Reflation trade sends riskier asset classes surging
Financial markets moved into risk-on mode this week as traders and investors increased bullish bets towards the global economy, and the prospect of more economic growth once the COVID-19 lockdown ends. The foreign exchange market saw some major moves this week, as safe-have currencies were aggressively sold, such as the yen and Swiss franc. Commodity-related currencies broke sharply to the upside as the reflation trade caused a major repricing of global asset classes. The US dollar broke its recent correlation with US bond yields and fell while US bond yields in the United States soared to multi-month highs.
- The EURUSD is only bullish while trading above the 1.2160 level, key resistance is found at the 1.2250 and 1.2315 levels.
- The EURUSD is only bearish while trading below the 1.2160 level, key support is located at the 1.2130 and 1.2100 levels.
Bitcoin had one of its most volatile trading weeks ever, as the top cryptocurrency started the new week around the $56,000 level and then crashed by around $10,000 towards the $46,000 support level. The BTCUSD pair posted its largest ever bearish daily candle as a major raft of profit taking kicked in due to bearish comments from US Treasury Secretary Yellen and major pricing misfunction on the crypto exchange Kraken. Bitcoin then recovered back to the benchmark $50,000 level as PayPal rival Sqaured Inc announced that were going to invest more than $100 million into Bitcoin. Data showed that a record amount of BTCUSD long positions were liquidated during this weeks price plunge.
- The BTCUSD pair is only bearish while trading below the $46,500 level, key support is found at the $44,500 and $43,000 levels.
- If the BTCUSD pair trades above the $46,500 level, buyers may test towards the $53,000 and $55,000 resistance levels.
Commodity markets experienced a major push this week as the reflation trade caused traders to bet that commodities would soon start to rise alongside inflation. The price of Copper rose to it highest level in over ten years this week, as the metal broke above the $400.00 resistance level. The price of Tin also moved to its highest level in a decade, as traders increased their interest towards industrial metals. WTI and Brent oil also moved to levels not seen in eleven months as fears over a supply glut and bad weather pushed the price of oil higher. The price of gold also went into recovery mode this week and crept back above the $1,800 resistance level and then gave back its gains.
- The XAUUSD pair is only bearish while trading below the $1,800 level, key support is found at the $1,760 and $1,720 levels.
- The XAUUSD pair is only bullish while trading above the $1,800 level, buyers may test towards the $1,815 and $1,825 resistance levels.
The British pound moved to its highest trading level since April 2018 against the US dollar this week, as British PM Boris Johnson outlined the United Kingdom’s path out of COVID-19 lockdown. PM Johnson noted that UK schools would start to open in March, and the UK would take tiered approach to end lockdown over multi-months as the government attempted to ease the country towards normaility. The GBPUSD pair spiked towards the 1.4240 resistance level as traders turned bullish towards sterling in a major way. Stop loss triggering in the EURGBP pair was also seen a reason behind the spike to the 1.4240 level.
- GBPUSD is only bearish while trading below the 1.4000 level, key support is found at the 1.3930 and 1.3860 levels.
- GBPUSD is only bullish while trading above the 1.4000 level, buyers may test towards the 1.4240 and 1.4350 resistance levels.