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Stocks slumped around the world as investors rushed into haven assets after…

Stocks slumped around the world as investors rushed into haven assets after the delta coronavirus variant cast a pall over the economic recovery, while tension between the U.S. and China escalated

20210720
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Market Focus

Stocks slumped around the world as investors rushed into haven assets after the delta coronavirus variant cast a pall over the economic recovery, while tension between the U.S. and China escalated. In a reversal of the reopening trade that has powered this year’s equity rally, cyclical companies bore the brunt of the rout on Monday. Commodity, financial and industrial shares led to losses in the S&P 500, which fell the most in two months. The Dow Jones Industrial Average had its biggest decline since October, while small caps extended a slide from March’s peak to nearly 10%. After recently plunging to pre-pandemic levels, the CBOE Volatility Index, or VIX, soared.

The resurgence of Covid-19 is unsettling global investors, who are considering whether new lockdown restrictions will sap the economic rebound and reverse an equity rally that had driven stocks to a record. Matt Miskin, the co-chief investment strategist at John Hancock Investment Management, told Bloomberg Television that the move to “higher-quality assets” such as Treasuries is justified. Americans should avoid traveling to the U.K. because of a surge in that nation’s spread of Covid-19, the U.S. government and health officials warned.

“Risk aversion is firmly in place as the Delta Covid variant spread is triggering a flight to safety,” wrote Edward Moya, senior market analyst at Oanda. “Equities were ripe for a pullback given Wall Street agreed that this is ‘as good as it gets’ for peak earnings, economic growth, monetary stimulus. It is hard to hold risky assets over the short-term now.”

Geopolitical jitters also resurfaced on Monday after the U.S., the U.K. and their allies said the Chinese government has been the mastermind behind a series of malicious ransomware, data theft, and cyber-espionage attacks against the public and private entities — including the sprawling Microsoft Exchange hack earlier this year.

Main Pairs Movement

The dollar index flirts with the 93.00 level amid the spreading risk-off sentiment across global markets. The greenback beat most of its major rivals except for JPY, which was also boosted by risk aversion. The upcoming Summer Olympics on Friday may also be a strong catalyst.

The euro pair slumped during the early European session and regained some of its losing grounds after the opening of the American trading hours, closing the day with a mild loss; commodity-linked currencies plummeted as the poor performance of stocks and commodities. Both antipodean pairs dropped over 0.5%, while Loonie surged over 1% as CAD being weighed by the severe decline in the oil price.

Cable experienced a huge plunge yesterday mostly due to the pessimistic Brexit news. News over the weekend suggested that the UK will demand EU more flexibility over the Northern Ireland Protocol. UK Brexit Minister David Frost is said to be preparing an announcement on the matter this week. When asked about the protocol, Frost said that it will always have to be a treaty due to the special situation of Northern Ireland, adding that “the question is what is the content.”

US 10-year Treasury Bond Yield dropped below 1.200%, the first time since February. The gold price was volatile, with the yellow metal once priced below $1800 a troy ounce but ended the day with mild gains. Crude oil prices plunged amid the dismal market mood and the announcement of the OPEC+, which finally reached a deal to increase output, coupled with slowing demand. WTI trades at $66.30 a barrel, and Brent settles at $68.90.

Technical Analysis

GBPUSD (4-hour Chart)

Sterling once fell to the daily lowest at 1.3654, the level was the last spot in Feb 2021. At the moment, the dollar hovered momentum from its safe-haven demand as the market worry the variant virus is getting out of hand, while the UK is suffering from Brexit woes. News over the weekend suggested the UK will demand EU more flexibility over the North Ireland Protocol. Furthermore, UK has reported roughly 40Knew contagions and 10 death as the country lifted most Covid-10 restrictions on freedom day. For the technical aspect, the RSI indicator has drop below 30 that showing sterling steeping in a diabolical over sought sentiment. On the other side, 15- and 60-long SMAs have death cross in an earlier session that also cripple the bull side.

If the market continuously goes down, we expect the next downside support will be found in 1.36 as a psychological spot. However, as the overly plummet in a day market and reached the over sought territory, we can’t rule out the market will gain a slight rebound. Therefore, the first resistance is setting at the price cluster zone at 1.3745 which is also a critical support level during the last consolidation pattern.

Resistance: 1.3745, 1.3896

Support: 1.3665, 1.36

AUDUSD (4- Hour Chart)

Aussie got struck badly by risk-off sentiment by variant virus then the lowest point in more than seven months after governor extended lockdown measures to contain the pandemic outbreak, and pan-commodities market were having an onerous condition as well. The copper futures market has slumped over 2.8% intraday and other industrial metals are also downbeat. From the technical perspective, despite the RSI indicator was a record 31.6 figure, the pair remaining a vital situation. Meanwhile, 15 and 60 long SMA retaining descending way to lower low. On the downside, if the pair fails to trade above recently low at .7323 level, it could hand over the first to next lower stage over even below .7300 level.

Resistance: 0.7415, 0.7492

Support: 0.7323, 0.73

USDJPY (4- Hour Chart)

Japan’s yen once dipped to 109.06 level, which last time has seen since May 26, as markets were driven by risk aversion mode while variant worries rose. At the same time, the Dow Jone shed over 900 points, its largest one-day for the year, as heating U.S. inflation fueled speculation the Fed will revoke monetize support earlier than expected. U.S. Treasuries yield overwhelming to 1.176 with contraction -1.2% roughly in daily. Japan will release National inflation data during the upcoming Asian session.

For the technical side, the RSI indicator shows 35 figures that hover some upside momentum for the short term, yet still under bearish expectation. Other than this, 15 and 60 long SMAs indicators are retaining a downward slope. In the light of the suggestion, we still expect the yen will extend the bearish movement at least for a short run. On the downside, we foresee 109.36 will be the first immediately support, if break through the first pivot support, the yen wound hobble move to the 109.04 level.

Resistance: 109.713, 110.1571

Support: 109.36, 109.04

20210720
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OPEC+ and its allies agreed to increase more oil supplies to the…

OPEC+ and its allies agreed to increase more oil supplies to the market, boosting output by 400,000 barrels daily each month from August

20210719
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Market Focus

US market fell as the concern of inflation raised and the Treasury yields fell for a three-consecutive week. Energy and materials shares led the S&P500 lower while Amazon extended its retreat from all-time highs, sending the Nasdaq 100 lower on Friday. US stocks market erased an earlier gain this week after a report showed the University of Michigan’s preliminary sentiment index dropped to 80.8 in July from 85.5 in June. Investors wondered how long the US Fed could remain dovish stance as many countries, including Canada and New Zealand, are turning hawkish.

OPEC+ and its allies agreed to increase more oil supplies to the market, boosting output by 400,000 barrels daily each month from August; this compromise eventually ended a two-week spat between the United Arab Emirates and Saudi Arabia. In the meantime, the compromise or the truce also eases a looming supply squeeze and reduces the risk of an inflationary oil price surge.

China signals to end the $2 trillion US stock listing juggernaut. These years, many technology firms have flocked to the US stock market, due to a friendly regulatory environment in one of the world’s biggest economies. However, with the US-China tension heats up, China decides to increase the requirement for all businesses trying to go public in other countries. As a result, Hong Kong will become an alternative for Chinese companies who plan to list in other countries.

Main Pairs Movement

The British Pound edged lower, trading in the near July’s lows at 1.3755 at the end of the week as the Covid-19 cases resurged to another record. While the pound was down, the US dollar regained strength after the US Retail Sales surpassed expectations by 0.6%.

The precious metal, gold, erased gains, declining 0.94%, as the Fed Chair Jerome Powell defended the stimulus plan, suggesting that it is still too early to scale back stimulus despite the inflation runs at uncomfortable levels at the moment.

The Aussie dropped 0.77%. on Friday as the US dollar regained strength amid risk. Sentiment and the better-than-expected US economic data. In the absence of high-tier Australian economic releases, the USD’s market valuation continues to impact the currency pair.

USDCAD climbed 0.67% to its highest level since April at 1.2615. Not only the US economic data has driven the US dollar, but also the falling crude oil prices have fueled USDCAD’s upside on Friday.

Technical Analysis

XAUUSD (Daily Chart)

Gold first with daily lows, trading around the 1815 region. Gold pulls back from weekly tops after hitting the resistance at 1829 and the upper bound of the Bollinger band. The outlook remains bullish on the daily chart as gold continues to trade steadily above the 20 Simple Moving Average. In the meantime, the MACD sustains its positive tone, lending supports to bulls. One thing to consider is that the retreat from the highs is not caused by the overbought scenario. To the upside, if a break of the resistance level at 1829 is successful, then gold will have some potential to move further north, 1876. The downside pressure will occur if gold trades below the 20 Simple Moving Average.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD battles around 1.1800 after mixed US economic data. From the technical perspective, EURUSD looks to consolidate slightly below the 50 Simple Moving Average, suggesting that the pair is suffering from the downside momentum on the 4- hour chart at the moment. Additionally, the RSI is outside of the oversold territory, indicating that there is room for more falls. On the downside, if the pair fails to trade above the bearish SMA, then it will have the potential to aim for the next support at 1.1704. On the upside, the pair needs to trade above the SMA to change its current bearish stance.

Resistance: 1.1837, 1.1919, 1.1985

Support: 1.1704

GBPUSD (4- Hour Chart)

GBPUSD is pressured below the 1.3800 level after the release of US Retail Sales, which upbeats the estimates. GBP suffers from downside on the 4- hour chart, trading below the 20 and the 50 Simple Moving Averages whilst having a negative MACD. The pair is expected to continue falling as the RSI has not yet reached the oversold territory, giving room to decline further. However, the decline of GBPUSD might not persist as the pair has reached the lower bound of the Bollinger band, which is due to a pullback. That being said, the price action looks to fall between 1.38 and 1.3744 for the next trading days.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3744, 1.3675

20210719
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U.S. stocks declined and Treasury yields turned lower again as Fed Chair…

U.S. stocks declined and Treasury yields turned lower again as Fed Chair Jerome Powell’s persistent dovishness raises concern about the sustainability of the economic recovery

20210716
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Market Focus

U.S. stocks declined and Treasury yields turned lower again as Fed Chair Jerome Powell’s persistent dovishness raises concern about the sustainability of the economic recovery. Communication services, energy, and technology shares weighed on the benchmark S&P 500. Growth favorites that led the recent rally such as Amazon.com and Google parent Alphabet dropped from recent all-time highs, sending the Nasdaq 100 lower (-0.70%, or -101.82). Dow Jones plummeted intraday but rebounded and closed the day with mild gains (+0.15%, or +53.79).

For a second day, Federal Reserve Chairman Jerome Powell defended the central bank’s stance to keep providing support to the U.S. economy even as inflation runs at uncomfortable levels. “This is a shock going through the system associated with the reopening of the economy and it’s driven inflation well above 2%, and of course we’re not comfortable with that,” Powell told the Senate Banking Committee Thursday.

The Fed chair called the price developments “unique” in history and said the central bank is closely watching to see whether its forecast that the high inflation will prove temporary is correct, or whether it threatens to be long lasting. “So we’re trying to understand the base case and also the risks,” he said.

This was Powell’s second round of testimony this week on Capitol Hill. On Wednesday, he was peppered with questions about surging prices from lawmakers serving on the House Financial Services Committee. Powell said the surge in inflation so far had been concentrated in a limited number of areas, such as used car prices, and reiterated that he expects those increases to be transitory.

Jerome Powell speaks during a Senate Banking Committee hearing in Washington on July 15.” To the extent that it’s temporary it wouldn’t make sense to react to it,” he said, though officials don’t know how much longer price pressures from these sources would remain elevated. “We also don’t know whether there are other things that will come forward and take their place,” he said.

The Fed is currently buying $120 billion of assets per month — $80 billion of Treasury securities and $40 billion of mortgage-backed debt – and has pledged to keep up that pace “until substantial further progress” has been made toward its goals of maximum employment and 2% inflation.

Main Pairs Movement

Lower than expected Chinese growth undermined the market’s sentiment at the beginning of the day. The sour mood extended during US trading hours, with the dollar making the most out of it, gaining ground against most of its major rivals.

US Federal Reserve chief Jerome Powell testified for a second consecutive day on monetary policy before Congress. His dovish stance added to the dismal sentiment, alongside mostly soft US data.

The euro pair hovers around 1.1800 while Cable approaches 1.3800, after flirting with 1.3900 earlier in the day. Michael Saunders, a policymaker from the Bank of England said that during the upcoming months, they would discuss whether to curtail the current assets purchase program and/or take further policy action next year. He clarified that if the “bank rate does rise in the next year or so, it is likely that any rise would be relatively limited.”

Commodity-linked currencies also edged lower, with both antipodean pairs dropped around 0.75%, and CAD being the worst performer against the greenback amid persistent oil weakness. WTI extended its slide and finished the day around $71.50 a barrel, while Brent dropped around 1.72% in the previous day and trades at 73.24 as of writing.

Gold prices consolidated weekly gains, ending the day at $1,828.50 a troy ounce. US 10-year Treasury Bond yield proceeded yesterday’s decline, plummeting near the 1.30 level.

Technical Analysis

XAUUSD (Daily Chart)

Gold remains positive after benefiting from the Fed’s dovish monetary policy. Gold extends its bullish tone toward 1830, the highest since June. From the technical aspect, as gold continues to trade above the 20 simple moving average, its near-term trend is bullish. To the upside, if a break of 1829 is successful, then the upside momentum is expected to extend further north toward 1876 since the RSI is far away from the 70 reading; at the same time, the upside momentum is supported by a strongly positive MACD. On the other hand, gold will become a negative tone if it falls below the 20 SMA, around the 1790 level.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD remains pressured around 1.1800 level as the Fed Powell maintains a dovish stance. The pair holds near its daily lows, turning its near-term momentum into a negative tone on the 4- hour chart. After declining below the 20 and 50 simple moving averages, the pair fails to attempt running above them. EURUSD remains bearish as the RSI has not yet reached the oversold territory, providing rooms to extend further south. If the selling interests continue, then the pair has some potential to head toward the support at 1.1704. On the other hand, the pair needs to climb above the simple moving averages first to reclaim its bullish tone.

Resistance: 1.1837, 1.1919, 1.1985

Support: 1.1704

GBPUSD (4- Hour Chart)

GBPUSD trades below 1.3850 after the Bank of England urges cutting some supports to the UK economy. From the technical perspective, after trading in between the resistance of 1.3926 and the support at 1.38, GBPUSD looks to consolidate this week so far. The short-term momentum turns bearish as the pair trades below the 20 simple moving averages and the midline of the Bollinger band on the 4- hour chart. On the downside, the pair is expected to head toward the immediate support level at 1.38; if a break of the hurdle occurs, then the pair will have some potential to move further south, contesting 1.3744.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3744, 1.3675

20210716
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