Market Ahead

Stay up to date with critical market information courtesy of Pacific Union market ahead. Our market ahead is a great way to prepare for the upcoming trading day.

The Weekly Initial Jobless Claims showed a better-than-expected reading with 222,000, implying…

The Weekly Initial Jobless Claims showed a better-than-expected reading with 222,000, implying a decreasing rate of labor shortage

20211203
Share

Market Focus

After falling sharply for two consecutive days, the three major stock indices finally rebounded strongly on Thursday. The main reason comes from the fact that cyclical stocks have recovered some of their recent declines. The Dow Jones Industrial Average rose 617.75 points to 34,639.79; the S&P 500 rose 1.42% to 4,577.10; while the Nasdaq Composite Index, which is dominated by technology stocks, rose 0.8% to 15,381.32 points. However, the market is still facing doubts about the latest variant of COVID-19, Omicron, and the risk that the US government may shut down. In terms of data, as of the week of November 27, a total of 222,000 people had applied for initial jobless claims, which was better than expected, implying a decreasing rate of labour shortage and lowered willingness for employers to lay off staff.

As price levels rise, available labour lessens, and supply chains are blocked, the Fed has ceased using the term “temporary” to describe inflation. This suggests that the Fed may accelerate the pace of interest rate hikes.

In terms of stocks, after the Chinese aviation authority issued the 737 MAX airworthiness directive, Boeing rose 3.5%, which will pave the way for the aircraft to resume service in China. Kroger Co rose 9.9% after the retailer raised its full-year sales and profit forecasts due to continued demand for groceries. In addition, Okta’s encouraging earnings increased by 11.66%, and retail company Duluth Holdings also rose 18.40% due to its outstanding revenue.

Main Pairs Movement

The U.S. dollar gained some momentum on Thursday, thanks to optimistic data and the rise in US government bond yields, putting concerns on hold for the time being. In addition, there is news that the Fed may need to reduce the scale of asset purchases faster than expected. Due to the virus, vaccines and financial support, inflation is rising faster than expected. On the other hand, ECB policymaker Fabio Panetta has stated that inflation and the new pandemic wave are endangering the EU’s early recovery, although earlier this week he pointed out that there was no need to tighten monetary policy to control inflation because all this is “temporary”. Last but not least, the United States will release a Nonfarm Payrolls report on Friday, and investors should pay close attention.

The EUR/USD continued to stay above the 1.13000 level, but fell for two consecutive trading days. Basically, the currency pair is still in a downward trend. If the European Central Bank maintains a loose monetary policy, it will be difficult for the euro to rebound. After testing the 1.32210 level on Tuesday, GBP/USD is currently hovering around 1.1330. Like the euro, it is in a weak and sharp downward trend, although it rose by 0.17% on Thursday.

Gold fell to a new one-month low of 1,761.87 and rebounded moderately before the close. Crude oil prices fell to a new low in several months but rebounded. WTI is currently trading at $66.10 per barrel.  

Technical Analysis

EURUSD (4- Hour Chart)

After the previous day’s tepid slide to 1.130 level, EUR/USD regained upside traction and rebounded above the 1.133 area on Thursday. The pair was trading higher before pulling back to a daily low in the early European session. During the American session, the pair saw fresh buying and continued to climb higher. The renewed US dollar weakness is lending support to EUR/USD, which is currently rising 0.02% on a daily basis. For the Greenback, investors seem to have already digested Powell’s hawkish testimony on Wednesday, as the DXY index dropped 0.15% despite strong US macro data. The Weekly Initial Jobless Claims showed a better-than-expected reading with 222K, but failed to support the Greenback. In Europe, October’s Unemployment Rate in the euro area eased to 7.3%.

On the technical front, the RSI indicator is at 54 as of writing, suggesting tepid bull movement ahead. But looking at the MACD indicator, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price has dropped slowly from the upper band to the moving average. Therefore, the bearish traction could persist for a while. In conclusion, we think the market will be slightly bearish as long as the 1.1374 resistance line holds.

Resistance: 1.1374, 1.1464, 1.1608

Support:1.1258, 1.1186

GBPUSD (4- Hour Chart)

Following the rebound from the lowest level since December 2020 under the 1.320 level, GBP/USD is holding steady above 1.330 area amid mixed market sentiment on Thursday. The pair reached a daily top above 1.33 during the European session, but has pulled back and surrendered some of its intraday gains since then. At the time of writing, Cable remains in positive territory with a 0.25% gain for the day. The weaker US dollar across the board acted as a tailwind for the cable, as concerns about the new Omicron variant seemed to ease after WHO officials said that some of the early indications showed that most cases are mild. Therefore market mood moderately improved and favoured the risk-sensitive Sterling. On top of that, Brexit woes still remain as there are real gaps between the UK and European Union in their disagreement over the Northern Ireland Protocol.

On the technical side of things, the RSI is at 48 as of writing, reflecting the pair’s indecisiveness in the near term. As for the Bollinger Bands, the price is falling from the moving average, indicating that the pair may experience some bearish momentum. In conclusion, we think the market will be slightly bearish as long as the 1.3370 resistance line holds. Technical indicators for Cable have lost directional strength, bears may have a chance if the pair break below the next support at 1.3195.

Resistance: 1.3370, 1.3514, 1.3607

Support: 1.3195, 1.3106

USDCAD (4- Hour Chart)

USD/CAD advanced amid falling oil prices on Thursday, continuing its previous day’s rally to 1.283 area. The pair was trading lower during the Asian session, but then rebounded moderately to a daily top in the early American session. USD/CAD now remains steady under the 1.283 area amid improving risk appetite, currently rising 0.11% on a daily basis. The rebound witnessed in the US dollar pushed the pair higher, as more Fed policymakers now favour a faster taper, adding to the hawkish list. Meanwhile, WTI Crude Oil posted a 0.01% loss today after OPEC+ agreed to go ahead with its planned 400K barrel per day output hike in January, acting as a headwind for the commodity-linked Loonie.

On the technical side, the RSI indicator is at 61 as of writing, suggesting that the upside appears more favoured as the RSI is still above the midline. Looking at the MACD indicator, a golden cross just formed on the histogram, which indicated an upward trend for the pair. As for the Bollinger Bands, the price is rising from the moving average to the upper band, therefore the upside traction could persist. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.2849 resistance, with the next resistance sitting at 1.2949.

Resistance: 1.2849, 1.2949

Support: 1.2645, 1.2493, 1.2387

20211203
Share
Pack Up

US equities underwent their worst back-to-back collapse since October 2020

US equities underwent their worst back-to-back collapse since October 2020

20211202
Share

Market Focus

US equities underwent their worst back-to-back collapse since October 2020 as Fed Chair Jerome Powell reiterated his pivot to inflation vigilance and the omicron variant continued to spread, with the U.S. confirming its first case on Wednesday. In a very volatile session, the S&P 500 erased gains after climbing almost 2% in the first half of the Wall Street hours. Dow Jones slid 1.34% to 34022.07, and Nasdaq Composite plummeted 1.83% to 15,254.05. Airlines, cruise operators and hotels also slumped. Investors flocked to the relative safety of Treasuries, with the yield on the 10-year note down to 1.404%. 

On the market front, professional traders bailing from stocks as anxiety over the omicron variant and monetary policy roil markets. Hedge funds have gone risk-off in a major way just as the S&P 500 endured a massive two-day pullback. Net leverage, a measure of industry risk appetite that takes into account long versus short positions, fell to a one-year low this week, according to data compiled by Goldman Sachs’ prime brokerage. 

The move is in contrast to retail traders, who renewed their manic dip-buying after Tuesday’s rout, pushing stocks higher by almost 2% earlier in Wednesday’s session. Then, Jerome Powell reinforced his message that the Federal Reserve would keep inflation in check as officials confirmed the first case of the omicron variant in the U.S, sparking an afternoon selloff that left the S&P 500 with its biggest reversal since April 2020. 

Few corners of the market were spared, as small caps gave up a 2.5% surge to end lower by more than 2%. Bitcoin dropped below $57,000, oil hit $65 a barrel, and Treasuries rallied on demand for safety. The S&P 500 is now down 3.1% in two sessions and more than 4% from its last record on Nov. 18. 

Main Pairs Movement

Unlike the dismal stock markets, fears seem to have cooled down a bit for forex on Wednesday, resulting in major pairs holding on to familiar levels. The Greenback ended the day mixed, firmer against its commodity-linked peers but down against other safe-haven currencies. 

Cautious optimism came from the World Health Organization, as it said that current vaccines could still offer protection against the new Omicron coronavirus variant, preventing severe illness. Also, the WHO has reported that so far, the new strain seems to be causing milder symptoms and illness. However, the risk that the Fed will bring forward its taper remains, as Fed Chair Jerome Powell has declared the need to remove the word “transitory” while describing the U.S. inflation issue. 

The EUR/USD pair is trading around 1.1320, while GBP/USD stands at 1.3280, and both are at risk of falling further. The AUD/USD pair is trading at around 0.7110, while USD/CAD is pressuring daily highs in the 1.2830 price zone. USD/JPY and USD/CHF posted mild gains, and are up 0.15% and 0.21% respectively. 

Gold remains under pressure, currently trading at $1,780 a troy ounce. Crude oil prices edged lower, with WTI now at around $65.75 a barrel, and Brent at $68.50. 

Technical Analysis

EURUSD (4- Hour Chart) 

After dropping to a weekly low around 1.124 area, EUR/USD saw some buying and rebounded slightly on Wednesday. The pair was flirting with the 1.133 area most of the day and is now sitting in negative territory and holding above the 1.132 level. The renewed strength witnessed in the Greenback weighed on EUR/USD, which is currently losing 0.06% on a daily basis. Stronger US dollar across the board today dragged the pair lower, as the DXY index rose 0.02% amid upbeat market sentiment. The US ADP Employment Change for November showed that private payrolls rose by 534K, which is more than the market’s expectations. In Europe, concerns about the new omicron variant and the likeliness of lockdown in many countries may dampen the near-term outlook for the European currency and cap the upside for the EUR/USD pair. 

On the technical side, the RSI is at 59 as of writing, suggesting that the upside appears more favoured as the RSI is still above the midline. As for the Bollinger Bands, the price is consolidating between the moving average and upper band, indicating that the bullish traction could persist for a while. In conclusion, we think that the market will be slightly bullish as the pair is heading to re-test the 1.1374 resistance. A break above that level would target 1.1464. 

Resistance: 1.1374, 1.1464, 1.1608 

Support: 1.1258, 1.1186 

GBPUSD (4- Hour Chart) 

GBP/USD edged higher on Wednesday, ending its previous slide to the lowest level since December 2020. The pair stayed steady to the north of the 1.330 level for most of the day and touched a daily top in the American session. At the time of writing, Cable remains in positive territory with a 0.08% gain for the day. The recovery in sentiment for global equity and commodity markets acted as a tailwind for the British pound, which is one of the risk-sensitive currencies. Looking at economic data, the UK Manufacturing PMI came at 58.1 for November, which is slightly lower than estimates but did little impact on Cable. Meanwhile, during his testimony before the House Financial Services Committee earlier in the session, Fed Chair Jerome Powell also reiterated that it was appropriate to consider a faster QE taper. 

For the technical aspect, the RSI indicator is at 46 of writing, suggesting that sellers remain in control of the pair’s action in the near term. As for the Bollinger Bands, the price is sitting between the moving average and lower band, indicating that the downside momentum should be stronger. In conclusion, we think the market will be bearish as long as the 1.3369 resistance line holds. The hawkish tone from Powell could limit any further gains for the cable. 

Resistance: 1.3369, 1.3514, 1.3607 

Support: 1.3195, 1.3106 

USDCAD (4- Hour Chart) 

After the previous day’s rally to a two-month high near 1.284 level, USD/CAD preserved its upside traction and edged higher on Wednesday. The pair was surrounded by bearish momentum during the Asian session, but rebounded back above 1.278 area amid renewed US dollar strength. USD/CAD now continues to climb higher and is currently rising 0.26% on a daily basis. Rising expectations for a Fed rate hike continue to lend support to the greenback and USD/CAD, as Powell said that the Fed will discuss whether to accelerate tapering by a few months at their next meeting. On top of that, the pullback in crude oil prices from earlier session peaks weighed on the commodity-linked loonie and pushed USD/CAD higher, as WTI oil dropped 1.43% for the day.

On the technical side, the RSI indicator reads 60 as of writing, suggesting that the upside appears more favoured as the RSI is still above the midline. Looking at the MACD indicator, a golden cross is forming on the histogram, which indicates an upward trend for the pair. As for the Bollinger Bands, the price is shifting from the moving average to the upper band, therefore the upside traction could persist. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.2849 resistance.

Resistance: 1.2849, 1.2896

Support: 1.2641, 1.2493, 1.2387

20211202
Share
Pack Up

Buffeted also by anxiety around the coronavirus, the S&P500 just endured its…

Buffeted also by anxiety around the coronavirus, the S&P500 just endured its worst stretch of turbulence in more than a year

20211201
Share

Market Focus

Stocks dropped on Tuesday as volatility resumed after a brief rebound earlier this week, with investors contemplating the impacts of a new coronavirus variant and new comments from Fed Chair Jerome Powell. Both the S&P 500 and Nasdaq declined, while the Dow Jones plummeted about 650 points, or 1.9%, intraday on Tuesday. Shares of airlines, cruise lines and lodging companies considered to be some of the most exposed to virus-related disruptions each sank in early trading to reverse Monday’s gains.

Powell’s appetite for a faster tapering of Federal Reserve stimulus is casting him in a role financial markets haven’t seen since the 2018 hawk.

Stocks slid, short-term interest rates rose, and VIX surged Tuesday after the central bank chairman warned that elevated inflation could justify ending asset purchases sooner than planned. Buffeted also by anxiety around the coronavirus, the S&P500 just endured its worst stretch of turbulence in more than a year.

For investors, an urgent question is whether Tuesday’s congressional testimony was a watershed moment for the monetary policies that have helped the S&P 500 to effectively double since Christmas 2018. That’s when Powell’s last big pivot occurred — the dismantling of interest-rate hikes that made the fourth quarter of that year one of the worst for equities ever.

“Not only is he speaking in a more hawkish tone, but he’s dropping major policy implications almost without regard to how the markets may take them,” said Max Gokhman, chief investment officer at AlphaTrAI. “All of the predictability he’s previously tried to cultivate in terms of taper and liftoff scheduling is in question.”

Main Pairs Movement

The Greenback initially dropped during the European trading hours, but soon rebounded during the US session to reach weekly highs against most of its major peers. The U-turn of the dollar derived from the two main concerns yesterday – the newest COVID variant and the Fed Chair Powell’s testimony.

The euro pair is of the best performers against the Greenback, and is now trading at around 1.1340. Cable, however, plummeted to a fresh 2021 low of 1.3194. Safe havens posted gains on Tuesday, with USD/JPY dropping 0.33% and closing the day at 113.15, and USD/CHF plunging near 0.5% to a fresh 2-week low of 0.9158. Commodity-linked currencies are the worst performers. Aussie was last seen at 0.7123, down 0.11% compared to its opening price, and Loonie trades at 1.2780, even once jumped to 1.2837 intraday.

Gold plummeted after briefly advancing beyond 1,800, now trading at $1,775 a troy ounce. Crude oil prices also fell, with WTI at $66.70 a barrel, and Brent at $70.10.

Technical Analysis

EURUSD (4- Hour Chart)

After retreating from a weekly high to under 1.128 level, the pair EUR/USD gained heavy upside traction and rebounded sharply on Tuesday. The pair continued to be surrounded by bullish momentum most of the day, touching the highest level since November 16. However, the rebound witnessed in the US dollar weighed on the EUR/USD, which currently losing 0.08% on a daily basis. The concerns about the new Omicron variant and rising uncertainty on the potential impact on the global economy have dragged US bond yields lower, therefore keeping the greenback under pressure. In Europe, the Eurozone Consumer Price Index jumped by 4.9% in November, which is higher than market expectations. But the dovish ECB and rising Covid-19 cases might cap the upside for the pair.

On the technical side of things, the RSI indicator is at 49 as of writing, suggesting that the downside appears more favoured as the RSI is dropping below the midline. Looking at the MACD indicator, a diminishing positive histogram also indicates that the pair may experience some downward trend. But for the Bollinger Bands, the price is falling from the upper band, therefore a downward trend could be expected for the pair. In conclusion, we think the market will be slightly bearish as the pair failed to break the long as the 1.1374 resistance, and a break below 1.1186 could open the road for additional losses.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1263, 1.1186

GBPUSD (4- Hour Chart)

GBP/USD declined on Monday, surrendering most of its intraday gains amid the resurging US dollar. The pair was trading higher and touched a daily top near 1.337 in the middle of the European session, but started to see heavy selling after Fed Chair Jerome Powell’s speech. At the time of writing, Cable remains in negative territory with a 0.52% loss for the day. During the speech, Powell said that it would be appropriate to consider wrapping up the bank’s QE taper a few months sooner. The Fed would also discuss speeding the QE taper at the 15 December FOMC meeting. This has lifted the greenback sharply and put heavy pressure on Cable. Meanwhile, worries about the spread of the new coronavirus variant and the UK-EU impasse over the Northern Ireland Protocol might keep weighing on the cable.

For technical analysis: the RSI indicator is at 32 as of writing, suggesting that the bearish momentum should persist for a while before there’s a trend reversal. Looking at the MACD indicator, a death cross is forming on the histogram, which also points that the pair may experience some downward trend. As for the Bollinger Bands, the price dropped out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think the market will be bearish as the pair is eyeing a test of the 1.3188 support, a break below that level suggests more losses ahead for the cable.

Resistance: 1.3390, 1.3514, 1.3607

Support: 1.3188, 1.3106

USDCAD (4- Hour Chart)

The pair USD/CAD advanced to 1.283 area amid falling oil prices on Tuesday, regaining upside traction and staying in positive territory. The pair climbed to a two-month top near 1.281 level, but then pulled back moderately during the European session. USD/CAD has now rallied above 1.2800 on Powell’s hawkish remarks, currently rising 0.55% on a daily basis. Increasing risks of higher inflation and expectations for a faster bond taper act as a tailwind for the US dollar and push USD/CAD higher. On top of that, WTI oil dropped below $66 amid a deterioration in market sentiment, as Moderna’s CEO said that he believes the vaccine effectiveness would probably be less effective against the new variant. As for now, the dampened outlook for jet fuel demand will keep putting pressure on the commodity-linked Loonie.

For the technical aspect, RSI indicator 65 figures as of writing, suggesting that the bullish momentum should persist for a while before there’s a trend reversal. As for the Bollinger Bands, the price is from the moving average to the upper band. Therefore, the upside traction could persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.2849 resistance.

Resistance: 1.2775, 1.2849

Support: 1.2641, 1.2493, 1.2387

20211201
Share
Pack Up

More Than Trading