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The surging US PPI and CPI data weighed on the equity market…

The surging US PPI and CPI data weighed on the equity market that this could make the Fed act more aggressively

20211215
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Market Focus

US stocks declined on Tuesday amid downbeat market sentiment, as pressures increased on the Federal Reserve to tighten monetary conditions at a faster than expected pace. The headline US Producer Price Index (PPI) released on Tuesday rose at an annual pace of 9.6% in November, which is more than the market’s expectation of 9.2%. The surging US PPI and CPI data weighed on the equity market as investors worried that this could make the Fed act more aggressively, despite the officials had given no signs that they would rush up to tighten monetary policy. On top of that, concerns about the spread of the new Omicron variant remained as the UK reported one death related to the newly discovered variant. Investors now await the critical Federal Reserve monetary policy decision on Wednesday, which might provide some clues on the pace of bond tapering and interest rate hikes.

The benchmarks, S&P 500, Nasdaq 100 and the Dow Jones Industrial Average both dropped on Tuesday amid a downbeat market mood. A perspective shows that Fed is about to end the cycle of easy money. S&P 500 was down 0.7% on a daily basis and the Dow Jones Industrial Average declined with a 0.3% loss for the day. Ten out of eleven sectors stayed in negative territory as the information technology and real estate sectors are the worst-performing among all groups, losing 1.64% and 1.27%, respectively. The Nasdaq 100 dropped the most with 1.0% loss on Tuesday and the VIX rose almost 12%, as investors started to move their investments from stocks to other assets.

In Asia, China will release Industrial Output for November and retail sales data, which are expected to show slower economic activity due to a real-estate recession and falling consumption. Meanwhile, Chinese property developer shares and bonds plunged to the lowest since early 2017.

Main Pairs Movement

The US dollar advanced on Tuesday, staying in positive territory amid risk-off market sentiment. The DXY index dropped to a daily low under 96.15 in the mid-European session, but then started to see heavy buying and rebounded towards 96.5 level. The higher yields and weaker stocks both lend support to the greenback, which rose 0.21% on a daily basis. Investors now expect the Fed to tighten its monetary policy at a faster pace due to higher PPI and CPI data.

GBP/USD advanced 0.10% on Tuesday amid upbeat UK job data, as the number of people claiming unemployment-related benefits declined by 49.8K in November. The cable touched a daily top in the late European session, then retreated to surrender some of its intraday’s gain. Meanwhile, EUR/USD dropped to a weekly low under 1.126 area, losing 0.21% for the day.

Gold slipped and touched a daily low of around $1766 amid renewed US dollar strength. The falling US stock market failed to push the precious metal higher, which dropped 0.87% on a daily basis. Meanwhile, WTI oil tumbled 1.16% for the day, as more countries reimpose restrictions to avoid an Omicron variant outbreak. The rising Covid-19 cases and the downbeat market mood both acted as a headwind for the black gold.

Technical Analysis

XAUUSD (4- Hour Chart)

The precious metal, gold, slipped to a fresh daily low below 1780 after the annual PPI surged to 9.6% in November. The sell-off mainly came from the market’s reaction as high inflation might quicken the pace of the US Fed’s QE taper as well as hikes in the interest rates. From the technical perspective, gold continues to trade in a subdued manner within the $1786-$1770 ranges. In the near term, the outlook of gold looks bearish as it trades below the 20 SMA, and heading to test its support at $1770. For now, any further rallies below $1770 will confirm a sell as if gold penetrates the level, it will at the same time break the descending wedge. More price action is likely to be in place after Wednesday’s FOMC policy announcement.

Resistance: 1786, 1804, 1818

Support: 1770, 1758

GBPUSD (4- Hour Chart)

GBPUSD stays in the positive territory near 1.3230 on Tuesday as the US dollar has a difficult time to find the demand after the release of PPI report. However, at the same time, the pound’s demand is at stake as the Omicron infections in the UK looks worse than expected. As a result, further price action eyes on Wednesday’s FOMC announcement. From the technical aspect, despite the recent rebound, the outlook of the currency pair continues to remain bearish as it still trades below the 20 and 50 SMAs on the 4- hour chart. In the meantime, the RSI is neither in the oversold nor overbought territory, punctuating the lack of upside strength. On the upside, GBPUSD needs to at least trade above the SMAs to reclaim bullish momentum in the near- term. Trading above the resistance at 1.3321 will re- confirm a bearish-to-bullish trend.

Resistance: 1.3321, 1.3419, 1.3499

Support: 1.3163

EURUSD (4- Hour Chart)

EURUSD trades near its weekly low at 1.1269 amid the advances in the US government bond yields. The focus remains on Wednesday’s US Fed decision and Thursday’s ECB meeting. From the technical analysis, EURUSD continues to seesaw within 1.1233- 1.1357 range. On the 4-hour chart, the outlook remains bearish as the pair continues to trade below the 20 and 50 SMAs; in the meantime, it trades within the lower bounce of the Bollinger Band. The RSI indicator remains neutral, suggesting a directionless situation. On the upside, EURUSD needs to trade above 1.1357 in order to begin another bullish trend; the pair might extend further gain to 1.1462 if it successfully breaches the immediate resistance at 1.1357.

Resistance: 1.1357, 1.1462, 1.1548

Support: 1.1186

20211215
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The three most important central banks in the world will hold their…

The three most important central banks in the world will hold their last monetary policy meeting in 2021, which will exacerbate weak sentiment

20211214
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Market Focus

US stocks fell on Monday due to concerns about the Omicron coronavirus variant before the Federal Reserve meeting later this week. The decline was mainly concentrated in the oil and gas, consumer services and technology sectors. At the end of the market, the Dow Jones Industrial Average lost 0.89% to 35,650.96 points, the S&P 500 index lost 0.91% to 4,668.98 and the Nasdaq Composite Index, dropped 1.39%.

Seven of the 11 major sectors of the S&P 500 fell, with only defensive stocks such as real estate, utilities, consumer staples and healthcare rising. Travel-related stocks fell because the fast-spreading Omicron accounted for about 40% of COVID-19 infections in London, and at least one person died in the UK. On the other hand, the best-performing stock in the Dow Jones Industrial Average was Coca-Cola Company, which rose 2.63%, Walmart rose 1.80% and Johnson & Johnson rose 1.79% in late trading. The worst performing stock was Boeing, which fell 3.74%, the Dow fell 2.49% and the Home Depot fell 2.45%. In addition, the best performing company in the Nasdaq Composite Index was SeaChange International Inc, which rose 128.81%, Arena Pharmaceuticals Inc soared 80.38% after Pfizer agreed to acquire a $6.7 billion all-cash transaction, Pfizer also rose 5.3%, and Foghorn Therapeutics Inc rose 54.96%. The worst performers were Nisun International Enterprise Development Group Co Ltd, which fell 60.29%, X4 Pharmaceuticals Inc fell 44.13%, and IGM Biosciences Incclose fell 41.31%.

Main Pairs Movement

The three most important central banks in the world will hold their last monetary policy meeting in 2021, which will exacerbate weak sentiment. The Federal Reserve will announce its monetary policy decisions on Wednesday, while the Bank of England and the European Central Bank will announce their monetary policy decisions on Thursday. Concerns were raised about how the ongoing Omicron epidemic might affect such decisions and global economic growth continue. At the same time, the UK reported its first death related to the Omicron variant, which stimulated market risk aversion.

In the US Treasury market, the 10-year long-term Treasury bond yields fell, and the 20-year and 30-year Treasury yields fell 7-8 basis points to close at 1.414%, 1.84% and 1.80%, respectively.

EUR/USD hovered below 1.1300, while GBP/USD fell to the 1.3200 area. Due to the slight decline in U.S. stocks, commodity-related currencies faced selling pressure and rebounded slightly before the close. AUD/USD fell by 0.54%, and USD/CAD rose by 0.62%. The safe-haven currencies Swiss franc and Japanese yen changed little against the U.S. dollar each day, and both fell 0.19% against the greenback.

Gold rose 0.21% and hovered at $1786 per ounce area, while WTI oil dropped 1.08% to $71.16 per barrel.

Technical Analysis

BTCUSD (Daily Chart)

On Monday, 90% of Bitcoin have been mined according to the tracker from Blockchain.com. That being said, 90% of the coin are on the open market. From the technical aspect, Bitcoin falls back from $50,132, a 1.41% rise on Sunday. Bitcoin starts the week by re-testing the support pivot again at $46,510. On the daily chart, Bitcoin needs to move back through $55,103 to initiate the first bullish momentum into play. Failure to move back through the immediate resistance would continue to make Bitcoin a downside. If the support at $46,510 cannot hold, then Bitcoin will head toward the next support at $39,566. However, it looks like the bearish momentum is being weakened as the RSI remains in an oversold condition, due for a bounce back.

Resistance: 55,103, 58,000, 68,991

Support: 46,510, 39,566, 32,621

GBPUSD (4- Hour Chart)

GBPUSD edged higher on Monday as the US dollar struggled to preserve its strength to start the week. From the technical perspective, the outlook of the pair turns upside in the near term as it has breached the descending trendline and is trading above the 50 moving averages. However, the upside momentum seems lacking in strength as the currency continues to consolidate in the range from 1.3321 to 1.3163. Moreover, the RSI indicator has hovered around the midline, indicating that the buyers and sellers show less interest in the pair for the time being. On the downside, if the pair falls below the bearish trendline, then it will turn bearish in the near- term and head toward 1.3163. Current resistance awaits at 1.3163 while supports are located at 1.3321, followed by 1.3419.

Resistance: 1.3321, 1.3419, 1.3499

Support: 1.3163

EURUSD (4- Hour Chart)

EURUSD rebounds toward 1.1300 to start the new week as the decline of the US bonds makes it difficult for the US dollar to outperform its rival currencies. From the technical perspective, the 4-hour outlook hints that the bullish momentum is still being limited as EURUSD continues to develop below the simple moving averages, currently hovering below the 20 and 50 SMAs. In the meantime, EURUSD keeps trading within the lower bounce of Bollinger Band after bottoming at 1.1259. It is expected to see the pair consolidate below the moving averages as the RSI is currently neutral, hovering around the midline; furthermore, the MACD is flat, neither supporting buyers nor sellers. Further movements of the pair will eye on Tuesday’s US PPI report.

Resistance: 1.1357, 1.1462, 1.1548

Support: 1.1186

20211214
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The US CPI came in 6.8%, which is the highest since 1982…

The US CPI came in 6.8%, which is the highest since 1982 but corresponds with the market’s expectations

20211213
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Market Focus

US stock advanced on Friday, recovering from the previous day’s slide. The market now tends to believe that the Federal Reserve won’t have to accelerate plans to tighten monetary policy after the release of in-line inflation data. The US CPI came in 6.8%, which is the highest since 1982 but corresponds with the market’s expectations. Therefore, the fact that high US inflation wasn’t even higher supports the equity market. Also, Consumer Sentiment in US improved from a decade-low in November. On top of that, concerns about the spread of the new Omicron variant keep weighing on market sentiment, as companies in UK have started to tell employees to work from home. Investors now await the key Fed meeting this week, which might provide some clues on the pace of bond tapering and interest rate hikes.

The benchmarks, S&P 500, Nasdaq 100 and the Dow Jones Industrial Average both rose on Friday amid an upbeat market mood and relief that Fed won’t have to raise interest rates too early. S&P 500 was up 1.0% on a daily basis and the Dow Jones Industrial Average advanced with a 0.7% gain for the day. All eleven sectors stayed in positive territory as the information technology and consumer staples sectors are the best performing among all groups, gaining 2.07% and 1.99%, respectively. The Nasdaq 100 advanced the most with 1.1% gain on Friday and the VIX fell a further more than 2.0 points to under 19.50.

In Asia, after disclosures that came a day after the developer officially defaulted on their dollar debt, China Evergrande Group chairman Hui Ka Yan was forced to sell pledged shares in the company. Therefore, shares of Evergrande declined 1.7% lower as well as Chinese real estate stocks, which were also down 1.5%.

Main Pairs Movement

The US dollar edged 0.2% lower last Friday, staying in negative territory amid improved market sentiment. The DXY index gained bullish momentum and touched a daily top above 96.42 level during the European session, but then pulled back to below 96 and surrendered its intraday gains at the end of the day. The in-line US CPI data supported major US equities and put pressure on the greenback. Markets focus now shift to the Fed meeting this week, as investors expect a speed-up bond tapering.

GBP/USD and EUR/USD both advanced last Friday amid US dollar weakness, climbing 0.34% and 0.20%, respectively. The cable saw fresh buying and touched a three-day high above 1.327 during the American session. Meanwhile, EUR/USD recovered from a two-day low that touched earlier in the day, trading at around 1.131 area at the end of the day.

Gold advanced and touched a daily top around $1790 amid the high US inflation report, which rose the most since the early 1980s. The renewed selling witnessed in the greenback also acted as a tailwind for the precious metal, which gained 0.41% on a daily basis. WTI oil surged 1.81% for the day, closing out its best weekly performance since August. The growing confidence that the new Omicron variant is set to be far milder than past variants like delta pushed oil prices higher.

Technical Analysis

AUDUSD (4- Hour Chart)

AUDUSD retests 0.717, gaining some positive traction after the US CPI report. From the technical perspective, the pair is currently challenging its immediate hurdle at 0.717. The outlook turns positive as the pair has breached the bearish trendline. If AUDUSD can officially trade above 0.717, then it will reaffirm its upside momentum in the near term. Either from the RSI or the MACD, a buying opportunity occurs as both indicators currently favor buyers. On the flip side, if AUDUSD falls below its support at 0.7116, then it will turn downside as it will fall within the bearish trendline.

Resistance: 0.717, 0.7227

Support: 0.7116, 0.6997

GBPUSD (4- Hour Chart)

GBPUSD climbs above 1.3230 on worrisome US inflation report, hitting the highest in almost four decades. The US dollar seems vulnerable after the inflation report; in the meantime, heating US inflation figures might hint at steeper US Fed tightening. From the technical aspect, today’s upside momentum seems to bring GBPUSD out of the bearish trendline on the 4-hour chart, suggesting an overturn from bearish to bullish in the near term. A neutral RSI looks to favor bullish traders, who are also supported by a positive MACD. The next relevant resistance is set at 1.332, followed by 1.3417. On the flip side, if the pair fails to close its intraday price above the bearish trendline, then a selling opportunity will occur. The next relevant support is set at 1.3163.

Resistance: 1.3321, 1.3419, 1.3499

Support: 1.3163

EURUSD (4- Hour Chart)

EURUSD bounces modestly above 1.1300 after the US inflation surged 6.8% in November, reaching the highest in almost four decades. From the technical aspect, the overnight pullback from weekly lows seems to turn the currency pair back to the bullish mode in the near term. Climbing back above 1.1300 favors bullish traders as EURUSD is now trading above its 20 and 50 SMAs; in the meantime, the MACD indicator is now turning into positive levels at the time of writing. The current upside momentum is expected to bring the pair toward its immediate resistance at 1.1357. On the flip side, selling below 1.1299 region will reaffirm the negative bias and accelerate the downside momentum toward its support at 1.1186.

Resistance: 1.1357, 1.1462, 1.1548

Support: 1.1186

20211213
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