Brent oil closed at the highest level since 2018, as supply-chain disruptions…
Brent oil closed at the highest level since 2018, as supply-chain disruptions forced energy companies to pull large amounts of crude out of stockpiles, resulting in global energy crunch
Market Focus There were both ups and downs in US stock market on Monday as 10-year treasury bond yields rose sharply amid investors’ expectations about monetary tightening. Investors …
There were both ups and downs in US stock market on Monday as 10-year treasury bond yields rose sharply amid investors’ expectations about monetary tightening. Investors have pulled the possible timeline of the rate hike forward after Fed chair Jerome Powell announced that the Fed could start bond tapering in November at the earliest. A decline in bonds sent the yields briefly above 1.55, which was the highest level in June, causing some of the world’s biggest technology companies to continue selling off.
The benchmarks, S&P 500 and Nasdaq, both declined on Monday. The S&P 500 was down 0.3% on a daily basis, ending in negative territory for the first time in the most recent three trading sessions. The real estate sectors continued its bearish momentum, dropping 1.71% on Monday. The energy and financials sectors were the best performing among all groups, climbing 3.43% and 1.31%, respectively. The Dow Jones, on the contrary, posting a 0.2% gain for the day.
The higher yields weighed especially on the overstretched growth stocks in the technology sector, which has low dividend yields. On top of that, Brent oil closed at the highest level since 2018, as supply-chain disruptions forced energy companies to pull large amounts of crude out of stockpiles, resulting in global energy crunch.
In Asia, the stock market was mixed on Monday as risk sentiment improved on the containment of China’s Evergrande Group’s default risk. Additionally, news about the release of Meng Wanzhou, daughter of Huawei’s founder and the CFO of the company, has indirectly eased the tension between the US and China, favoring the market sentiment.
Main Pairs Movement
The broad U.S. equity market wavered on Monday as the U.S. 10-year treasury bond yield rose to 1.494%, the highest intraday level since June. Major Asian benchmark indices were mixed on Monday. The Hang Seng Index edged up 0.1%, while the Shanghai Composite Index lost 0.8%. Germany voted for a new chancellor over the weekend, but analysts are suggesting the leadership change would not affect Germany’s fiscal stance.
Risk on sentiment combined with increasingly hawkish global central banks have caused money to flow from safe-haven assets to higher yielding asset classes. Despite the dollar index advancing on Monday, the Cable and Loonie both rose against the Dollar. Gold made small gains against the dollar as the U.S. 10-year treasury yield rose to a 3-month high, but gains were limited for the precious metal as investors looked for higher yielding assets.
GBPUSD (4 Hour Chart)
After losing more than 0.3% on Friday’s trading, Cable has found solid support at around the 1.3665 price level, and has repaired most of its losses from Friday’s trading. The BoE’s hawkish decision on Thursday has helped bouy the Pound against a strong Dollar. However, a recent truck driver shortage, which has brought on a supply disruption of petrol in 90% of U.K. gas stations, poses as a near term threat to the U.K.’s economic recovery.
From the technical perspective, Cable has lost most of its gains since late September, but the pair has found support at the 1.3665 price level. As of writing, Cable is trading at 1.37111, with the nearest level of resistance at around the 1.3747 price level. RSI for the pair sits at 54, a neutral buying signal. Cable is currently trading below its 50, 100, and 200 day SMA.
Resistance: 1.3747, 1.381, 1.3851
Support: 1.3665, 1.36
USDCAD (4 Hour Chart)
USD/CAD continued its downtrend since last Friday, and the pair is continuing to edge lower, testing our previously estimated support level of 1.2635. The pair’s recent downtrend has been attributed to the renewed “risk on” sentiment leading to renewed Dollar weakness on Monday, and the rising cost of commodities— specifically oil as it is Canada’s largest export item. On Monday, WTI reached and broke its 3-month high of 75 dollar per barrel.
From the technical perspective, risk on sentiment combined with rising commodity costs has brought USD/CAD below our previously estimated support level, but this level remains relevant as the pair seems to have found support near this region, as of writing. RSI for pair sits at 39, suggesting mild underbuying. USD/CAD is trading above its 50, 100, 200 day SMA.
Resistance: 1.2834, 1.2912
Support: 1.2635, 1.2586, 1.2509
XAUUSD (4 Hour Chart)
Gold continued its climb against the Dollar at the start of a new trading week. However, the upward momentum is hampered by the “risk on” sentiment of equity investors and the recovering Dollar. Rising U.S. bond yields could further strengthen the dollar and pose strong downward pressure on the safe-haven asset. Despite hawkish signals from global central banks, China’s Evergrande Group still looms over global markets and has prevented Gold from suffering further losses.
From the technical perspective, XAU/USD met resistance at around the 1759 price level and has reversed its upward course. RSI for the pair sits at 43, indicating a neutral market. XAU/USD is trading below its 50, 100, and 200 day SMA.
Resistance: 1759.27, 1779.04, 1808.42
Support: 1742.39, 1725.51
Despite the hawkish tone from Fed, and the contagion risks from China…
Despite the hawkish tone from Fed, and the contagion risks from China Evergrande, US stocks finished in the positive territory for a third day.
US stock advanced on Friday amid turmoil in the global stock market earlier in the week. Despite the hawkish tone from Fed after the meeting this week, and the contagion risks from China Evergrande Group’s debt crisis, US stocks finished in the positive territory for a third day. Investors believed that the US economy is recovering at a steady pace, and has met the central bank’s conditions for starting to reduce its bond purchases soon. This is also because some of the Fed bank presidents have supported starting bond tapering in November and concluding them over the first half of next year.
The benchmarks, S&P 500 and Dow Jones both advanced on Friday. The S&P 500 was up 0.2% on a daily basis, showing a late day rebound after fluctuating throughout most of the session. The energy, communication services and financials sectors are the best performing among all groups, climbing 0.84%, 0.69% and 0.55%, respectively. The Nasdaq, on the contrary, posted a 0.1% loss for the day.
Surprisingly, the S&P 500 and the Dow Jones ended the week with gains amid uncertainty surrounding the indebted real-estate giant Evergrande Group. But for investors, this can be a challenging weekend for holding weekend risk given the ongoing and still-developing scenario around Evergrande.
In Asia, China has said that crypto-related transactions will now be considered illegal financial activity. In the face of such news, bitcoin tumbled alongside crypto-related shares. Investors remain vigilant about the next step of China regulators.
Main Pairs Movement
The US dollar advanced on Friday, bouncing back from Thursday’s slide as it touched a daily high before the American session. But the Greenback failed to preserve its bullish momentum after breaking the 93.4 level and closing at 93.277. The safe-haven dollar benefited from the uncertainty over Chinese property developer Evergrande Group and bounced back from its biggest one-day percentage drop in about a month on Thursday. Investors are worried about a default by China Evergrande Group as the company missed a Thursday deadline for a payment of $83.5 million. To sum up, the US dollar strengthened on Friday amid hawkish Fed and the Evergrande risks, rising 0.19% on a daily basis.
EUR/USD and GBP/USD both declined on Friday amid stronger US dollar across the board, losing 0.15% and 0.33% for the day respectively. EUR/USD dropped to a daily low during European trading hours but recovered modestly after declining to 1.1700. The risk-averse market environment weighed on the pair as the Greenback to continued to outperform its rivals during the day.
Gold rose on Friday, rebounding slightly from Thursday’s slump. But the prospects for an earlier rate hike move by the Fed and the Bank of England kept a lid on any meaningful gains for gold. The precious metal posted a 0.45% gain on a daily basis. WTI Crude Oil, in the same way, climbed more than 1% on Friday.
GBPUSD (Daily Chart)
GBP/USD acelerated its slump, trading under 1.3700. The tumble trimmed almost half of its post BOE gains as market concerns about the shifting tone of the Fed moved from dovish to hawkish. From the technical perspective, the intraday bias remains on the downside as the currency pair continues trading below the descending trendline. At the same time, the previous bounce-up seemed to be temporary from the double top trading pattern. As a result, the pair lost its bullish strength today. Moreover, according to the RSI, it has not yet reached the oversold territory, which indicates that the bearish move continues to keep up its momentum. The fall will accelerate if the pair falls below 1.3605. On the contrary, GBP/USD needs to trade above 1.3835 to reverse from bearish to bullish.
Resistance: 1.3726, 1.3835, 1.3905
Support: 1.3604, 1.3441
Gold (Daily Chart)
Gold tumbled, failing to recover above the $1,750 region after the Fed and BoE turned hawkish this week. Resurgent US dollar demand also exerted additional pressure on the precious metal. From the technical aspect, any subsequent decline is likely to find its immedicate support at 1740.85. The decline might find it hard to extend losses below the support level as the RSI has reached the oversold territory, minimizing the selling pressure. If gold ends up falling below the support level and ascending trendline, then it will acelerate the downside towards its next support at $1,683.34. On the flip side, $1,786 looks to act as an immediate hurdle, above the level that will give bulls an opportunity to challenge the 200- SMA.
Resistance: $1,786, $1,817.71
Support: $1,740.85, $1,683.34
USDJPY (4-Hour Chart)
USDJPY gained traction for the third consecutive day as the US dollar obtained strength from the Fed’s hawkish tone. At the time of writing, USDJPY has reached multi-week tops, trading around the 110.73 region. From a technical standpoint, the intraday bias looks to be bullish as the pair is trading along the ascending trendline. At the moment, the pair is contesting its immediate resistance at 110.704. If the pair successfully breaches the resistance, then it will acelerate the upside momentum towards the recent peak at 111.576. However, the pair is going to confront a firm obstacle as the RSI has overreached the overbought condition, almost at the 80 threshold. That being said, the bullish momentum has a high possibility of holding. The pair might consolidate in the price range of 110.698 and 110.155 until the RSI cools down.
Resistance: 110.698, 111.576
Support: 110.155, 109.716
After the two-day FOMC meeting, Fed has turned more hawkish, and is…
After the two-day FOMC meeting, Fed has turned more hawkish, and is expected to reduce bond purchases in November at the earliest
US stocks advanced on Thursday amid risk-on market sentiment as investors embraced the Federal Reserve’s bullish economic outlook. After the two-day FOMC meeting, Fed has turned more hawkish, and is expected to reduce bond purchases in November at the earliest. Generally, a hawkish Fed should be bearish for the equity market. But surprisingly, the hawkish tone from the Fed has been welcomed by investors as it was seen as a confirmation of substantial progress in economy recovery. Additionally, gold declined and oil rose.
The benchmarks, S&P 500, Dow Jones, and Nasdaq all rose on Thursday as they rode the wave of positive risk sentiment. S&P 500 was up 1.2% on a daily basis as the index registered its biggest two-day gain since July. Nine out of eleven sectors posted a gain as the energy and financials sectors were the best performing among all groups, rising 3.41% and 2.50%, respectively. Real estate .and utilities were the only major groups to end lower on the day. The Dow Jones gained the most, at 1.5%.
On top of that, the Bank of England moved closer to raising interest rates after officials said developments appear to have strengthened the case for modest tightening. Therefore, the British pound rallied on Thursday.
In Asia, Financial regulators in Beijing instructed China Evergrande Group to avoid a near-term dollar bond default. China is also said to have told the company to focus on completing unfinished properties and repaying individual investors. For now, there is no indication that regulators offered financial support to Evergrande Group for the bond payment yet, and concerns of an Evergrande failure continues.
Main Pairs Movement
The 2-day long Fed meeting concluded with signals from the FOMC that tapering, and a revised rate hike schedule should start relatively soon. This could begin by as early as 2022. Besides the FOMC minutes, markets were also moved by a report that Chinese authorities signaled reluctance to bail out Evergrande despite the Chinese Government’s continued effort to inject more cash into the financial system. Furthermore, Chinese regulators have instructed Evergrande to avoid near-term defaults on bonds. The combination of the two events boosted investor sentiment and a risk-on investing scene as most U.S. indices continues to rise for the second day in a row.
Cable rose against the dollar, as the Greenback weakened due to investors redirecting funds into a “risk on” equity market environment. The Pound was also fueled by the increasingly hawkish stance of the BoE. The redirecting of funds and “risk on” sentiment hurt gold, as the precious metal tumbled throughout the trading day.
GBPUSD (4-hour Chart)
Cable traded lower during the European trading session, but the pair would rebound significantly once the Asian and American trading sessions began. Broad Greenback weakness and risk-on sentiment in equity markets have propelled Cable to its 3-day high. The BoE’s increasingly hawkish tone also added to the Pound’s strength against the Dollar. As of writing, Cable has broken through our previously estimated resistance level of 1.3687 and the pair is trading at 1.3747.
From the technical standpoint, Cable successfully defended the 1.36 support level and quickly broke through the 1.3687 resistance level. Near-term resistance for Cable will sit at around the 1.378 price level. RSI for the pair sits at 61.5, indicating modest overbuying in the market. As of writing, Cable is trading above the 50, 100, and 200 day SMA.
Resistance: 1.3687, 1.381, 1.3851
Support: 1.3627, 1.3603
USDCAD (4- Hour Chart)
USD/CAD reversed course for the day as the Dollar lost steam, brinigng the pair below our previously estimated support level of 1.2752. During the earlier part of the trading session, USD/CAD was able to repair some losses from the previous trading day, but the pair quickly lost ground once the American trading session began. Canadian July retail sales declined, although actual figures fared better than analyst estimates.
From a technical viewpoint, USD/CAD broke through the 1.2752 support level and is currently trending towards the nearest support level of 1.2635. RSI for the pair is at 35.47, indicating modest overselling. As of writing, the pair is trading at the lower bound of the bollinger bands, and the pair is trading below its 50, 100, and 200 day SMA.
Resistance: 1.2834, 1.2912
Support: 1.2752, 1.2635, 1.2586
XAUUSD (4- Hour Chart)
XAU/USD tumbled as equity markets heated up. Furthermore, a weaker Dollar did not help the pair, as investors adopt the “risk-on” sentiment. The increasingly hawkish tone from the Fed and BoE also did little to help gold as U.S. bond yields soared and flows redirected away from the non-yielding precious metal. Cash injection by the People’s Bank of China further eased equity investors’ concerns.
For the technical aspect, XAU/USD has found some support at the 1748 price level, but, if investors continue to move away from the safe haven asset, XAU/USD could trend down towards its next immediate support level of 1725. RSI for the pair sits at 36, as of writing, indicating modest overselling. The pair is trading below its 50, 100, and 200 day SMA.
Amaran Risiko: Perdagangan Kontrak untuk Perbezaan (CFD) membawa risiko yang tinggi terhadap modal anda dan boleh mengakibatkan kerugian, anda hanya boleh berdagang dengan wang yang anda mampu kerugian. Perdagangan CFD mungkin tidak sesuai untuk semua pelabur, pastikan anda memahami sepenuhnya risiko yang terlibat dan ambil langkah yang sesuai untuk menguruskannya. Sila baca dokumen Pendedahan Risiko yang berkaitan dengan teliti, terdapat di sini Dokumentasi Undang-Undang.
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