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Brent oil climbed above $65 a barrel as Goldman Sachs Group Inc.…

Brent oil climbed above $65 a barrel as Goldman Sachs Group Inc. predicted prices could advance into the $70s in the coming months

20210223
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Market Focus

Tech stocks dropped on valuation concerns while commodities rallied, and bond yields rose with investors pricing in stronger growth and faster inflation as the global economy recovers. The Nasdaq 100 tumbled more than 2.5% to a three-week low as investors questioned the appeal of expensive, growth-focused stocks. The S&P 500 Index fell for a fifth day, its longest losing streak in a year. Gains for energy shares and financial companies limited losses on the Dow Jones Industrial Average. European and Asian markets were broadly negative.

Commodities were almost uniformly green. Brent oil climbed above $65 a barrel as Goldman Sachs Group Inc. predicted prices could advance into the $70s in coming months. Copper briefly rose above $9,000 a metric ton for the first time in nine years, taking another step closer to an all-time high set in 2011 as investors bet that supply tightness will increase as the world recovers from the pandemic.

After a tremendous run from the depths of the pandemic selloff 11 months ago, stocks are under scrutiny as an increase in interest rates bolsters the appeal of fixed-income investments.

According to Scott Knapp, a chief market strategist of CUNA Mutual Group, “Long-duration assets are the ones that are most vulnerable in a rising interest rate environment. The same stocks that led the market higher when interest rates were plummeting are the ones most vulnerable when interest rates rise.”

Treasury yields climbed and a key part of the curve – the gap between 5- and 30-year yields – touched the highest level in more than five years.

Market Wrap

Main Pairs Movement

The EURUSD pair trades just below the 1.2170/80 resistance area, lacking momentum despite the broad dollar’s weakness. Risk is skewed to the upside. The Aussie pair trades around 0.7920, as a better market mood and firmer commodity prices, underpin the AUDUSD. US Treasury yields keep setting the market’s tone. The Loonie pair rose to 1.2650 during the early American session but lost its traction with the rising crude oil prices providing a boost to the commodity-sensitive CAD.

With decreasing US yields, DXY turned south and is approaching 90.00. Crude Oil prices regain the smile at the beginning of the week and push the barrel of WTI back above the key barrier at $60.00. The uptick in crude oil prices comes amidst the persistent weakness hitting the dollar, while activity in Texas is expected to gradually return to normality following the recent extreme freezing weather conditions.

Technical Analysis

USDJPY (Four-hour Chart)

After failing to find acceptance above the 105.88 resistance level earlier today, the USDJPY gradually tumbled near 105 in the following sessions. At the moment, the USDJPY is teasing the 105 support level at 105.04. Please note that the price range USDJPY is trading at currently is also the lowest seen in a week. A declined in the US yields weakened the greenback, but no rebound has been formed as the DXY continued to dive lower, sitting around 90.009 (the lowest in a month).

From a technical perspective, the USDJPY is still on a bullish trend as indicated by the 21-Day SMAVG. Therefore, it is inferable that the plummet of USDJPY is mainly constructed by the fundamental outlook of the lowered US yields circulating the markets. In other words, the fundamentals outweigh the technical. Given that the RSI is nearing the oversold threshold, a positive correction can be expected.

Resistance: 105.40, 105.88

Support: 105, 104.79, 104.53

GBPUSD (Four-hour Chart)

The Cable pair extended to a multi-year high after UK PM Boris Johnson announced his plan to ease UK’s lockdown in a four-step procedure. On top of that, a broad-based greenback weakness also helps fuel the surge of Cable. At the moment, we can see that the Cable has been confined in an uptrend channel since the beginning of Feb and some higher highs are suggesting the bullish GBPUSD is well-supported.

Additionally, from a technical perspective, both 15-Day SMAVG and MACD histogram indicate that the Cable remains on bullish momentum. However, as the RSI for the pair is almost hitting the 70 lines, a downward correction is likely. On a side note, if GBPUSD can penetrate the 1.4085 resistance, the following resistance would be 1.4150.

Resistance: 1.4085, 1.4150

Support: 1.4009, 1.3977, 1.3900

XAUUSD (Four-hour Chart)

The precious metal extends its modest gain from last Friday amid a broad-based greenback weakness and advances north above $1800. At the time of writing, the XAUUSD is trading around $1808.

Technically speaking, the recent rise of XAUUSD is supported by the MACD histogram. However, in the bigger picture, the price action of the precious metal has yet to overturn the bearish trend implied by the 60-Day SMAVG. The low 60s RSI indicates that the bulls are dominating the market at the moment, but there is little room for them to further extend their gains. If XAUUSD can sit well above the $1808 resistance, the next resistance level the bulls are within reach is $1817, followed by $1825. Conversely, the most immediate cushion for XAUUSD is $1788 and $1774.

Resistance: 1789, 1823, 1872

Support: 1765, 1691

20210223
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The power outage in Texas also dragged down oil prices, and the…

The power outage in Texas also dragged down oil prices, and the WTI crude oil futures plunged 2.16%

20210222
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Market Focus

US equities slightly edged to the downside amid continuously rising US Treasury yields, hit as high as 1.36%. Soaring yields could derail the ongoing economic recovery by rising borrowing costs and depressing prices. The S&P 500 Index fell 0.1% with materials and industrial stocks leading the gain whilst utilities suffered amid Texas power outages.

The Federal Reserve warned of significant risk in business bankruptcies and acute drops in commercial real estate prices in a report released on Friday. The committee said “Business leverage now stands near historical highs. Insolvency risks at small and medium-sized firms, as well as at some large firms, remain considerable.”

Bitcoin’s market value surpassed $1 trillion as price topped $55,000. The leading cryptocurrency has added more than $450 billion since 2021, data compiled by Bloomberg show. Experts suggest FOMO (fear of missing out) may be creeping behind the scenes as various cryptocurrency prices constantly break higher ground.

The G7 group said they will work closely to defeat the coronavirus and rebuild their economy in a joint statement. Group members will “engage” with others, especially G20 countries including large economies such as China. Meanwhile, Biden and Merkel condemned Beijing for its economic abuses.

Market Wrap

Main Pairs Movement

Eurodollar rallied 0.21% on Friday. February’s German Manufacturing PMI increased to 60.6 from the previous month’s 57.1, and also beating expectation of 56.5. On the vaccination front, European countries are finally receiving more doses albeit the EU commission’s hesitancy to take the AstraZeneca shots.

The US dollar tracking index dropped 0.25% as vaccine rollouts were slowed down by the freezing storm in Texas. The power outage also hampered down oil price, the WTI crude oil futures plunged 2.16%. Rising US treasury yields touched 1.36%, the highest level since February 2020, and it is somewhat concerning to investors since such a steep climb could spook risk sentiment and trigger “tantrums” in the stock market. There are also speculations that the Fed will have to step in to initial an emergent yield curve control if yield continues to rise.

Cable extended its gain beyond 1.4 level. The groundbreaking move was inspired by an upbeat PMI figure, both Manufacturing PMI and Services PMI came on top of estimates, printed 54.9 and 49.7 compared to forecasts of 53.2 and 41.0. Successful Covid19 vaccination rollout resumes in the backdrop of Sterling’s strength.

Antipodean Aussie and Kiwi soared 1.25% and 1.07% respectively. RBA noted earlier this week that the trade-weighted Aussie would normally be expected to be around 5% higher based on higher commodity prices, which were greatly boosted by the reflation theme. Aussie’s bullish run is also supported by a cyclical recovery in Australia.

Technical Analysis

GBPJPY (Daily Chart)

GBPJPY is marching straight into the long-lasting resistance line of 148.3. Upward momentum accelerated after sellers failed to guard resistance band between 141.6 and 142, rising US yields should be credited for the depression of the Japanese Yen. Given the lack of technical levels established between 144.65 and 148.27, it is likely that this pair will be capped by near resistance and retreat toward the blue trendline to create some supports before advancing. Moreover, RSI on the daily chart indicates the price is overheated, which boosts the possibility of a temporary pause from the bulls.

Resistance: 148.27, 152.83

Support: 144.65, 142

AUDUSD (Weekly Chart)

Aussie refreshed three-year high amid broad dollar weakness. The pair is approaching resistance of 0.79 dated back to August 2017, it has been rising on a steep slope since March 2020. The current consensus of reflation continues to bolster commodities price, which in turn ekes out the commodity-linked Aussie. We have not seen any major retracements after it regained 0.7 handles or any further validations of the ascending trendline. Combined with an overheated relative strength index of 71.45, we expect some strong friction ahead of the 0.79 hurdles, then a pullback toward 76.4% Fibonacci of 0.7516 or at least a test of the upward trendline.

Resistance: 0.79, 0.8, 0.8136

Support: 0.7516, 0.7133, 0.6823

XAUUSD (Daily Chart)

Gold’s value continues to deteriorate in the wake of constantly rising US bond yields. The price plummeted nearly $70 in five consecutive days, and speculators were playing tug-of-war during yesterday’s session, which created a nice Doji pattern. That being said, Doji usually implies a trend reversal, and this would be a bullish reversal in our case. Moreover, selling bias was eased upon failing to breach 50% Fibonacci of $1765, some rebound would give bidder some breathing room, and provide sellers better entry prices to keep the longer-term downtrend alive. On the upside, $1789 will act as a near resistance, next to $1823.

Resistance: 1789, 1823, 1872

Support: 1765, 1691

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Yields on 10-year Treasuries climbed as high as 1.31% before paring the…

Yields on 10-year Treasuries climbed as high as 1.31% before paring the increase

20210219
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Market Focus

US stocks and bonds pared losses amid lingering concern rising borrowing costs could cap a rally that’s driven equity values to historic highs. The tech-heavy Nasdaq 100 trimmed its loss by more than half to 0.6%. The energy and technology sectors weighed on the SP 500, while utilities were in the green. A report earlier showed initial jobless claims rose more than expected. Walmart Inc. dropped after saying it will increase spending on worker salaries and automation.

Yields on 10-year Treasuries climbed as high as 1.31% before paring the increase. Yields reached the highest levels in a year earlier this week. Technology companies such as Tesla Inc., which have seen their valuations surge, are often seen as the most at risk of a pullback.

According to Peter Boockvar, chief investment officer at Bleakley Advisory Group, “This rise in rates will certainly test the mettle and staying power of the bulls.”

  • The SP 500 Index decreased nearly 0.45%, the lowest in more than a week on the largest dip in almost three weeks.
  • The Dow Jones Industrial Average decreased almost 0.4%, the first retreat in a week and the biggest dip in almost three weeks.
  • The Nasdaq Composite hit 13,865.36 (-0.7%), experiencing the lowest point in two weeks.

Market Wrap

Main Pairs Movement

EURUSD is rising toward 1.21 as US jobless claims disappointed with a leap to 861,000. US Treasury yields are off the highs. AUDUSD heads into the Asian opening trading around 0.7770, as bulls refuse to give up. The pair steadies around 0.7765 ahead of Australian Retail Sales take center stage. The Loonie dropped to a daily low of 1.2660 during the early trading hours of the American session but didn’t have a hard time staging a rebound with falling crude oil prices hurting the commodity-sensitive CAD.

The greenback loses further the grip and drops to session lows near 90.50. After a stunning recent run to the upside, crude oil markets have come off the boil a little on Thursday; front-month futures contracts for the delivery of West Texas, the US benchmark for sweet light crude oil, are back below the $61.00 mark and down about 40 cents or 0.7% on the day. The yield on 10-year Treasuries gained two basis points to 1.29%.

Technical Analysis

USDJPY (4-Hour Chart)

Extending on the previous day’s loss, USDJPY remains under the bearish pressure today. Retreating US bond yields weighed on the USD and exerted additional downward momentum on the USDJPY. At the moment, a cushion at 105.60 seems supportive as the bulls have fenced off the bears’ multiple attempts to drag USDJPY further down low in the past 12 hours.

From a technical perspective, the USDJPY still enjoys a modestly bullish trend as indicated by the 21-Day SMAVG and the 50ish RSI. However, looking at the long tails of the two-prior candlestick, I would assume the USDJPY is now slowly shifting its trend downward. If the pair can break below 105.60, it would be a confirmative signal for the bears to engage, and as a result, the price for USDJPY could dip to 105.31, then 105.13. Conversely, if an upward momentum resumes, the bulls will first meet some resistance at 105.85, followed by 106.16.

Resistance: 105.85, 106.16

Support: 105.60, 105.31, 105.13

GBPUSD (4-Hour Chart)

The Sterling continues to overwhelm the greenback on Thursday as the Cable surges above 1.3950, hitting the highest price level since early 2018. The upbeat UK coronavirus figures strengthen the markets’ expectations of a near-term UK economy reopen. There was a temporary downward correction during the early American session that was due to a modest recovery in the greenback as equity prices in Wall Street dropped further into the negative territory. The pullback was overturned, and the bulls continue to drag the Cable back near the 1.3980 territories.

From a technical perspective, the Cable’s bullish trend is supported by the 15-Day SMAVG, however, with an RSI nears the 70-threshold, a downward correction is likely. In the short-term, it would not be prudent to place additional long positions at the current price level, at least not until the pair finds acceptance above the 1.3979 resistance level.

Resistance: 1.4029, 1.3979

Support: 1.3922, 1.3875, 1.3849

XAUUSD (4-Hour Chart)

The Gold witnessed a modest recovery that brought the pair back near $1790 during the early European session, but the gain was immediately wiped out in the following sessions and XAUUSD now trades around $1774. Improving market sentiment and higher real bond yields put the non-yielding precious metal on the back foot.

Technically speaking, the XAUUSD is going to remain on the downward slide, as indicated by the 60-Day SMAVG. However, with a below-than-30 RSI, it implies that a near-term upward correction is likely. If the XAUUSD finds acceptance above the $1779 level, the bulls can cap their gains at $1785, followed by $1797. On the flip side, if the pair continues to dive low, the most immediate cushion is $1769 then $1764.

Resistance: 1779, 1785, 1797

Support: 1769, 1764

20210219
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