Two trades to watch: S&P500, GBP/USD

Rising yields drag on S&P 500 boost USD, GBP/USD eyes 1.39

Rising yields drag on S&P500

After closing 2.4% lower on Thursday the S&P 500 is on the decline once again and now trades 3% below its all time high of 3950.

Investors are increasingly betting that the US economy will overheat on the back of a strong vaccine led recovery and with the Biden administration’s $1.9 trillion stimulus package causing the Fed to intervene.

US treasury yields rose to 1.6% the highest level since February 2020, taking the shine off stocks and boosting the USD. Today’s yields have eased back slightly to 1.5%.

US personal spending & income data due in the US session.

Where next for the S&P 500?

The S&P 500 reached an all time high of 3950 mid February and has bee trending lower ever since.

It trades below its 20& 50 sma on the 4 hrs chart. The 20 sma crossed below the 50 sma in a bearish signal and the RSI is supportive of further losses.

The S&P 500 has bounced off support of the lower channel of the ascending channel and horizontal support at 3805, today’s low. A move below this level is needed for the bears to target a much deeper selloff towards 3665 the yearly low.

GBP/USD heads for 1.39

GBP was one of the top performing G10 currencies across the start of the week meaning it had the furthest to fall as the USD storms the board.

USD strengthens as the bond market rout deepens

BoE Governor Andrew Bailey expects an economic contraction in Q1 

Where next for GBP/USD?

The overnight selloff saw GBP/USD fall below the lower band of three week ascending trendline which could be the first sign that the pair has topped.

The RSI is in bearish territory but not yet oversold, indicative of further weakness.

Immediate support can be seen at 100 sma at 1.3900 before the bears target 1.3830 low 17th Feb before 1.3750 resistance turned support from late January.

Any attempt at a rebound would need to break back above support turned resistance at 1.3950 ahead of the key 1.40 level which if the 50 sma, the low band of the ascending trendline and a key psychological level. A move above here could see the bullish move gain momentum once again.

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