for GBP’s direction given also the absence of any high impact UK financial releases today.

GBP/USD maintained a sideways motion yesterday leaning on the 1.3990 (R1) resistance line. We tend to maintain our sideways bias currently, yet today’s fundamentals on both sides of the pair may alter that. The RSI indicator below our 4-hour chart is at the reading of 50, implying a rather indecisive market. Should a selling interest be displayed for cable, we may see the pair aiming if not breaking the 1.3835 (S1) support line, which hasn’t seen any price action since February 18th and if so aim lower . Should the pair find fresh buying orders along its path, we may see it breaking the 1.3990 (R1) line and aim for the 1.4145 (R2) level.

Other economic highlights today and early Tuesday:

Today during the European session we note UK’s construction PMI for February, and Eurozone’s retail sales and unemployment rates for January. In the American session, we highlight the release of the weekly US initial jobless claims figure as well as the factory orders growth rate for January.

US 100 Cash H1 Chart