STATE OF THE MARKETS

Equities retreated on waning optimism. Global equities were mixed with major stocks indexes retreated lower after report on jobless claims in the US was worst than expected. Though markets cheered the fresh $1.9T stimulus plan from Joe Biden administration, rising cases of covid-19 globally and new variants discovered in Japan and Brazil, brought the fear and greed index lower. More than $256b flowed into the shorter US 5Y bond as investors were concerned on the long term. Yield for the 10 year rose to 1.13% as price fell.

The waning optimism however, was rebalanced with bullish signs from Chinese import data; which drove crude higher to close above $53.55/bl, while the yellow metal gold remain well bid above $1,845/oz as the greenback drove lower post Fed Powell speech of accommodative monetary policies.

The Feds chairman reassured that the US central bank is not raising rates anytime soon or reducing its bond purchases in the near term, which weigh heavy on the Dollar. Commodity currencies were back in demand for the short-term while medium term accounts were seen on profit taking. Positioning in the long term accounts suggested that Dollar short-covering is going to stay for quite some time.

OUR PICK – No new pick

No new pick going into weekend. Of our three picks this week, GBP/USD was stopped out, Gold and USD/CHF are still in play. We see weaker Dollar in the short term as markets digest the new stimulus plan, while medium and long term technical suggested that Dollar short covering is gaining momentum. Heavy bidding in the bond markets, as investors seeking higher yield might continue to buoy Dollar in the medium term.