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According to its CPI report, U.S. inflation surged to its highest level…

According to its CPI report, U.S. inflation surged to its highest level in 30 years in October

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Market Focus

US indices edged higher on Wednesday as technology stocks rebounded due to the slowdown in bond yields rises. The recent increase in yields is due to President Joe Biden’s renomination of Jerome Powell as chairman of the Federal Reserve on Monday. After the 10-year US Treasury bond yield closed at 1.55% last Friday, it traded above 1.68% this week. However, the ratio fell to about 1.64% on Wednesday.

At closing, the S&P 500 Index rose 0.23% to close at 4,701.46, the Nasdaq Composite Index rose 0.44% to 15,845.23, and the Dow Jones Industrial Average fell only 9.42 points to close at 35,804.38. The Nasdaq Composite Index, which is dominated by technology stocks, outperformed the broader market, mainly due to the 1.1% increase in the stock price of Facebook’s parent company Meta, the increase in Apple’s stock price by 0.33% and the TSLA increase by 0.63%.

There are slightly more falling stocks in the S&P 500 index than rising stocks. The gains in technology, real estate, and energy stocks outpaced declines in banks, materials companies and other parts of the market. Currently, several companies have released their latest quarterly reports. Computer manufacturer HP rose 10.10% after announcing solid financial results, Autodesk shares fell 15.5% after the design software company warned investors that its pace of recovery is being affected by supply chain issues and inflationary pressures. As crude oil prices remained relatively stable and natural gas prices rose, energy stocks rose. Devon Energy rose 3.8%.

Main Pairs Movement

After a series of U.S. data suggesting that inflationary pressures remain high and that the Fed is about to take action to deal with it, demand for the U.S. dollar continues.

According to its CPI report, U.S. inflation surged to its highest level in 30 years in October. In addition, at the FOMC meeting held yesterday, the statement showed that if inflation continues to heat up, they will be prepared to adjust the pace of production cuts and raise the target range of the federal funds rate in advance. However, since the announcement was not unexpected, the market response was very limited.

Affected by local data and the European Central Bank’s inaction, the EUR/USD fell below the pivot support level of 1.1200 and failed to hold. In addition to market sentiment, another factor affecting the euro is the resurgence of the coronavirus in Europe.

GBP/USD is facing bearish pressure again and is currently in the 1.33362 area. The USD/JPY reached a new high of 115.51 in 2021 and remained stable near the close. AUD/USD is currently trading below 0.7200, and USD/CAD is trading near 1.2670.

Technical Analysis

EURUSD (4- Hour Chart)

After the previous day’s slight rebound from a sixteen-month low, EUR/USD was surrounded by heavy selling pressure again on Wednesday. The pair was flirting with 1.124 area to start the day and touched a daily top in the early European session, but then dropped to under 1.120 level amid US dollar strength. EUR/USD now remained under pressure, losing 0.41% on a daily basis at the time of writing. The US Weekly Initial Jobless Claims released today decline to 199K, which was better than the market expectation of 260k. The upbeat data supported the Greenback and push the DXY index higher above 96.8. In Europe, the Germany IFO Business Climate eased to 96.5 in November, therefore the dismal report weighed on the EUR/USD pair.

For the technical aspect, the RSI indicator 23 figures as of writing, suggesting that the pair is in the oversold zone, a trend reversal could be expected. As for the MACD indicator, a death cross just formed on the histogram, which means a short-term downward trend for the pair. Looking at the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend is likely to persist. In conclusion, we think the market will be bearish as the pair already broke below the previous 1.1226 support, now eyeing a test of the 1.1115 support that was touched in June 2020.

Resistance: 1.1275, 1.1374, 1.1464

Support: 1.1115

GBPUSD (4- Hour Chart)

GBP/USD declined on Wednesday as it continues to maintain its bearish tone for the fourth day. The pair started to see fresh selling in the early European session and is now trading at the lowest level since December 2020 and posting a 0.31% loss for the day. The stronger US dollar across the board keep acting as a headwind for Cable, as the upbeat US economic data and hawkish Fed expectations both lent support to the greenback. Meanwhile, the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights still weigh on the GBP/USD pair, but France will continue discussions with the UK over post-Brexit fishing access before any retaliatory measures are taken.

On the technical side of things, the RSI indicator 29 figures as of writing, suggesting that the pair is in the oversold zone, a trend reversal could be expected. Looking at the MACD indicator, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price just touched the lower band, suggesting that the bearish tone will be intensified if the price moves out of the band. In conclusion, we think that the market will be bearish as the recent downward momentum might still be far from being over, and the next 1.3188 support awaits.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3188

USDCAD (4- Hour Chart)

After falling from a monthly high near 1.275 area yesterday, USD/CAD edged higher on Wednesday amid renewed US dollar strength. During the American session, the pair pulled back from a daily top touched earlier in the day and surrendered its modest intraday gains. USD/CAD was last seen trading at 1.2672, currently posting a 0.01% gain on a daily basis. The risk-off market sentiment and better-than-expected US job data both spurred demand for the greenback, which is sitting at the highest level since July 2020. On top of that, falling oil prices put pressure on the commodity-linked loonie and pushed the USD/CAD pair higher.

On the technical side, the RSI is at 53 as of writing, suggesting tepid bull movement ahead. However, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, because the price dropped off the upper band and then crossed below the moving average, the lower band has become the loss target. In conclusion, we think the market will be bearish as the pair is eyeing a test of the 1.2585 support.

Resistance: 1.2475, 1.2775, 1.2849

Support: 1.2585, 1.2493, 1.2387

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The Greenback extended its previous gains, with the dollar index reaching fresh…

The Greenback extended its previous gains, with the dollar index reaching fresh 2021 highs around 96.55

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Market Focus

U.S. shares rose on the back of gains in cyclicals, while the technology sector extended losses as rising Treasury yields damped the outlook for growth stocks. The S&P 500 ended the day higher, after swinging between gains and losses in the last of trading. The tech-heavy Nasdaq 100 slid, building on Monday’s last-hour selloff. Video meeting corporation Zoom tumbled on signs of slowing growth.

After weeks of apparent hesitation, and amid months of market speculation, President Joe Biden has decided to stick with Jerome Powell for the position of the Fed’s chair. He does this despite clear indications that this will anger the left in his party. Some liberals in the closely-divided Senate have already promised to oppose Powell — who was first selected by Donald Trump — when his nomination comes to a vote in the chamber. However, Biden has opted for stability in the Federal Reserve at a time when rising interest rates and continued Covid-related challenges put the US economy in a precarious position.

The president may consider Powell the safe choice, with some Republicans already offering their support, but if Senate Democrats fracture over the nomination, it may create obstacles to a cohesive vote on Biden’s Build Back Better social spending legislation — a development that could have grave political consequences for their party.

Traders pruned bets for a dovish-for-longer Federal Reserve after Jerome Powell was selected for a second term. The chair himself sought to strike a balance in his policy approach, saying the central bank would use tools at its disposal to support the economy as well as to prevent inflation from becoming entrenched.

Main Pairs Movement

The Greenback extended its previous gains, with the dollar index reaching fresh 2021 highs around 96.55. The dismal mood of the equity markets and the higher government bond yields fueled demand for the safe-haven dollar.

EUR/USD bottomed for the day at 1.1226, while GBP/USD fell to 1.3342 amid worrying labour shortage and inflation issues. Bank of England head Andrew Bailey said that the bank may not return to offering a hard form of guidance, according to Reuters. However, it was not “off the table” that they give no guidance at all on rates, with decisions to be made meeting by meeting, the governor added, before stating that the UK labour market is very tight.

Commodity-linked currencies performed well on Tuesday with the help of the rebound in commodity prices. AUD/USD successfully defended its rates against the soaring US dollar, while USD/CAD dropped 0.25% amid a strong pullback of the oil prices.

Gold declined for a fourth consecutive day, failing to find support at the key level of $1800, and now trading at $1792 a troy ounce. The US 10-year benchmark yield soar to its monthly high at 1.685. Crude oil prices surged significantly, with WTI up 2.65% to $78.50 a barrel, and Brent up 3.5% to $82.20.

Technical Analysis

EURUSD (4- Hour Chart)

After the previous day’s slide to a sixteen-month low, EUR/USD rebounded moderately and stayed in positive territory on Tuesday. The pair climbed higher and touched a fresh daily high in the early European session, but then pulled back towards the 1.124 area. EUR/USD surrendered its modest intraday gains and is currently rising 0.27% on a daily basis at the time of writing. In Europe, the flash German Manufacturing PMI released today came in at 57.6, which was better than market expectations. The upbeat data showed that the manufacturing sector activity in the Eurozone continues to expand, underpinning the EUR/USD pair. On top of that, concerns about rising Covid-19 cases and the reimposition of lockdown measures continues acting as a headwind for the Euro.

On the technical side, the RSI indicator is at 38 as of writing, suggesting bearish movement ahead. As for the MACD indicator, a golden cross has just formed on the histogram, which means a short-term upward trend for the pair. Looking at the Bollinger Bands, the price rose from the lower band, therefore the upward trend is likely to persist. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.1374 resistance, but the prospects for an early policy tightening by the Fed might keep a lid on any meaningful recovery for the EUR/USD pair.

Resistance: 1.1374, 1.1464, 1.1609

Support: 1.1226, 1.1168

GBPUSD (4- Hour Chart)

The pair GBP/USD declined on Tuesday, continuing to stay under pressure for the third day. The pair touched a daily top near 1.341 in the early European session, but then failed to preserve its bullish traction and dropped below the 1.335 level. At the time of writing, Cable has rebounded slightly amid weaker US dollar across the board, currently losing 0.09% on a daily basis. Despite an upside surprise from the UK flash Manufacturing PMI report, which rose to 58.2 in November, Cable remains underminned by the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights. As the UK threatens to trigger Article 16, which may worsen relations with the European Union and potentially lead to a trade war.

On the technical side, the RSI indicator is at 39 as of writing, suggesting bearish movement ahead. Meanwhile, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend could persist. In conclusion, we think the market will be bearish as the pair is now testing the 1.3353 support, a drop below that level could extend the recent downfall to under 1.3300 area.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3353, 1.3188

USDCAD (4- Hour Chart)

Following its previous rebound from two-week lows near 1.25 area, USD/CAD preserved its bullish momentum and advanced on Tuesday. The pair was trading higher to a daily top above 1.274 during the European session but now has pulled back amid renewed US dollar weakness. USD/CAD was last seen trading at 1.2708, currently posting a 0.05% gain on a daily basis. Oil prices climbed higher to the $78.00 level despite the official announcement by the White House that it will release crude oil reserves. The resurging oil prices have lent support to the commodity-linked Loonie and dragged the USD/CAD pair lower, offsetting most of its intraday gains.

For technical analysis: the RSI indicator is at 69 as of writing, suggesting that the pair is in the overbought zone, a trend reversal could be expected. Looking at the MACD indicator, the diminishing positive histogram indicates that the pair could experience a bearish trend. As for the Bollinger Bands, the price moved out of the upper band first, and dropped right back inside the band, therefore the trend is negated. In conclusion, we think the market will be bearish as long as the 1.2775 resistance line holds.

Resistance: 1.2775, 1.2849

Support: 1.2585, 1.2493, 1.2387

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Biden appointed Jerome Powell as the chairman of the Federal Reserve for…

Biden appointed Jerome Powell as the chairman of the Federal Reserve for his second term, U.S. stocks rose to a record high, the price of gold plummeted

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Market Focus

As investors cheered on the appointment of Federal Reserve Chairman Jerome Powell for his second term, U.S. stocks rose to a record high, and the S&P 500 index surged to a high of the day immediately after the opening of the U.S. market. However, the S&P 500 Index closed lower on Monday as Wall Street expects banks to raise interest rates in 2022. In addition, rising U.S. Treasury yields put pressure on major growth stocks such as Amazon and Alphabet, which fell -2.83% and -1.92% respectively. Moreover, following the surge in US Treasury yields, the S&P 500 Bank Index rose as investors priced in tightened policy in the first half of 2022. Wells Fargo Bank (WFC.N) is one of the strongest banks on Wall Street.

At the close of the market, the S&P 500 Index fell 15.38 points or 0.32% to close at 4,682.88 points, the Nasdaq Composite Index fell 202.68 points or 1.26% to 15,854.76, and the Dow Jones Industrial Average rose 17.28 points, or 0.05%, to 35,617.83.

Tesla is also one of the biggest gainers, rising 1.74%. Earlier on Monday, Tesla CEO Elon Musk said on Twitter that the Model S Plaid may arrive in China “around March.”

Main Pairs Movement

The US dollar led the way and became the overall winner. In 2021, it set a new high against the euro and a multi-month high against other major competitors. Most of the dollar’s strength comes from US President Joe Biden, who HAS nominated Jerome Powell for re-election as chairman of the Federal Reserve.

The US 10-year bond yield finally rose by nearly 9 basis points to 1.62% in intraday trading. The current yield has returned to its highest level since last Wednesday and is currently only about 3 basis points lower than last week’s high of 1.65%. With the rise in yields, the US dollar index has also continued to roll to the year’s high of 96.502, and its upward trend seems to be endless.

The EUR/USD is currently hovering near 1.12400 and is in a sharp downward trend because it continues to suffer from the severe wave of Covid-19, and the dovish state is also the main key to the weakness.

The price of gold plummeted due to the strengthening of the U.S. dollar, trading at $1,803.00 per ounce. Crude oil prices are rising, and WTI is currently hovering around US$76.70 per barrel. 

Technical Analysis

EURUSD (4- Hour Chart)

After touching the lowest level since July 2020 under the 1.126 level, EUR/USD continued its bearish traction on Monday amid US dollar strength. The pair flirted with 1.128 level most of the day, but then dropped towards 1.124 area, currently losing 0.14% on a daily basis at the time of writing. The White House announced on Monday that Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden. The news provided strong support to the US dollar and sent the DXY index above the 96.4 level. In Europe, concerns about rising Covid-19 cases acted as a headwind for the Euro, as some countries in Europe may reimpose a full lockdown or bring back restrictions to tackle rising infections.

On the technical side, the RSI indicator is at 30 as of writing, suggesting that the pair is in the oversold zone, a trend reversal could be expected. Looking at the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend is likely to persist. In conclusion, we think that the market will be bearish as the Greenback is kept strong by hawkish Fed expectations. A potential move lower towards 1.1200 seems possible as the pair has broken the previous support.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1168

GBPUSD (4- Hour Chart)

Following last Friday’s slide, GBP/USD declined for the second day on Monday. The pair was trading in a range near the 1.344 area during the Asian and early European sessions, but started to see heavy selling after the announcement of Powell’s renomination as Fed chair. Cable rebounded slightly after touching a two-week low, currently losing 0.28 on a daily basis. The latest dovish comments from BoE governor Andrew Bailey over the weekend put some downward pressure on the GBP/USD pair. Moreover, the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound.

From a technical perspective, the RSI is at 41 as of writing, suggesting tepid bear movement ahead. Meanwhile, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price has moved out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think that the market will be bearish as the pair is eyeing a test of the next support, which is at 1.3353. Given that there aren’t any major market-moving UK macro data today, investors await Tuesday’s UK PMI reports for trading impetus.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3353, 1.3188

USDCAD (4- Hour Chart)

After a five-day rebound from 1.25 area, USD/CAD climbed higher on Monday amid stronger US dollar across the board, now targeting at 1.27 level. The pair jumped to a monthly top after Powell’s renomination, paring its initial intraday losses. USD/CAD was last seen trading at 1.2695, currently posting a 0.45% gain on a daily basis. Even though WTI crude oil has risen 1.15% for the day, the resurging oil prices failed to underpin the commodity-linked loonie. On top of that, expectations that the Fed will hike rates by the middle of 2022 also acted as a tailwind for the pair, as hawkish Fed speculations were reinforced by elevated US Treasury bond yields.

For technical analysis: the RSI is at 75 as of writing, suggesting that the pair is near the overbought zone, a trend reversal could be expected. But looking at the MACD indicator, the MACD is now sitting above the signal line, which means that the upward trend could persist. As for the Bollinger Bands, the price has moved out of the upper band, therefore a strong trend continuation could be expected. In conclusion, we think the market will be bullish as the pair already broke the previous 1.2648 support, a break above 1.2775 could intensify the bullish tone.

Resistance: 1.2775, 1.2896

Support: 1.2585, 1.2493, 1.2387

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