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Market Ahead

202118
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Stocks rallied a day after violence rocked the U.S. Capitol

Market Focus Stocks rallied a day after violence rocked the U.S. Capitol, with investors firmly focused on the prospect for more stimulus and the likelihood that calm will prevail as Joe Biden takes the presidency. All major U.S. equity benchmarks were on track for all-time highs, with nearly 70% of the companies in the S&P 500 in the green and …

Market Focus

Stocks rallied a day after violence rocked the U.S. Capitol, with investors firmly focused on the prospect for more stimulus and the likelihood that calm will prevail as Joe Biden takes the presidency.

All major U.S. equity benchmarks were on track for all-time highs, with nearly 70% of the companies in the S&P 500 in the green and the Nasdaq 100 jumping 2.5%. The Dow Jones Transportation Average, a proxy for economic activity, also climbed toward a record. Tesla Inc. surged after RBC Capital Markets upgraded the stock, noting it was “completely wrong” with a previous bearish view. Another notable call came from Goldman Sachs Group Inc., which said banks have “moved back into vogue” due to optimism about financial aid and rising rates. Bitcoin pared gains after topping $40,000.

House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer demanded that President Donald Trump’s cabinet immediately remove him from office and threatened a new drive to impeach him if they don’t act. Democrats, who already have a majority in the House, are set to take control of the Senate and presidency, paving the way for Biden to bring his legislative agenda to life and reshape the economy.

Data showed that growth at U.S. service providers unexpectedly accelerated as gains in business activity and new orders helped offset a decline in a measure of employment. Federal Reserve Bank of Dallas President Robert Kaplan said officials shouldn’t intervene to slow rising bond yields because that’s expected to happen as the economy recovers.

Market Wrap

Main Pairs

The dollar advanced to a one-week high Thursday as spillover from broadly weaker emerging-market currencies dented the greenback’s Group-of-10 currencies and as dollar shorts were unwound. U.S. Treasury 10-year yields rose to the highest since March.

The dollar gauge advanced the most in over two weeks as real money unraveled short-dollar positions and as weakness in currencies such as the Mexican peso and offshore yuan filtered into G-10 currencies; the offshore yuan fell as much as 0.4% against the dollar while the South African rand fell as much as 2.7% in its biggest one-day loss in over three months vs the USD.

Among G-10 peers, the Canadian dollar was the most resilient while the yen and Swiss franc led losses. The dollar rose to the highest since Dec. 15 against the yen amid fast-money demand, according to a New York-based trader. The yen also weakened as fast-money accounts unwound USDCNH downside, the trader added.

Technical Analysis

AUDUSD (4 Hour Chart)

Aussie reverses Thursday’s earlier losses while picking up the bids near 0.777-75 during the early Friday morning in Asia. The Aussie pair had to bear the burden of political drama in the US, which mainly triggered the greenback run-up while snapping the two-day uptrend the previous day. However, hopes of the American stimulus propelled Wall Street benchmarks by the end of the day and favored the Aussie bull’s return.

From the SMAVG perspective, short- and long-term indicators both remain ascended trend. On the other hand, the RSI indicator stood above 50 then hold around 57, suggesting bullish guidance. Therefore, we are still optimal for further market impetus. Conversely, psychological support at 0.78 would be another significant burden for the short term.

Resistance: 0.7778, 0.78

Support: 0.7691, 0.7647, 0.762

USDJPY 4 Hour Chart)

USDJPY is up 0.8%; tests session high of 103.96 as bids continue to grind away at short dollar-yen positions, driving the pair toward 104.00, which also marks the 50-DMA. Traders in North America see stop-loss buy-dollar orders building between 104.10-104.20 with some initial resistance ahead of stops at 104.05, which coincides with the 55-DMA. Japan’s finance ministry comments on the recent strength of the yen vs the greenback also pressured the currency.

Skews and implied on the yen eased as the dollar, Treasury yields, and shares rose.

As price action, currently, the yen is having a downwind trend but seemingly approaches a critical resistance at 103.9 girds. Whilst RSI indicator close at 67 which suggesting a bullish momentum ahead. From the Moving Average perspective, the short-term indicator reverses to a positive way, and the long-term indicator kick-start slightly went up.

Resistance: 103.9, 104.14

Support: 103.53, 103.32

XAUUSD (4 Hour Chart)

After a rough fell from a recent high, the market moves around a consolidation pattern currently and stood above psychological support in 1900 as of writing. The worth noting, short period moving average indicator turn into a negative slope while the long period indicator remains upward trend momentum. For the RSI aspect, the indicator has a drastic correction to under 50 after breach 80 figure once. Therefore, combing those suggestions from the indicator, we expect the gold market would mire into a consolidation range which is 1905 to 1933 around. Moreover, $1900 psychological support will remain critically for the mid-term.

Resistance: 1933.35, 1947.55

Support: 1905, 1900, 1888

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202117
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US 10-year breakeven topped 2% this week for the first time since 2018

Market Focus While the US stocks market retreated from session highs after protestors stormed the US Capitol, forcing a lockdown that interrupted certification of the presidential election, the equity market still managed to stabilize in the green. The SP 500 trimmed its advance to 0.6% at the close of trading in New York, after rallying as much as 1.5% earlier …

Market Focus

While the US stocks market retreated from session highs after protestors stormed the US Capitol, forcing a lockdown that interrupted certification of the presidential election, the equity market still managed to stabilize in the green. The SP 500 trimmed its advance to 0.6% at the close of trading in New York, after rallying as much as 1.5% earlier today. Equities had been on track for a record, buoyed by likely Democratic control of Congress that could unleash a torrent of spending to revive growth. That sparked a relation trade, with investors pouring into small caps and banks, companies that benefit from an economic rebound. Tech shares lagged.

The buoyant mood was pierced, but not sunk when Vice President Mike Pence left the floor of Congress as hundreds of protestors swarmed past barricades surrounding the building where lawmakers were debating Joe Biden’s victory in the Electoral College.

Democrats claimed one of the two Senate seats contested in Georgia and led in the other tight race. Two wins would give Biden’s party control of Congress and smooth the path for some of his spending policies. That’s fueled bets that increased stimulus will boost the economy and spark inflation. The 10-year Treasury yield climbed past 1% for the first time since March.

Congress passed at year’s end a $900 billion spending deal to bolster an economy showing signs of slowing as the raging virus prompts stricter lockdowns across the country. The number of employees at US businesses unexpectedly declined in Dec for the first time since Apr. US 10-year breakeven, a market gauge of inflation expectations over the next decade, topped 2% this week for the first time since 2018.

Market Wrap

Main Pairs

Risk-appetite pushed the Aussie higher against its American rival, with the pair nearing April 2018 high at 0.7812. USDJPY, on the other hand, stages a modest recovery from multi-month lows set earlier this Wednesday. The underlying bullish tone undermined the safe-haven JPY and remained supportive. The prevalent greenback selling bias might cap gains as the focus shifts to FOMC minutes. Cable has recovered above 1.36 as the risk appetite put a cap to the greenback’s advance.

The pessimism surrounding the dollar remains well and sound early in 2021, with DXY dropping to new lows in the 89.20 area on Wednesday. The front-month futures contract for the American benchmark for light sweet crude oil (WTI) has survived a brief pre-US session dip below the $50 level and has recently recovered back above the $50.50 level to set fresh highs since Feb 2020.

Technical Analysis

EURUSD (4 Hour Chart)

EURUSD has retreated from the highs above 1.23 zone earlier Wednesday but immediately regained its bullish movement as the pair was last seen trading around 1.2288 at the time of writing. The bearish theme surrounding the greenback continues to be the main driver for EURUSD’s upward trend. However, given that the uncertainty that revolves around the coronavirus situations is a huge factor that can deteriorate the market sentiment instantly, the demand for safe-haven assets still can revive the greenback during times of worsening global pandemic situations. Overall, the EURUSD is likely to advance further as its upward trend is supported by the 15-Day SMAVG. On top of that, with the RSI now sitting around 60, the room has been cleared for the pair to proceed upward. If the EURUSD can find acceptance above 1.2338, the next resistance would be found around 1.23765 (a price zone last seen in Apr 2018). On the flip side, strong support can be seen around 1.2259, followed by 1.2205.

Resistance: 1.2338

Support: 1.2259, 1.2205, 1.2164, 1.2121

USDCAD (4 Hour Chart)

The Loonie recovered substantially from its multi-year lows at 1.2630, which it reached during the early European session, and is currently trading around 1.2715, nearly a 20% bounce back. Nevertheless, in the bigger picture, the Loonie pair remains its downward sloping movement as the Oil continues to surge (the WTI is trading above the $50 territory) and the overall risk-on sentiment keeps weighing down on the demand for the greenback. From a technical perspective, the bearish momentum of the Loonie is supported by the 60-Day SMAVG. But the intersecting MACD line and the signal line is indicating that the recent rebound of the pair may have overturned the short-term selloff pattern of USDCAD. A positive move above 1.2735 may trigger a short-term recovery of the bearish Loonie. On the flip side, the short-lived daily lows around 1.2652 would become the most immediate support for the pair.

Resistance: 1.2816, 1.2773, 1.2735

Support: 1.2673, 1.2652

XAUUSD (4 Hour Chart)

Gold made a sharp correction from its 2-month high, nearing the $1960 zone, to around $1900, which is strong, psychological support at the time of writing. The news of the Democrats managed to secure control of the Congress by winning both available seats in Tuesday’s Georgia Senate elections spurred the bond market on Wednesday. Essentially, the greater fiscal stimulus from a Democrat-controlled Congress would imply more US government debt issuance, which exerts downwards pressure of US government bond prices and holds upwards pressure on US bond yields. With yields and debt rising, investors are likely to switch their targets from safe-haven metals to US government debt. From a technical perspective, the gold’s bullish movement remains supported by the 15-Day SMAVG. Thus, it is likely that the XAUUSD would resume its upward movement after this round of profit-taking wears off. Conversely, if the bears can find acceptance below 1900, an extensive decline can be expected.

Resistance: 1933.35, 1947.55

Support: 1905, 1900, 1888

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202116
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Energy stocks surged as oil traded near $50 a barrel

Market Focus Stocks rose and bonds dropped amid key elections in Georgia that will decide which party controls the U.S. Senate for the next two years, setting the scope of President-elect Joe Biden’s agenda. In a session marked by thin trading volume, the S&P 500 rebounded after suffering its worst start to a year since 2016. Energy stocks surged as …

Market Focus

Stocks rose and bonds dropped amid key elections in Georgia that will decide which party controls the U.S. Senate for the next two years, setting the scope of President-elect Joe Biden’s agenda.

In a session marked by thin trading volume, the S&P 500 rebounded after suffering its worst start to a year since 2016. Energy stocks surged as oil traded near $50 a barrel, and the Russell 2000 Index of smaller companies jumped 2%. While markets have been factoring in a greater chance of a Democratic sweep in Tuesday’s election, some analysts see the potential for increased volatility. In anticipation of the outcome of the vote, which will likely be known on Wednesday, Treasury yields climbed — with a key curve measure reaching its steepest level in four years.

Whether or not Wall Street is getting more comfortable with the idea of Democrats taking control of both chambers of Congress, the scenario implies the possibility of a more generous stimulus package. That could also potentially lead to upward pressure on inflation and interest rates as well as higher taxes to pay for fiscal aid. Conversely, should the Republican incumbent win re-election, the party would have enough votes to block any Biden initiative.

Market Wrap

Main Pairs

A gauge of the dollar traded near its lowest level since February 2018 amid corporate hedging flows, rising inflation expectations, and commodity currencies surged following an agreement by oil-exporting countries to cut supply. Treasury Secretary Steven Mnuchin called NYSE Group Inc. President Tuesday to express his disapproval with the exchange’s surprise decision to spare three major Chinese telecommunications companies from being delisted, according to two people familiar with the matter.

The euro trades up 0.4% to 1.2300 after trading as high as 1.2305. Hedging flows were two-way in the currency with sellers of the pair at 1.2300/1.2280 while buyers of the pair emerged at ~1.2260, upcoming option strikes at 1.2300 are also supportive.

The pound is up 0.4% to 1.3630; Sterling saw corporate action ~1.3580 according to an internal trader. USD/JPY is on pace for a three-day drop; fell as much as 0.5% to 102.61, the lowest since March, after decent-sized corporate sales materialized near 103.00, the New York trader said.

Technical Analysis

XAUUSD (4 Hour Chart)

On Tuesday, the gold extends its previously edged up position to an almost two-month high at 1952.69 which was set up to secondary pivot resistance as we mention yesterday. In the meantime, the gold market rallied also be driven by greenback depreciation pressure as it fell under 90. From the Moving Average perspective, short- and long-term indicators remained upward trend, moreover, short term indicator turn sharply ascend in recent. For the RSI aspect, the indicator has set up over 70 that settle gird 75 in the overbought zone, suggesting over torrid at this stage. Therefore, we expect the gold market would take a break in the short term while the market seemingly overextended at the current stage.

Resistance: 1955, 1965

Support: 1936.6, 192.17, 1904

USDCHF (4 Hour Chart)

The Swiss franc has dropped to 0.87833 which is 5 years ago at the lowest level. As price action, swiss franc breakthrough yellow upward trend supports that tamp down its position to currently low. For the RSI aspect, the indicator drop to 36, suggesting bearish guidance at this stage. For the Moving Average aspect, the short term indicator was death cross long term couple of days ago and short one asymptotically fell that following investor sentiment ahead.

Indisputably, Swiss franc appreciation to record-setting rock-bottom amid weakness greenback and dollar traumatize by rising inflation expectation. At the same time, combing indicators suggest that expect ongoing bearish ahead for the short run at least.

Resistance: 0.8795, 0.8813

Support: 0.8775

AUDUSD (4 Hour Chart)

After unexpected slipped to 0.7647 bottoms yesterday, Aussie pulls back to a 2-year-long peak at 0.7778 and set around 0.7763 at market close, advancing by 1.1%. Meanwhile, net AUD short positions increased moderately last week but remain well below their recent highs. For the RSI aspect, the indicator close at 64 girds which suggesting a bullish sentiment for the short term at least. Meanwhile, short-term SMAVG is still propelled at an upward slope, supporting short-run market momentum.

Of note for the weeks ahead, Sino-Australian tensions could be a stumbling block for the Aussie and the RBA’s QE policy could be tempering the attraction of the AUD.

Resistance: 0.7778, 0.7802

Support: 0.7691, 0.7647, 0.7621

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202115
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Equities pared a slide that drove major US benchmarks down more than 2% earlier Monday

Market Focus Volatility gripped the financial market, spurring a stock selloff amid concern that a surge in global coronavirus cases could crimp the nascent economic recovery. Traders were also jittery ahead of Tuesday’s runoff elections in Georgia, which will determine whether Democrats have control of Congress to push President-elect Joe Biden’s agenda. While equities pared a slide that drove major …

Market Focus

Volatility gripped the financial market, spurring a stock selloff amid concern that a surge in global coronavirus cases could crimp the nascent economic recovery. Traders were also jittery ahead of Tuesday’s runoff elections in Georgia, which will determine whether Democrats have control of Congress to push President-elect Joe Biden’s agenda.

While equities pared a slide that drove major US benchmarks down more than 2% earlier Monday, the S&P500 still had its worst day in almost 10 weeks. Giants Apple Inc. and Amazon.com Inc. sank at least 2.1%, Boeing Co. weighed on the Dow Jones Industrial Average after an analyst downgrade, and Tesla Inc. climbed after coming close to meeting its vehicle-deliveries goal. The Cboe Volatility Index surged the most since October.

UK PM Boris Johnson imposed a third coronavirus lockdown across England, shutting schools and ordering the public to stay at home, amid dire warnings that the National Health Service is at risk of being overwhelmed. The emergency measures will start immediately and last until at least Feb. 15, potentially devasting retail and hospitality businesses and threatening to push the economy into a double-dip recession, as medics try to get a grip on the pandemic.

According to John Stoltzfus, chief investment strategist at Oppenheimer, “Equity markets will remain sensitive to developments tied to the pandemic that have held the US and global economy hostage for nearly a year. A nearer hurdle for the markets to consider will be the outcome of the runoff elections for two seats in the US Senate taking place in Georgia. Should the Democrats win both seats, we expect the S&P 500 to become vulnerable to a downdraft in the neighborhood of 6% to 10% from the end of 2020.”

Market Wrap

Main Pairs

EURUSD is trading below 1.23, upon the day but off the highs. The market mood has somewhat soured as concerns about the resurgence of coronavirus are outweighing vaccine hopes. Tensions are mounting ahead of Tuesday’s special elections in Georgia. US equities plummeted after reaching record highs, backing the greenback during US trading hours. Mounting coronavirus concerns and tougher restrictive measures weighed on sentiment. The Loonie pair dropped to its lowest level since April 2018 at 1.2663 on Monday but reversed its course in the second half of the day. The DXY starts the new year on the negative side and extends the drop to fresh lows in the 89.40 regions, but has now reversed the trend and is currently sitting at 89.900 as of writing.

WTI is trading at $47.71 between a range of $47.28 and $49.80 bbls. The price of a barrel of oil dropped from multi-month highs in volatile trade to start the year.

Technical Analysis

XAUUSD (4 Hour Chart)

On Monday, the gold exhibits an extensive rally that topped at $1945 from the low of $1904, and the yellow metal is currently trading around $1940. The worsening global Covid situations and hopes for more inflow of monetary and fiscal support have significantly boosted investors’ interests in acquiring safe-haven assets, such as Gold and cryptocurrency, on the first trading day of 2021. Another indicator for the bullish momentum of gold can be found in the continually weakening DXY, the rate of DXY has to be found trading near 89.425 at one point in the earlier session today.

From a technical perspective, with the 20-Day SMAVG crosses above the longer-period 60-Day SMAVG and the MACD line sets well above the signal line, it is inferable that a bullish momentum of Gold is well-supported, at least in the short-term. Another notable trend is that the reading of RSI has been hovering above the overbought threshold for quite some time, suggesting the bulls are dominating the trading bias for the pair, nonetheless, that also means a downward correction is likely. If the bulls can penetrate the resistance at $1945.39, the bulls can see to cap their profit at $1952.39. Conversely, the bears would need to find acceptance below the most immediate support at $1917 to bring XAUUSD back down below the $1900 zone.

Resistance: 1952.69, 1945.39

Support: 1917.53, 1897.97, 1888.50, 1876.53

GBPUSD (4 Hour Chart)

Investors for GBPUSD are anticipating the UK PM Johnson to announce a new and stricter nationwide lockdown amid an increase in Covid cases, which in turn, drag down the price of Cable substantially from the high of 1.37 to the lowest of 1.3542. The sharp decline of GBPUSD pulled down the RSI from the overbought region to around 44 at the time of writing, indicating a bearish sentiment is spread out across investors. However, given that the 15-Day SMAVG is still supporting a bullish move, it is reasonable to assume that it would not be a prudent move to place additional short positions of the Cable pair as of now, especially since Britain has begun to administer the AstraZeneca vaccine on Monday.

Resistance: 1.3629, 1.3702

Support: 1.3555, 1.3471, 1.3407

USDJPY (4 Hour Chart)

After bottoming at nine-month lows of 102.71, USDJPY bounced back extensively, the pair is trading around 103.12 at the moment. The rebound of USDJPY is possibly supported by the declining US equity markets. All three major index of Wall Street have once fallen by 2% today, this reversal of trading to the downside across US equities helped boost the demand for the greenback, and in turn, supported the USDJPY to stage a rebound from the nine-month lows. From a technical perspective, the USDJPY continues to stay bearish as the 60-Day SMAVG is fluctuating above the 15-Day SMAVG. Additionally, the rally of the pair has seemed to pause as the RSI is no longer raising after it reached the 50ish neutral line. If the USDJPY bulls want to stage a confirmative recovery, the pair must first find acceptance above 103.27 resistance. Conversely, if USDJPY loses grounds at 103.02 support, the pair would likely resume its declining tendency.

Resistance: 103.27, 103.47, 103.66

Support: 103.02, 102.75

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