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During Powell’s testimony in the House, he repeatedly said the central bank…

During Powell’s testimony in the House, he repeatedly said the central bank stands ready to change its policy if inflation expectations overshoot

20210715
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Market Focus

US equities edged slightly higher on Wednesday as Fed Chair Jerome Powell reiterated that the current price surge is temporary. The Nasdaq and Dow Jones Industrial Average index both climbed 0.13%, while the S&P 500 index gained little as 0.05%. On the earnings front, Bank of America failed to deliver upbeat earnings, while Wells Fargo & Co. beat analyst estimates. The 10-year US Treasury yield retreated 7 basis points to 1.35%.

During Powell’s testimony in the House, he repeatedly said the Fed believes price increases are linked to recovery in pandemic most impacted industries, and the central bank stands ready to change its policy if inflation expectation overshoot. Regarding demand and supply mismatch in the labor market, he commented such mismatch should be temporary, noting that extra unemployment insurance will soon expire for most states, so it won’t be a factor for much longer. Powell was also asked about the increase in house prices, one of the most critical sectors that elevated recent US CPI. He said the Fed has limited capacity to do anything about it, and the purchase of MBC should not cause any material impact to the housing market.

Bank of Canada kept interest rate unchanged at 0.25%, and here are Bloomberg’s key takeaways from its monetary policy report:

  • The central bank will cut its bond purchases by a third to C$2 billion a week.
  • Governor Tiff Macklem emphasized that many drivers of higher inflation are temporary and include supply bottlenecks that will be resolved.
  • There’s still a lot of room for growth in the labor market.
  • Macklem said nothing would change investors perceptions of divergence with Fed. And he seems to be fine with BoC as an outlier.

Main Pairs Movement

Kiwi dollar soared 1.28% on Thursday as RBNZ announced it will reduce monetary stimulus. Governor Adrian Orr said it will halt bond buying under its Large-Scale Asset Purchase program by July 23rd. This surprising move prompt speculators to expect some sort of rate hikes as early as this August.

The hawkish announcement from the Bank of Canada initially delivered a decent boost to the Canadian dollar, gained as much as 0.68%. However, the oil-linked currencies pared all of their gains as crude oil prices tanked. The UAE has finally reached a preliminary deal to resolve its standoff with OPEC+, newly set baseline for UAE is 3.65 million barrels a day from May 2022, marked a 0.48 million barrels increase from the current level. The increase in overall supply weighed down on the WTI and Brent crude oil futures, plunged 2.82% and 2.26% respectively.

US dollar was on the back foot against its G-7 peers, with the dollar index dipping 0.37%. The retreat was attributed to Powell’s comment to water down heated discussion of potential early Federal Reserve asset purchase tapering, explicitly stated: “While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue.”

Technical Analysis

XAUUSD (Daily Chart)

The precious metal, gold, jump to one-month tops, 1820 region, after the Fed Chair Jerome Powell’s dovish comments. After three days of consolidation, gold seems to have confirmed a near-term bullish trend. The upside momentum is expected to keep up its strength as the positive MACD is getting solid and the RSI is not yet in the overbought territory, providing gold rooms to extend further north. The next resistance is pegged near 1829; if a breach of 1829 is successful, then it will head toward the next hurdle at 1876 before reclaiming 1900. On the downside, the near-term trend will turn bearish if gold trades below the midline of the Bollinger band or the 20 SMA, around the 1787 region.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD recaptures 1.1820 level after Fed Powell’s dovish comments. From the technical perspective, EURUSD pulls back after reaching the lower bound of the Bollinger band on the 4- hour chart; however, the intraday bias remains bearish since the pair still trades below the 20 and 50 simple moving averages. At the moment, the pair is contesting its minor resistance at 1.1837; if the pair can breach 1.1837, then the bias will become bullish. The pair has some potential to penetrate as the RSI has not reached the overbought territory, giving some room to move upward. That being said, the recovery can extend but needs to trade beyond a critical Fibonacci resistance level at 1.1837.

Resistance: 1.1919, 1.1985

Support: 1.1837, 1.1704

GBPUSD (4- Hour Chart)

GBPUSD trades toward 1.3900 amid the UK’s strong inflation data and Powell’s dovish comments. From the technical aspect, the intraday bias turns neutral after the previous slides. The support pivot at 1.3800 successfully holds the ground, resulting in a momentum change in GBPUSD. At the time of writing, the pair hovers around, 1.3858, the midline of the Bollinger band; the pair is lacking of directions as the MACD is currently neutral and the RSI reading is around 50. If a break of the midline of the Bollinger band occurs, then the pair will have some potentials to contest the next immediate resistance at 1.3926; on the other hand, if the pair fails to breach the midline, then it will potentially head toward 1.38, turning back to bearish mode.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3744, 1.3675

20210715
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Six months into his presidency, Joe Biden is revealing a hard-edged China…

Six months into his presidency, Joe Biden is revealing a hard-edged China policy that suggests relations between the world’s two biggest economies are only going to get worse

20210714
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Market Focus

U.S. stocks fell to reverse course on Tuesday, with the S&P 500 pulling back from a record high as investors monitored an early batch of corporate earnings results. Inflation was also back in focus as new data showed consumer prices surged by the most since 2008 June. Dow Jones retreated 0.31%, or 106.93, to 34889, and Nasdaq declined 0.38%, or 55.59, to 14677.65.

Six months into his presidency, Joe Biden is revealing a hard-edged China policy that suggests relations between the world’s two biggest economies are only going to get worse.

A spate of U.S. actions in recent days — including a warning to American businesses in Hong Kong, new import controls for the Xinjiang region and talks about a digital trade agreement that would exclude Beijing — underscore that Biden plans to extend and deepen President Donald Trump’s more confrontational approach.

Biden administration officials say the U.S. strategy is a reaction to China’s aggressive behavior. That stance will force tough choices for investors and companies caught in the middle of what Biden himself has defined as a defining battle of the 21st century, and may come as a surprise to those who expected a softer touch under the Democratic president.

“It’s very clear that the U.S. under the Biden administration is going to continue with the trend that we saw during the Trump administration and before,” said David Loevinger, managing director of emerging markets at TCW Group Inc. “There’s some disappointment — investors had expected a different approach.”

Beijing officials may have expected a difference, too, after the tumult of the Trump years. But in Washington, Biden administration officials point to a series of hostile actions by President Xi Jinping’s government that they say forced the U.S. hand, adding that the challenge now is to keep the relationship in the realm of competition, not conflict. Recent actions on both sides show how hard that will be to achieve.

Main Pairs Movement

The dollar approaches its monthly high against most major rivals, boosted by climbing US inflation. The US Consumer Price Index was upwardly revised in June to 5.4% YoY, much higher than the expected 4.9%. The core reading also rose from 3.8% to 4.5%. The figures revived speculation about a tighter monetary policy, despite policymakers work hard on cooling down such expectations.

The euro pair reached a fresh multi-month low of 1.1780, holding nearby ahead of the Asian opening. Cable hovers around 1.3820, while the antipodean pairs near their yearly low, with Aussie at 0.7440 level and Kiwi below 0.7000.

Loonie extended further north regardless of higher oil prices. WTI moved above $75.00 a barrel amid expectations of a further draw in US inventories. Brent also climbed to $76.50 a barrel as speculation of tighter supply due to the OPEC+’s disagreement on higher output.

Gold prices were quite volatile after the release of US inflation figures, but the yellow metal is ending the day pretty much unchanged at around $1,808 a troy ounce.

The focus shifts to Semi-Annual US Fed chair Jerome Powell testifies, as well as RBNZ and Bank of Canada’s Interest rate decisions, and British inflation figures.

On the other hand, the coronavirus Delta variant is dominant in the Northern Hemisphere and the number of new cases is on the rise in the US and Europe. Fears about it delaying the economic comeback weigh on investors’ mood.

Cryptocurrencies act dully in recent days ahead of the largest unlocking of Grayscale Bitcoin Trust share. On July 17, 16,240 bitcoin worth of GBTC becoming available to trade, and fears of a potential sell-off looms as Bitcoin has declined 4.35%, and Ethereum has fallen 9.3% since the start of the week.

Technical Analysis

XAUUSD (Daily Chart)

From the technical aspect, the dominant trend remains bullish on the daily chart as it continues trading within the upper region of the Bollinger band, even though it seems to enter into a consolidated phase recently. The upside momentum is favored by the positive MACD and the neutral RSI of 50, giving gold some potential to move further north. If the upside momentum is sustained, then gold is expected to move toward 1829; afterward, the momentum might confront pressures as it will reach the upper bound of the Bollinger band. On the downside, if gold trades below the midline of the Bollinger band, it will head toward 1770.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD heads toward the 1.1800 regions as the US dollar gains strength after the Core CPI data. On the 4- hour chart, intraday bias has turned to the downside as the price action is below the 20 and the 50 SMAs, indicating that the bulls vanish at the moment. Additionally, the double top pattern also confirms the bearish mode of the pair. From the technical indicator, the current MACD is negative, which lends supports to bears; however, the bearish momentum looks to weaken at the moment as the RSI is near oversold condition, signaling that the bears might need a break before heading to the next immediate support at 1.1704.

Resistance: 1.1919, 1.1985

Support: 1.1837, 1.1704 

GBPUSD (4- Hour Chart)

GBPUSD stabilizes above 1.38 amid the US upbeat Core CPI and the UK’s reopening. From the technical perspective, the dominant trend for GBPUSD has turned into the downside as the double top pattern has been formed on the 4- hour chart. During the second peak, the RSI was not in the overbought territory; this, it confirms a start of the bearish momentum for the pair. Moreover, the bearish momentum is also supported by a negative MACD while the pair is trading in the lower area of the Bollinger band. All in all, GBPUSD is expected to head toward the next support level at 1.38; if a break of 1.38 is successful, then the pair has some potential to continue trade toward 1.3744.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3744, 1.3675

20210714
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White House officials proposed to reach a digital trade agreement with India-Pacific…

White House officials proposed to reach a digital trade agreement with India-Pacific economies, aiming to curb China’s influence in the region

20210713
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Market Focus

US equities market broke record high as investors are optimistic about earnings season. The three big indices climbed around 0.35% on Monday. Financials shares led the gains within S&P 500 index, while Consumer Staples stocks lagged slightly behind. Large banks such as Bank of America, Goldman Sachs, and JPMorgan will kick off earnings season this week.

White House officials are proposing a digital trade agreement with Indo-Pacific economies including Canada, Japan, Malaysia, Australia, New Zealand, and Singapore. Such an agreement aims to curb China’s influence in the region and get the United States back in the trade game in Asia. According to Bloomberg, the deal could set out rules on the use of data, trade facilitation, and electronic customs arrangements.

ECB President Christine Lagarde told investors to buckle up for new guidance on monetary stimulus in 10 days. She said that “given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certainly be revisited.” Lagarde also mentioned the current 1.85 trillion-euro bond-buying plan to run at least until March 2022, and hinted ECB might adopt fresh measures after the emergency bond program ends.

Main Pairs Movement

US dollar was the best performer among its G-7 peers as high inflation pressure continues to favor the greenback. The New York Fed’s Survey of Consumer Expectations for June indicates expected inflation over the next 12 months rose to 4.8%. Despite Fed’s effort to ease hyperinflation fears, but inflationary data are popping out from every corner of the economy, constantly rising skepticism on Federal Reserve’s transitory talks. Such anxiety will persist until investors see a deceleration in inflation-tracked indexes such as CPI and PPI.

Gold price is sitting comfortably above $1800 amid worries of spreading delta variant. However, the mutated virus should not be a strong supporter to move the precious metal since health authorities around the world are much more capable to contain COVID-19 with the help of lockdowns and vaccines.

Oil prices retreated on Monday with the Brent and WTI futures dipped 0.52% and 0.62% respectively. Demand for crude oil was on a downhill in South Asian countries during the nationwide lockdown. According to Bloomberg, Indonesian motor fuel demand will drop by 8% in the third quarter compared with May, while Malaysia will witness a plunge of 17% over the same period.

Technical Analysis

XAUUSD (Daily Chart)

Gold remains depressed amid the US dollar’s strength; however, the downside seems limited. On the daily chart, gold hovers above the midline of the Bollinger band during the American session. It seems that gold needs to consolidate before heading toward the resistance 1829; the near-term outlook remains bullish as the MACD is leaning up and the RSI reading is around 48, outside of the overbought region, giving gold spacious rooms to head upward. If gold successfully breaks its current consolidation, it is expected to see another pause around 1829 because 1829 is not only the resistance but also the upper bounce of the Bollinger band, due to a bounce back.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD trades around 1.1850 level as the US dollar recovers strength. A new rise in Covid-19 cases and US inflation figures are awaited. From the technical perspective, the 20 simple moving average contains advances while EURUSD has bounced from the bullish 10 SMA on the 4- hour chart. In the meantime, the pair has breached the descending trend line, which indicates that the bullish momentum has been formed in the near- term. As the RSI reading falls outside of the overbought territory, the pair still has some potential to move further north toward its resistance at 1.1919.

Resistance: 1.1919, 1.1985

Support: 1.1837, 1.1704 

GBPUSD (4- Hour Chart)

The British Pound slides toward 1.3870 against the US dollar as the UK might raise the restriction due to the rising cases of Covid-19. On the 4- hour chart, short- term outlook remains positive as GBPUSD still stays above the previous descending trend line, meaning that the bullish momentum still exists. The bullish mode is supported by a positive MACD as well as an RSI of 58, suggesting that the upside still has some potentials. It is expected to see the price action toward its resistance at 1.3926, then it will either consolidate or pull back as the RSI will likely surpass 70 during that time. After, if a break of 1.3926 is successful, then it will head to 1.4000, a psychological resistance.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3675

20210713
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