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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
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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
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US inflation expectations have fallen for the third consecutive day, testing the…

US inflation expectations have fallen for the third consecutive day, testing the lowest level since November 5 at the end of the North American session on Monday

20211130
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Market Focus

The US stock market rebounded moderately this Monday, with the S&P 500 index rising about 1.32%. Fearing that the newly discovered variant of Covid-19, which has been given the omicron designation, will trigger travel restrictions and global lockdowns, damaging global growth prospects, the index fell 2.3% on Friday to close below 4600 points. This is the first time it has closed below 4,600 so far in November. The index then returned to the 4,600 level to close at 4,655.26. The Nasdaq Composite Index rose 1.9% to 15,782.83, and the Dow Jones Industrial Average rose 236.6 points to close at 35,135.94.

Although the new variant may become more infectious and vaccine-resistant, it may be less harmful to the health of people who have been vaccinated or previously infected. As a result, the Covid-related stock market’s decline has become increasingly moderate, and the length of decline has become shorter.

The information technology sector performed well under the Standard & Poor’s 500 Index, with Apple (AAPL) moving up 2.19% and Microsoft (MSFT) trading up 2.11% on today’s stock market. In addition, the semiconductor industry performed better, with Lam Research (LRCX) going up 6.01%, Nvidia (NVDA) rising 5.95%, and Applied Materials (AMAT) moving up 5.53%.

Electric vehicle leader Tesla (TSLA) rose more than 5% on Monday. Electric car peer Rivian (RIVN) rose about 3.5%, while Lucid Motors (LCID) rose 1.8%. China’s electric vehicle leader Li Auto (LI) soared after reporting earnings, while Xiaopeng Motors (XPEV) rose more than 4%.

Main Pairs Movement

US inflation expectations have fallen for the third consecutive day, testing the lowest level since November 5 at the end of the North American session on Monday. As inflation fell sharply, the Greenback was also under pressure. Last Friday, the U.S. dollar index fell below the 96 level, but then successfully defended it and returned to above that level.

Although the pace of the US dollar has slowed, the trading prices of the US dollar against major competitors have mostly increased. The EUR/USD is trading around 1.12906, and the GBP/USD is working hard to defend the 1.3300 threshold. The USD/CAD traded at 1.27373, the AUD/USD was close to the year’s low of 0.7105 and the USD/JPY closed at 113.529.

After hitting $1,800 per ounce, gold fell slightly, ending at a trading price of approximately $1,782 per ounce. Crude oil prices also fell after reaching 72.9 closing at $70.04 per barrel.

Technical Analysis

EURUSD (4- Hour Chart)

After last Friday’s rebound to a weekly high near 1.133, EUR/USD lost its upside traction and declined on Monday. The pair was trading lower and dropped to a daily low in the early European session, now staying in negative territory under 1.129 level amid concerns about the new variant omicron. EUR/USD was undermined by the resurging US dollar and is currently losing 0.37% on a daily basis. The falling US dollar now rebound from last week’s low and pushed higher to above 96.40, as investors continue to favour the safe-haven Greenback and assets due to rising uncertainty following the discovery of the new omicron variant of the coronavirus in southern Africa. In Europe, the dovish ECB and rising Covid-19 cases might continue acting as a headwind for the pair.

On the technical side, the RSI indicator is at 50 as of writing, suggesting that there is no obvious trend now. But looking at the MACD indicator, the diminishing positive histogram indicates that the pair may experience some downward trend. As for the Bollinger Bands, the price sits near the moving average after falling from the upper band, therefore the downward trend could persist. In conclusion, we think the market will be bearish as long as the 1.1331 resistance line holds. A break below 1.1186 would target 1.1185, which was touched in July 2020.

Resistance: 1.1331, 1.1374, 1.1460

Support: 1.1186, 1.1185

GBPUSD (4- Hour Chart)

GBP/USD declined on Monday, falling from the 1.336 area and surrendering its modest intraday gains. The pair gained some bullish momentum and touched a daily top during the European session, but started to see heavy selling amid renewed US dollar strength. At the time of writing, the cable remained under pressure with a 0.26% loss for the day. Market mood deteriorated during the American session, which underpinned the US dollar and dragged Cable lower. The previous strong recovery in the equity markets earlier in the day has also lost its strength. However, expectations for an imminent interest rate hike by the Bank of England in December might limit the losses and cap the downside for the cable.

For technical analysis: the RSI is at 32 as of writing, suggesting that the bearish momentum should persist for a while before there’s a trend reversal. The diminishing positive histogram in the MACD indicator 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 ready to test the 1.3279 support, a daily close below that level suggests more losses ahead for Cable.

Resistance: 1.3390, 1.3514, 1.3607

Support: 1.3279, 1.3188

USDCAD (4- Hour Chart)

After last Friday’s rally to two-month highs, USD/CAD pulled back and dropped to the 1.273 area amid surging oil prices on Monday. The pair declined sharply in the early Asian session, but then rebounded back moderately and recovered most of its intraday losses. USD/CAD remains in negative territory and is currently losing 0.20% on a daily basis. WTI oil surged 3.42% today as investors considered that last Friday’s drop was overdone as the fluctuation was also exacerbated by thin liquidity conditions due to the Thanksgiving holidays in the US. Moreover, there still not enough is yet known about the new variant. Therefore the recent bullish momentum witnessed in oil prices supported the commodity-linked Loonie.

For the technical aspect, the RSI indicator is at 61 as of writing, suggesting that the upside appears more favoured as the RSI still holding above the midline. As for the Bollinger Bands, the price is consolidating between the upper band and moving average, indicating the USD/CAD has an upward bias. In conclusion, we think that the market will be bullish as the pair is testing the 1.2775 resistance. Concerns about decreasing demand for oil amid fears about the global spread of the Omicron Covid-19 variant might keep acting as a tailwind for the USD/CAD pair.

Resistance: 1.2775, 1.2849

Support: 1.2641, 1.2493, 1.2387

20211130
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Commodities plunged harshly amid the American trading hours, especially crude oil, which…

Commodities plunged harshly amid the American trading hours, especially crude oil, which was down more than 10%

20211129
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Market Focus

Global equities plummeted on Friday, with a new COVID variant discovered in South Africa raising concerns that new lockdown policies could be imposed, hindering the recovery of the economy once it gets widely spread. In Asia, Japan’s Nikkei 225 dropped 2.53%, and Hong Kong’s HSI slumped 2.67%. In the US, Dow Jones slid 2.52% to 34900.79, and the Nasdaq Composite declined 2.23% to 15491.66.

The World Health Organization is urging caution after two South African health experts, including the doctor who first sounded the alarm about the omicron variant, indicated that symptoms linked to the coronavirus strain have been mild so far.

“Understanding the level of severity of the omicron variant will take days to several weeks,” WHO said in a statement Sunday, adding that “there is currently no information to suggest that symptoms associated with omicron are different from those from other variants.”

The latest variant wreaked havoc in global markets on Friday, and early signs in Asia suggest an uneasy start to the new week as traders digest omicron’s initial impact and spread. Equity futures for Japan, South Korea and Australia pointed lower, while currencies were generally steady. The South African Rand strengthened.

The U.K. government will convene an urgent meeting of Group of Seven health ministers on Monday to discuss the latest developments, according to the country’s Department of Health. In the U.S., President Joe Biden will give an update also on Monday, the White House said.

Main Pairs Movement

After a warm and cosy Thanksgiving holiday, the global forex market got smashed as the unexpected fresh panic toward the newly found COVID variant frustrated sentiments. Commodities plunged harshly amid the American trading hours, especially crude oil, which was down more than 10%. The dollar index also dropped 0.74% due to concerns that Fed may postpone the interest rate hike schedule to July from June 2022.

Benefitting from the weakness of the Greenback, most major currencies posted gains against their American peer. Cable ended its weeklong decline and gained a mild 0.14% to 1.3337, and the euro pair even surged around 100 pips to regain the 1.1300 level. Safe-haven currencies were the best performers during Friday’s chaos, with USD/CHF plummeting 1.21% and USD/JPY diving to 1.82%, once breaching the key level 113.00. On the flip side, commodity-linked currencies got left behind oil prices crashed. AUD/USD went down 1.04%, while USD/CAD surged 1.11%.

Gold price got a roller-coaster ride on Friday, as the price first stretched north on the Europe session, and then rolled down accordingly after the US dollar’s fall amid the dismal Wall Street opening. Oil price got wrecked the most, as both WTI and Brent nosedived more than 10%, back to the price levels two months ago. WTI closed the day at $68.16, and Brent at $72.86.

Technical Analysis

EURUSD (4- Hour Chart)

EUR/USD advanced and gathered upside traction on Friday, continuing its previous rebound from 2021 lows under the 1.119 level. The pair started to see heavy buying in the early European session and touched a fresh weekly high near the 1.130 area at the time of writing. EUR/USD was supported by US dollar weakness, currently rising 0.87% on a daily basis. The falling US dollar is mainly due to the resurgence of coronavirus concerns, as a new variant appeared in Southern Africa. Investors now worry that if the new Covid-19 variant does spread globally and damages the global economic recovery, this will leave the Greenback more vulnerable to dovish Fed policy expectations. However, gains for the EUR/USD pair seem to be limited, as the dovish ECB and rising Covid-19 cases both acted as a headwind.

On the technical side, the RSI indicator is at 62 as of writing, suggesting that the bullish momentum should persist for a while before there’s a trend reversal. The MACD is also sitting way above the signal line, which means a strong upward trend for the pair. Looking at the Bollinger Bands, the price rose out of the upper band, therefore a trend continuation could be expected. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.1374 resistance.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1186, 1.1115

GBPUSD (4- Hour Chart)

After dropping to a yearly low near 1.328 area, GBP/USD rebounded slightly back on Friday. The pair was trading lower and struggled in negative territory during the Asian session, but was then surrounded by bullish momentum after the European session started. At the time of writing, the cable has reversed its intraday loss with a 0.02% gain for the day. GBP/USD gained some bullish traction today amid weaker US dollar across the board, as the benchmark 10-year US Treasury bond yield is falling nearly 7% and weighing heavily on the greenback. Meanwhile in the UK, after the new Covid-19 variant appeared in Southern Africa, the British Health Secretary Sajid Javid announced on Friday that flights from six African countries will be banned from now on.

For the technical aspect, the RSI indicator is at 39 as of writing, suggesting that the downside appears more favoured as the RSI still holds below the midline. As for the Bollinger Bands, the price is falling after touching the moving average, therefore the downward trend should remain. In conclusion, we think the market will be bearish given that its technical correction today could be temporary since the fundamental outlook doesn’t yet point to a steady recovery.

Resistance: 1.3390, 1.3514, 1.3607, 1.3698

Support: 1.3188

USDCAD (4- Hour Chart)

Following its previous three-day slide, USD/CAD rebounded sharply to the 1.278 area on Friday amid falling oil prices. The pair continued to climb higher most of the day and touched the highest level since September 22. USD/CAD had pulled back since then and surrendered some of its intraday gains, currently rising 0.86% on a daily basis. Despite the Greenback tumbling 0.75% today, USD/CAD still rallied amid risk-off market mood. The new South African Covid-19 variant, which has more mutations and evades vaccines, are pushing countries across the world to start implementing travel restrictions. Therefore the concerns about fuel demand sent the oil prices below $70 while underpinning the USD/CAD pair.

For technical analysis: the RSI is at 66 as of writing, suggesting the bullish momentum should persist for a while before there’s a trend reversal. Meanwhile, the MACD is now sitting above the signal line, which means an upward trend for the pair. As for the Bollinger Bands, the price has moved out of the upper band, dropping immediately back inside the band, therefore the suggested strength is negated. In conclusion, we think the market will be bearish as long as the 1.2828 resistance line holds. The pair is likely to experience technical correction after accelerating the upward move.

Resistance: 1.2828

Support: 1.2645, 1.2585, 1.2493

20211129
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