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GameStop Corp., the poster child for Redditors looking to squeeze short-sellers, and…

GameStop Corp., the poster child for Redditors looking to squeeze short-sellers, and movie-theater chain AMC Entertainment Holdings Inc. rebounded following Tuesday’s plunge

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Market Focus

Stocks almost wiped out their advance as a drop in technology and retail shares dragged down the Nasdaq 100. Treasuries retreated. Oil climbed. The S&P500 closed with a small gain following its biggest two-day rally in almost three months. Energy and financial shares outpaced tech even after Google’s parent Alphabet Inc. hit a record on stellar results, while Amazon.com Inc. slumped. Banks climbed as JPMorgan Chase & Co. and Morgan Stanley issued bullish calls on the industry. GameStop Corp., the poster child for Redditors looking to squeeze short-sellers, and movie-theater chain AMC Entertainment Holdings Inc. rebounded following Tuesday’s plunge. Drug-maker Biogen Inc. slumped after disappointing forecasts.

A widely watched segment of the Treasury yield curve reached its steepest level in almost five years even as the U.S. decided not to increase auction sizes for long-maturity notes and bonds at next week’s quarterly refunding sales. Data showed companies added more jobs than forecast in Jan, while growth at service providers accelerated.

According to Mike Loewengart, the managing director of investment strategy at E*Trade Financial Corp, “There has been a ton of noise in the stock market these past few weeks, so it’s encouraging to see solid economic reads. There may be signs of overextension when it comes to single stocks, but under the surface, there is an economy regaining serious momentum.”

Market Wrap

Main Pairs Movement

JPY net long positions had dropped after their recent push to the highest levels since October 2016 which is transpired in the spot market following a breakout of the long-term bearish dynamic resistance.

Demand for the greenback receded, leaving room for the Aussie to recover some ground. At the time of writing, AUDUSD trades around 0.7625, looks to snap a three-day losing streak.

USDCAD has for the most part stayed below the 1.2800 level on Wednesday, with resistance in the form of the 50-Day moving average at 1.27967 also helping to keep the price action under wraps. Right now, USDCAD is trading in the 1.2760s and eyeing a test of Tuesday lows.

The US Dollar Index, which tracks the greenback vs. a bundle of its main competitors, recedes to the 90.15/10 band following earlier 2021 tops around 90.30.

WTI surged for a third straight day on Wednesday, rallying from around the $55.00 mark during early European trading hours to as high as the $56.30s in wake of the 14:00GMT crude oil pit open.

Technical Analysis

EURUSD (4H Chart)

EURUSD continues to dip low on Wednesday amid stronger greenback and better-than-expected US ISM PMI data. At the beginning of the day, the EURUSD traded in a tight range between 1.2050 and 1.2036 but tumbled to the daily low near the psychological support at 1.2000 in the American session. The renewed bearish pressure is largely initiated by the increasing demand for the greenback as the upbeat data published by Eurostat earlier in the day is mostly ignored by the market.

From a technical perspective, the 60-Day SMAVG is supporting the current bearish trend of the Fiber. However, as both the RSI is approaching the 30-threshold and the price of EURUSD is closing near the 1.2000 support, it is inferable that a positive correction may be staged shortly. On Thursday, Retail Sales data from the eurozone and US Initial Jobless Claims are closely monitored.

Resistance: 1.2049, 1.2093, 1.2131

Support: 1.2014, 1.1960, 1.1925

GBPUSD (4H Chart)

The Cable pair is trading modestly lower on the day after temporarily touching the high of 1.3684 in the early Euro session. The pullback of the GBPUSD was largely due to the two-consecutive day winning DXY, however, despite the better-than-expected US ISM and ADP data, the DXY did not seem to react much to those numbers. This is possible because the UK data in the service sector is also indicating a strong, resilient comeback. On top of that, since the expected rate cut from the BoE is lifted, the pound is perceived to be relatively strong amid the strengthened greenback. Upcoming post-Brexit meetings are eyed.

Technically speaking, the Cable is under a downward momentum, and would likely remain bearish as the 40ish RSI indicates there is still room for the pair to move lower.

Resistance: 1.3681, 1.3711, 1.3761

Support: 1.3636, 1.3608, 1.3554

XAUUSD (4H Chart)

For the second day in a row, the XAUUSD continues to struggle to find a direction between the close range within $1833 and $1842. Although U.S. President Biden is pushing to go big on the next stimulus package, his decision only incentivizes a sell-off in bonds and does not help to boost the pricing of Gold.

From a technical perspective, the XAUUSD remains under pressure as the 60-Day SMAVG is currently fluctuating above the 20-Day SMAVG. Additionally, if the XAUUSD can break below the multiply tested support at $1829, the RSI reading suggests the precious metal would dip further. On the flip side, if the XAUUSD reverses its downward trending pattern, the first resistance can be seen at $1842, then $1858, followed by $1875.

Resistance: 1842, 1858, 1875

Support: 1829, 1818, 1805

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RBA kept the interest rate unchanged at 0.1% on Tuesday

RBA kept the interest rate unchanged at 0.1% on Tuesday

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Market Focus

US equities gained traction on Tuesday, the three big indices each rallied nearly 2% amid corporate earnings seasons. Meanwhile, the Reddit frenzy has been cooled off, GameStop Corp. and AMC Entertainment Inc. tanked 56% and 40% respectively. The GameStop rout wiped out $27 billion market value as Redditors leave the party, however, the battle between retail investors and hedge funds may not be over.

The Senate will begin a process that will allow Democrats to pass President Joe Biden’s $1.9 trillion proposals without Republican votes, Majority Leader Chuck Schumer said. Although the push to deliver a relief package is urgently needed, but a single party vote could somewhat contradict President Biden’s calls for unity during his inauguration.

RBA kept the interest rate unchanged at 0.1% on Tuesday, here are the key takeaways from its monetary statement:

  • The central bank will extend its quantitative easing by A$100 billion.
  • Does not expect key interest rate until 2024.
  •  Will not increase cash rate until actual inflation is sustainably within the 2 to 3% target range.
  • RBA was slightly upbeat on the global outlook, but recovery heavily depends on the vaccine rollout.
  • House prices are picking up pace due to record low borrowing cost though it didn’t flag any concerns about asset prices or bubbles.

Market Wrap

Main Pairs Movement

The US greenback recovered amid rising 10-year US treasury yield reclaim 1.1% on Tuesday. Safe-haven currencies like the Japanese Yen and Swiss Franc were on the defensive as investors are reviving carry trades, both down 0.1% against the dollar.

Gold is falling in sync with a significant pullback in silver markets, gold dropped 1.21%. After a sudden surge in retail investor demand for the silver metal subsides, silver price ramped up nearly 19%, refreshing 8 years record high. CME immediately followed to hike margin requirement for silver futures, a move that is said to take some of the froth out of the market. Soon, Redditors realized they are picking the wrong bully, as a result, silver price dumped 8% on Tuesday.

Euro-dollar declined 0.2%, to the lowest level since Dec. 1, 2020. The shared currency lagged as the EU vaccination program slowly takes place across regions. On the data front, fourth-quarter GDP from the EU Zone declined 5.1% on a year-to-year basis, missing the expectation of -4.3%, putting further pressure on the Euro.

The Cable was essentially unfazed at 1.3658. Scotland has extended its current lockdown into early March. The pandemic situation continues to ease in the UK with its government speeding up vaccine immunization. So far, the UK has administered nearly 10 million doses. Kiwi outperformed its peer Aussie, AUDNZD slipped 0.33%. The Aussie failed to bounce upon RBA’s optimism towards its economic recovery. Falling iron ore prices are dragging down the commodity-linked currency, market consensus on reflation trades seems to pause here.

Technical Analysis

EURUSD (Daily Chart)

Euro-dollar breached a critical support line at 1.206. This level has successfully defended the seller’s attack in the last two months, but its strength looks faint this time. We cannot rule out the possibility of a false breakout, Tuesday’s session settled with a long lower and upper wick, which always indicates tentative trading. If the downward breakout is proven to be valid, then the bears will eye for 1.193 support. However, the longer-term ascending trend line is expected to persist as the general dollar weakness theme remains intact throughout 2021. On the upside, it would take a while for the bulls to build up power to march toward 1.233 resistance.

Resistance: 1.206, 1.2333

Support: 1.193, 1.163

USDJPY (Daily Chart)

USDJPY has overcome the long descending trend line that kept price subdued since last March. Bidders cheered the bullish reversal and ramped up 1.5% in the past 5 sessions. The bulls are now eyeing for the 38.2% Fibonacci retracement of 105.4, but given its previous strong rebound, upward momentum is exhausting before reaching 105.4. Nonetheless, we expect the price to at least touch this level within the near term before staging for a retreat. On the south, DMA100 could be supportive if the bulls lose steam. MACD on the daily chart is indicating a sustainable bullish trend.

Resistance: 105.42, 106.72

Support: 104.4, 103.84

XAUUSD (Daily Chart)

Gold is under pressure on Tuesday, slipping from $1865 to $1838, refreshing two-week lows. Despite breaking the ascending trendline from below, the precious metal is still able to find acceptance from the $1839-$1822 support band. The weak dollar narrative has been changed recently attributed to rising Treasury yield, it would be interesting to see how bidders will react to Gold’s declining price this time around. If they give up the defensive line at $1822, then the bears will bring the price down to $1765, last seen in November 2020. Conversely, we expect some rangebound trading between $1874 and $1838 if downward momentum looks unconvincing. MACD on the daily chart provides little to no sign of trading direction.

Resistance: 1874, 1930

Support: 1838, 1823, 1765

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GameStop Corp. tumbled as bearish investors appeared to cover their positions while…

GameStop Corp. tumbled as bearish investors appeared to cover their positions while retail traders flocked to other corners of the market

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Market Focus

Stocks had their biggest rally in about 10 weeks as several strategies said the recent explosion of speculative buying won’t derail the bull market inequities. In a broad-based advance led by retailers and tech companies, the S&P500 rebounded from last week’s route as the Nasdaq 100 jumped 2.5%. Amazon.com Inc. and Alphabet Inc., which are set to report earnings Tuesday, climbed at least 3.6%. Tesla Inc. soared after an analyst more than doubled his price target on the electric-car maker, claiming “fireworks aren’t over.” GameStop Corp. tumbled as bearish investors appeared to cover their positions while retail traders flocked to other corners of the market. Silver climbed to an almost eight-year high.

The battle between retail traders and hedge funds is unlikely to cause a significant setback for markets, according to JP Morgan Chase & Co. Major drawdowns have usually occurred when there’s a worse outlook for growth, as well as signs of overvaluation beyond price-earnings ratios and credit spreads. Few markets show signs of extraordinary price momentum or excessive leverage.

Market Wrap

Main Pairs Movement

EURUSD pair bounced from the 1.2060 regions but fails to break above 1.21. The dollar eases slightly as equities stage a modest comeback as retail investors’ frenzy temporarily cooled. Aussie, on the other hand, finished Monday nearly unchanged as the pair is trapped between the greenback’s demand and rising equities. RBA is expected to keep the monetary policy on hold, and the market is eyeing its rate decision to be released on Tuesday. USDCAD is higher by around 0.4% on Monday, having rallied from late Asia Session lows in the 1.2760s to current levels in the 1.2820s, up around 50 pips from last Friday’s closing levels in the 1.2670s.

DXY picks up extra pace and trades at shouting distance from the key 91.00 thresholds at the beginning of the week. Crude oil prices continue to fluctuate in a relatively tight range on Monday after closing the previous week little changed. A barrel of West Texas Intermediate was up 2.57% daily.

Technical Analysis

USDJPY (4 Hour Chart)

USDJPY rose above 105.00 and is trading comfortably above that multi-monthly high price zone. Bouncing back from the worst equity market performance of last week, the market today has seemed to be fueled with investors that are risk positive, which means the safe-haven JPY would lack sufficient demand. Additionally, the greenback has regained some substantial demand as the DXY has risen over the multi-month high of 91.00 despite the upbeat equity market. Given that there will be no major macroeconomic data awaiting to be released on Tuesday that associates with JPY or USD, and that the risk-positive sentiment is likely to persist if nothing major can potentially reverse the ongoing sentiment, it is reasonable to expect the rise of USDJPY would extend.

Technically speaking, the surge of USDJPY is supported by both its 15-Day SMAVG and MACD histogram. However, because the RSI for USDJPY has surpassed the overbought region, a downward correction can be expected. On the upside, if the USDJPY can continue to be traded above the 105.00 resistance level, the USDJPY bulls can cap their gains in the 105.21 zone. On the flip side, the bears are eyeing critical support levels at 104.62, 104.30, and 104.07.

Resistance: 105.00, 105.21, 105.38

Support: 104.62, 104.30, 104.07

GBPUSD (4 Hour Chart)

GBPUSD topped above 1.3755 in the late European session but gradually tumbled and bottomed at 1.3657 in the American session. Although there is a shortage of fundamental news in the market, it is inferable that the sudden decrease in the GBPUSD pricing may be a result of the bears failing to advance above the key 1.3761 resistance. Given that the 1.3761 resistance is a multi-year high price level, the bulls’ failure to extend the pair’s bullish trend offered the bears an opportunity to place additional short-selling positions that ultimately pull down the Cable’s price. Not to mention the fact that a recent rise in DXY also contributed to the plummet of GBPUSD.

From a technical perspective, the GBPUSD is still supported by the 15-Day SMAVG; however, as the RSI is dipping down to the low 40s, the selloff trend in the pair seems to have formed, but the duration may not be too long, and that is because the upcoming BoE Interest Rate decision is expected to be left unchanged, which in turn, can resume the rally of GBPUSD.

Resistance: 1.3731, 1.3745, 1.3761

Support: 1.3693, 1.3645, 1.3606

XAUUSD (4 Hour Chart)

On Monday, the yellow metal has surged extensively from the lows of $1849 and climbed up to $1871.85 amid a strengthened demand in the greenback. Afterward, the XAUUSD pair failed to advance further and remained consolidative between the $1875 and $1858 range.

From a technical perspective, the precious metal is under bearish pressure as indicated by the 60-Day SMAVG. Additionally, because the surge of XAUUSD heavily relies on the slumping US 10-year yields on Monday, the bullish run of the pair is choppy. This can be found in the pair’s spinning top candlestick patterns and the 50ish RSI reading of the yellow metal. If the XAUUSD can break above the $1875 resistance, the next resistance level would be near $1891.On the flip side, if the XAUUSD reverses its bullish trend, the first cushion of the pair can be found at $1858, followed by $1850, then around $1843.

Resistance: 1875, 1891, 1906

Support: 1858, 1850, 1843

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