USD Weakness Returns & Bitcoin Tops 48,000 Overnight

Okay, very good morning to you. It's coming up to 7 AM on Tuesday, the 9th of February. Just going to give you a quick rundown of the major fundamental news and the view for the day ahead, what to look out for. Also going to incorporate quite a few charts into the briefing this morning given the fact that it's actually pretty quiet on the news front. Um, but first things first, I just wanted to mention this. This is the Amplify Live new Twitter handle. So just to keep you informed, and I will convey this on Twitter later, but given the growth of Amplify, we've now split into 3 distinct different brands given our business areas. So for the trading division, we are now officially called Amplify Live. So this is our new handle. You can just search for Amplify Live, or it's @AT_AmplifyLive. So if you do follow the Amplified Trading official Twitter handle, I now strongly encourage you to follow this one if you want to stay on top of anything market or trading related. Everything is going to go down this handle going forward. The Amplified Trading official one will be kept completely corporate news going forward, so do check that out. Otherwise, look, let's get straight into the briefing, talk about this morning And what we had yesterday was a higher close on Wall Street for the 6th consecutive session. The S&P, Dow, NASDAQ 100 all finishing up in a relative uniform fashion between 0.6 to 0.7% higher. Uh, we've generally maintained that in the overnight session. Crude oil is trading firmly through $58. Uh, precious metals saw a bit of rebound. We've had a key break through a long-term trend line in the Dixie, which is pressuring prices overnight in the Asia-Pac session for the dollar, which is in turn supporting both major currency pairs here with EUR/USD up 21 top left and Cable up 31 at the moment. So yeah, let's, let's talk about why is this happening. Um, well, it's a fairly clear and positive picture really that's been driving markets for the last couple of sessions. And really, this can be summarized by fiscal— further fiscal stimulus is coming in the US. Whether or not it's going to be quite the lofty heights of $1.9 trillion that Biden originally proposed isn't really the point. The idea is that even if that's watered down, there's a bit of a range of what Wall Street banks are expecting, but it's still well in excess of a trillion dollars. That will be coming at some point in the near future. That in itself has led to a bit of an ongoing, uh, kind of reflation trade. We've seen breakevens suggest then that that is being priced in, and that is helping underpin some of the resurgence in the likes of gold prices. You've then got a declining rate in cases of COVID-19. Now, in terms of latest statistic, the US reported a 25% drop new cases of COVID-19 to around 825,000 last week. That's the biggest fall in, in America since the start of the pandemic in one single week. Health officials did say that they are still worried about new variants of the virus that could slow progress, but nonetheless, that number definitely is a positive catalyst as well. You've then had the earnings season, which I think generally has gone a little bit to the wayside, but otherwise has been particularly strong, particularly if you're looking at the likes of the mega-cap tech names, which of course are such large components that underpin the composition a lot of these stock indices. And then you've got an accelerated vaccination program. Remember when Joe Biden came in, he's definitely ramped that up. It's already well underway in the UK. Europe has been a bit of a laggard, but obviously vaccination programs are ongoing. And so all of these things have been definite, clear, positive catalysts. Uh, definitely reading a couple articles this morning, there's one in the FT which I shared on the Amplify Live Twitter account talking about the potential for commodity supercycle. The idea then, the early phase of this is somewhat of restocking in a lot of these developed markets, but then the demand underpinned for commodity prices given the period ahead of renewed economic growth that we could be in store for Probably a little bit early to be talking about supercycles in the commodity space, but, uh, definitely that is a factor that's helped lift some of these metals across the spectrum from precious to base at the moment. Um, so look, let's look at a few of the charts to encapsulate some of these ideas, and let's start with equities. So have a look at the S&P 500, and from a price performance point of view, we have had 6 consecutive days of gains, and we'll look at the calendar in a moment. The calendar from an economic point of view, is very quiet. And that always makes me think, well, perhaps we've got a bit of a period here of consolidation, uh, if anything, just a bit of a soft pullback from the highs then, given the fact that the market has, you know, moved higher so consistently, uh, for a fairly long period of time. So here, sticking in the overnight Asia-Pacific session, actually petered out at all-time highs at 3913.25 in the S&P future. But wouldn't be too much of a surprise to see us just drift back down until we get into the North American trading hours and kind of consolidate around these areas. 3900, a pretty nice area of downside support. You've got the pivot level, you've got the previous yesterday afternoon high with the prior overnight Asia-Pac session high coming in. So all around this kind of 3900 to 3902 area. And then given the way that this market tends to technically in price pattern form, you kind of have like these areas of, I guess, consolidation of range which can then define areas of potential key interest. So here, as just mentioned, if we go further down than 38,8650, and you can see price responding quite a lot around these areas at 75, 25, and then again down here at 38.68. Now in terms of today's session, I definitely don't see us getting down here, but could we come back down to these types of levels? These are solid areas of support, particularly down here at 86.50, where if we got down there, I think just, um, all the more reason then for people to just pick up the pullback for the eventual push back up to all-time highs. So still remaining fairly bullish of mindset in equities for all the aforementioned reason. Um, now that doesn't mean just blindly jumping in at the top of these levels, but just looking for the pullbacks. Then if you were looking at any type of long strategy, the buyers still to the upside. Otherwise, elsewhere, you know, following on, gold— excuse me, oil and equities have pretty much been moving in a uniform way because they're both moving off the same narrative at the moment. And here's a look at WTI crude. I mean, it's just had such a great move initiate since the beginning of the month. So the last several trading sessions, we've just gone from around a 52 handle all the way up, and we're trading at 58.54, the front month futures at the moment. Now we've gone through the next kind of near area of technical relevance, which would have been that high back here, which was the 22nd of Jan, and we're above that this morning, which means then that technically not a great deal until we get further up to that 21st of Jan 2020 high, which was also that high print that we had back on the 6th of December 2019. And that pretty much is the $60 handle. I mean, that level would be actually $59.73. So upside— now we're up here, and given the fact that we've gone through a couple of these previous areas of resistance, then perhaps we can just continue moving up until $60 as well. Psychologically, perhaps the market has that as a target in mind. for this, this run up that we've had in oil prices. So be keeping an eye on that as well today. Otherwise, I did mention the Dixie, and, and really the Dixie is an important catalyst for, uh, oil and metals as well as the direct dollar-based currency pairs. And this was that long-term descending kind of trend line from May-November test that when we broke last week above it was quite a key catalyst for subsequent price movement in those assets. What we've had in the overnight session is we basically last night very late closed below it, and then we've pushed back down beneath it. And I think that is important. So the Dixie in the overnight session did trade, um, quite heavy at around 2 AM London time. I think that was more just confirmation of the move back below this area. So So the Dixie is down about a quarter percent on the session today, but I do think that this means then this market's now a little bit more susceptible for that prevailing dollar weakness trend to materialize, irrespective of the facts of this ongoing kind of reflation trade happening in the fixed income space. There has been a bit of a breakdown in the correlation of what you would normally perceive to be then firmer dollar with higher moving yields. That isn't particularly holding true right now. So I don't think there's much in a way to stop now this dollar trading a little heavy. The Fed, remember, is the final catalyst of the key component that's helped elevate these markets, which is they're in accommodative mode for the foreseeable future. And that dovishness lends its hand then, irrespective of these positive elements happening economically, for this dollar to continue to remain on the back foot. So with that being said, quite key to watch then the major currency pairs So if we're looking at EURUSD here, we're in a very tight range here in the overnight Asia-Pac session. So really just keeping an eye on this as European markets get fully up and running in a short while. We've just had out now as I speak, it's just gone 7 AM, the German trade balance. The export number +0.1, expectations were for -1%. So I'm quite keen to look at the upside here because if we do get that consistent dollar weakness come through, then we'll be looking out for a breakout of this tight range. Perhaps then a push up in the euro takes us back up to the 121 handle, which on the daily pivots looks like that's the R2, but was also, um, combined then those— that double top that we had of price action going back to the beginning of the month on the overnight session of the 2nd. So consequently, it's a dollar day, it's not really so euro-based, and that meaning then the cable is also making some gains on the upside. You can see here, this was some of the price pattern. I know the chart's a little bit messy here, but this is something we were looking at last week. Uh, look at that perfect test on that trend line, something that Sam will be proud of, um, to the tick actually. So let me just remove some of these just to really make it crystal about that cable trend line. So here, going back to— this is a year-to-date trend line from the beginning of the a year on the 4th. We've had the retest on the 21st of Jan, 27th, and then absolutely to the tick overnight. And we've had that in a late Asia-Pac session here on cable. So that's going to be a key area to watch. I'd have that trend line on for any further push up should we then start to see that dollar weakness come through. Just above around this trend line, you've obviously got the 138 handle in the futures I start looking on a daily chart here on cable. Obviously the upside looks a little bit blue skies now, um, there's not nothing too much here technically in the way. So looking more psychologically on these handles, if we start reverting back to type, which is just generally the pound cushioned by the fairly successful and speedy rollout of the vaccination program, irrespective of some minor secondary data on the retail sales front talking about how bad that's been. I don't think that's necessarily new information, and I think markets are willing to look beyond the current state of high street sales in the UK on the back of the vaccination program being successfully adopted and that bringing further forward sooner, irrespective of the fact that yes, we are aware of variant risk in the virus, but the economic recovery ensuing in the UK. And then quick look in the metal space, just, just really gold I wanted to have a quick look at. And I was just looking here at gold on a 30-minute chart and looking at the high that we had. So let me just give you a— tighten this a little bit. This is that range that we were trading, and that was a clear double top from the 21st of Jan and the 29th of Feb, um, and that was the, the range high at the time that we were trading before the breakdown in price that we saw on the 4th of this month. But I'm using that high from the 29th, so firstly just drawing a Fib retracement to the low that we printed last week on the 4th, and that 61.8 Fib retracement does come in at around the exact same levels as this support area on the 29th and resistance here on the 3rd. Um, on, on two occasions and in the overnight Asia-Pacific session. So quite a key area here of resistance with this recovery that we have seen in the yellow metal that I'll be watching today. Any breakout above here, then prices could pop higher quite quickly. I'd be looking at 47.7, which is the previous highs and lows in this period here back on the 2nd of February. And then just looking at these previous price points, probably up then to $55 would be the next target, and then $18.60 above there. So using these previous prices that we were seeing back at the beginning of the month as potential upside targets under those scenarios. Again, dollar weakness kind of generally helps that, as does the whole idea of the reflation trade and therefore an inflation hedge and bringing back the shine, if you like, to, to gold prices for the moment. Um, so yeah, technically some quite interesting charts. Um, you know, European indices, I'd be looking at kind of the same setup to a certain degree. So the DAX futures trading a little heavier this morning, but again, just having a look here, well, quite an interesting level the DAX is just flirting with actually. We still got an hour or so till the cash open, but the futures market Um, and the DAX is a very volatile character, so I'd definitely keep an eye on that there at the 14,033 level. Any breakdown there, if it does trade heavy, um, kind of got an area that's quite nice just around the S1 as support, as a target, uh, on any quick move down to 14,000. S1 and those previous highs and lows would be a good target, um, on any short or area of then potential support for eventually equities to just generally— again, the bias remains to the upside, um, irrespective of any short-term, what I would classify more profit-taking moves than anything really fundamentally driven. Um, Italian equities obviously have been the biggest beneficiary. They're still performing very well at the moment. They did yesterday at least on the back of Mario Draghi looking more positive given some of the weekend narratives that he's going to be able to form It's looking like a technocratic government in Italy, so BTP futures still remaining fairly elevated around the top end of their recent range of last week, and Italian yields then consequently still trading lower at the moment. Bitcoin will finish— got to mention it, right? Tesla and Elon Musk obviously investing $1.5 billion, and generally, you know, a big corporate name legitimizing cryptocurrency in that way is just going to fuel probably further gains then into the crypto space overall in the short term. We had a big pop in price yesterday. We've basically— Asia's taken that baton and just followed that up to $48,000 seen in the overnight session, and Europe here has just pressed it up to $49,000 as we've come in early doors. Will we go to $50,000? Well, it's not a question of will. Yes, we will. Will it happen today? Possibly. Will it happen at some point in the future? Absolutely. So this market tends to trade very much in a behavioral and technical way. I think just looking at the price action from yesterday, you can see we— after we popped higher through $40,000, fresh all-time highs, where do we go? What's the instant target? Well, 45,000, round figures. Comes back down, pulls back, finds support area. Where does it find it? 43,000. Comes back up for a test, a period of hesitation on price, 45,000. Break up, where does it go? 48,000. So it's all very round figure driven when we're trading a market that has never been this high. So whether we get to 50,000 or not, uh, just remember that generally speaking on these types of days, I mean the initiation of this move to the high is around a 21% gain in the price of Bitcoin. Now that does mean that Bitcoin, as we have seen in the past, is susceptible to pretty strong pullbacks of several percentage points, perhaps even as much as 10% on a day when it has gone up 20%. Before then, the next kind of move higher then ensues. So yeah, just be careful of coming into this market at its relative highs trying to get long when actually you might have missed the boat here. And actually then you've just got to wait for a strategic point of it coming back down. Now whether that's 48,000, whether that's 46,000 here from that overnight Asia pack low, or whether that's 45,000, which obviously is a very— probably the most appetizing key technical level here is 45 and 43 in the short term. Any pullback to there, I'd probably anticipate people to come back in and start buying it up again. Um, so, and pull back here to then move it back higher, or we come back down to this area to move it back higher. All right, quick look at the calendar and we'll wrap it up. So what have we got today? And again, just to stress, not much of me talking about news, of course, because there really isn't any major headlines for me to speak of other than the general overall sentiment as we, we've discussed. Um, but as far as the day is concerned, one of the main things I'm looking out for— what it is, a quiet calendar day, hence the reason why I really wanted to go through those charts in a bit more detail. I think it's definitely going to be more responsive to general trends and technicals today given the lack of fundamental catalysts, because overall then, all of those macro drivers still remain in place. Nothing's really changed there. The only thing is markets have got a little bit more expensive, if you like. So there's a degree, particularly with equities, or whether or not you might have a bit of a pullback on this push higher that we've had. But again, just to say that it doesn't deter from the fact that still remain relatively bullish in direction. Um, so this morning is pretty quiet now as German data is out the way. This afternoon equally so, nothing major coming out. And then the oil inventory is not coming from the API until after market, of course. Speaker-wise, ECB's Lane talking this afternoon at 3 PM London. Fed's Bullard, non-voter, but is speaking on the economy and monetary policy. And is a vocal chap. He's speaking at 5 PM London time, so perhaps worth keeping an eye on as well. And then for any fixed income traders, you've got the $58 billion in the 3NO auction later on this evening at 6 PM London time. All right, that is it. So have a good session ahead. Any questions at all, um, feel free to reach me on the Discord room. If you're watching this on YouTube, don't forget to like and subscribe to the channel. Much more coming. If you missed this, uh, the session the guys recorded yesterday about Tesla and Bitcoin, check out on the channel. I'm sure you'll enjoy it. Thanks very much, guys. Have a good day.