Vaccine optimism pushed global stocks higher last week, with Nikkei completing the most impressive rally. Commodity currencies ended generally higher as led by New Zealand Dollar. Yen and Dollar ended as the worst performing ones. Though, no key levels were taken out, except in NZD/USD and NZD/JPY. Dollar index is also holding on to an important near term support.
While the British Pound ended as just the third weakest, the late selloff is worth a mention. The clock is ticking as the Brexit transition period is going to end in a month’s time. The upcoming days could see some violent move in Sterling, in particular against other European majors.
Japan returning to the glory days of 80s and 90s
Talking about stocks, Japanese Nikkei deserves the first mention as it hit new 30-year high last week, following the strong upside breakout this month. Japan has likely emerged from the three “lost decades” already, and it’s returning to the glory days of the 80s and 90s.
Sustained break of 61.8% retracement of 39260 to 6994.89 at 26934.72 will solidify this optimistic case. We might finally hear Nikkei making record highs again (well, “again” for those who lived through the golden age), in the coming year or two.
How that would reshape BoJ’s position as the everlasting dovish central remains to be seen. That could also directly and indirectly change the dynamics between Yen’s exchange rate and global risk sentiments, which, we felt, has already started somewhat.
DOW hit 30k level for the first time ever
DOW’s up trend continued last week and hit 30k level for the first time ever. 38.2% projection of 18213.65 to 29199.35 from 26143.77 at 30340.30 presents an important test to the sustainability of the up trend. Decisive break there will pave the way to 61.8% projection at 32932.93 and above, with prospect of upside acceleration.
However, break of 29231.20 support will be the first sign of rejection by the mentioned projection level. Focus will then be turned back to 55 day EMA (now at 28334.21). Sustained break there will be an alarm of near term trend reversal.
Dollar index still holding on to 91.74 support for now
While Dollar was solid off broadly last week, no important near term support level was taken out. The levels include 1.2011 resistance in EUR/USD, 1.3482 resistance in GBP/USD, 0.7413 resistance in AUD/USD, 0.8982 support in USD/CHF, 103.17 support in USD/JPY and 1.2928 support in USD/CAD.
Such development is reflected in Dollar index too, as it’s gyrated further lower, but barely held on to 91.74 support. Current downside momentum doesn’t warrant a strong break of 91.74 yet. Instead, break of 55 day EMA (now at 93.08) will extend the consolidation pattern from 9.174 with another rise through 94.30 resistance. However, firm break of 91.74 will resume whole down trend from 102.99.
EUR/GBP and GBP/CHF to react to last-ditch Brexit negotiation
Sterling could be subject to much volatility in the coming days as EU negotiation Michel is now in London for a four day make-or break Brexit nego