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US Treasury yields rose as markets await the Fed’s next move regarding…

US Treasury yields rose as markets await the Fed’s next move regarding the timeline of raising interest rates after it has finished tapering

20211022
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Market Focus

US markets were mixed amid strong earnings reports from companies, and the Fed’s upcoming tapering move. The S&P 500 continued to notch new records, while the tech weighted Nasdaq Composite rose 0.6% on Thursday. The Dow Jones Industrial Averages closed a bit lower after reaching an all-time high on Wednesday, dropping 6 points.

US Treasury yields rose as markets await the Fed’s next move regarding the timeline of raising interest rates after it has finished tapering. US inflation expectations, which is measured by a 10-year breakeven inflation rate, jumped to the highest since 2012. The US dollar might witness a rally when the 10-year yield crosses the 1.70% mark.

Responding to the growing controversy over investing practices, the Fed has announced new rules to ban policymakers from investing in individual stocks. In the meantime, they will be restricted to buying and selling mutual funds, which will also require permission. The purpose of the change is to ensure the Fed’s ethical conduct and address the controversy.

Main Pairs Movement

The US dollar was trading at familiar levels throughout the day as the light macro calendar provided no news that would impact the market. The Dollar index consolidated within a tight range, between 93.550 to 93.800. Further instructions may be given after the Markit PMI is revealed on Friday.

However, most major pairs performed badly against the Greenback. The EUR/USD pair traded around 1.1625, while GBP/USD dropped below the 1.3800 level, hovering around 1.3785. The commodity-linked currencies failed to maintain their previous momentum, with AUD/USD dropping over 0.5% to 0.7465, NZD/USD retreating to 0.7150, and USD/CAD surging over 70 pips to 1.2375. JPY was the best performer of the day. USD/JPY once dived to 113.65, and settled at 114.00 at the time of writing.

Gold seesawed around $1,780 a troy ounce during the day, while crude oil encountered some corrective selling pressures, with WTI slipping to $82.60 a barrel, and Brent at $84.70. The US benchmark 10-year Treasury yield resumed its 5-day winning streak and reached a 5-month high at 1.690%.

Cryptos plunged on Thursday right after Bitcoin hit an all-time high yesterday. Bitcoin has lost over 7% of its total value from its peak, while Etherum declined a modest 1.90%, still standing above the $4,000 threshold. 

Technical Analysis

USDCAD (4-hour Chart)

The Loonie finally got a decent hike on Thursday after losing for almost 3 weeks. The pair posted its lowest daily close since early July at 1.2288 during Asian hours, and then bounced to the upside. During the American session, it printed a fresh daily high at 1.2383, and was last seen at 1.2370.

The dollar index swung higher at the close of Wall Street, ending its six-day downtrend. Higher US Treasury yields and the deteriorating market mood underpinned the Greenback. Moreover, the correction in oil prices also weighed on the demand for CAD, further pushing the USD/CAD price upwards. The main trend in USD/CAD should still be on the downside, as long as the worldwide recovery from the pandemic continues, and the demand for energy remains robust.

On the technical front, both the daily MACD histogram and RSI indicator suggests strong bearish sentiment. The price actions are away from the bottom of the Bollinger bands, sparing some rooms for further southern extension.

Resistance: 1.2480 (50% Fibonacci), 1.2750 (78.6% Fibonacci), 1.29490 (yearly high)

Support: 1.2232 (23.6% Fibonacci), 1.2010 (yearly low)

EURUSD (4-hour Chart)

The euro continued its reversal from week-highs at 1.1665 to hit fresh session lows at 1.16 during Thursday’s late U.S. session. The pair is giving away gains after a three-day rally, weighed by higher demand for the Greenback amid sourer market sentiment. Quarterly earnings numbers have failed to lift spirits, and concerns about surging inflation and the supply chain collapse have bolstered demand for safe assets against riskier currencies such as Fiber.

On the macroeconomic side, U.S. data has been mixed. Weekly jobless claims have dropped to their lowest levels in 19 months and existing home sales increased 7.0%, the highest reading since January. On the other hand, the Philadelphia Fed Manufacturing survey dropped to 23.8 from 30.7 in the previous month. On the technical side, the RSI moved down under the 50 threshold to 48.6 figures in the day market, suggesting slightly bearish movement in the short term. For the moving averages, the 15- long indicator has reversed its downward trajectory with exceedingly rapid momentum and the 60-long indicator is turning its head toward slightly upward momentum.

In light of the backdrop of mixed suggestions from the indicators, we expect that the euro will continue to float in a consolidation range between 1.161 and 1.1675. Moreover, it should hover around perfectly upside momentum as it breaks through a W pattern by price-action. However, the market is still lingering in a choppy box pattern.

Resistance: 1165, 1.1675, 1.171

Support: 1.153, 1.161

USDJPY (4 Hour Chart)

The Japanese yen edged lower for the second successive day after hitting the highest level in years amid reviving safe-haven demand. Renewed worries about China’s property sector extended support to the safe-haven JPY. Recently, it dropped below 114 level to 113.63, the lowest point in the week. Furthermore, with the U.S. 10-year Treasuries bond yield hitting its 4-month peak at 1.68%, the market is anticipating that the persistently high inflation and global supply chain congestion will force the Fed to accelerate its tapering of their monetary policy, which has provided additional support to the dollar as well.

From a technical perspective, the RSI indicator retreated under the natural level at 48, suggesting slightly bearish momentum in the short term. On moving average indicators, the 15-long indicator has turned its way to the subtle downside, and the 60-long indicator has retained upward movement.

Since the yen has slipped under the 114 level as the neckline of a double-head, it seems to have lost bullish momentum under current circumstances according to price action. Therefore, we deem that strong resistance has turned to 114 and 115 next. On the slipway, we expect the next immediately support will be a psychological level at 113.5

Resistance: 114, 115

Support: 113.5, 112.57, 112

20211022
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Inflation data from the UK missed expectations, adding pressures on the Bank…

Inflation data from the UK missed expectations, adding pressures on the Bank of England to accelerate its monetary normalization plan

20211021
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Market Focus

US markets were mixed on Wednesday, with the major indices hovering slightly below all-time highs. The Dow Jones jumped 0.4% to a new high, whilst the S&P 500 rose for the 6th straight day as a parade of strong earnings results boosted equities. Meanwhile, the Nasdaq dropped 0.05%. Recent rallies of US markets have essentially shown that the markets are in the process of climbing a wall of worries over the last two months, including fears over a resurgence of the pandemic, the Chinese property crisis, and the Federal Reserve’s hawkish tone.

After the first Bitcoin ETF debuted in New York on Tuesday, Bitcoin investors cheered and push Bitcoin price to notch a fresh all-time high on Wednesday. Bitcoin climbed 3.9% to $66,398 while Ethereum also rallied 7.4% to the $4,000 level.

China’s Evergrande scenario has signalled and warned the Chinese real estate sector has to be substantially smaller to keep the overall Chinese economy stable and healthy. According to an economics professor at Texas A&M University, China has “too big of a risk in the sector.” The sector can potentially slow down China’s economic growth, which reported a disappointing 4.9% for its Q3 GDP.

Main Pairs Movement

The Greenback again closed in the red against most of its major rivals on Wednesday. The Dollar index climbed to the intraday high of around 93.870 during the early European session, but plunged after American trading hours. Inflation data from the EU and Canada appeared positive, while the UK one missed expectations, adding pressures on the Bank of England to accelerate its monetary normalization plan.

The EUR/USD pair is trading around 1.1650, while GBP/USD has stuck firmly above the 1.3800 threshold. The commodity-linked currencies resumed yesterday’s strength, with AUD/USD breaching the 0.7500 level, NZD/USD bouncing off 0.7200, and USDCAD retreating toward the 1.2300 support. USD/JPY is hovering around the familiar levels and is trading at 114.28 at the moment.

Gold surged nearly 1% to $1,785 a troy ounce during the day. Crude oil prices continued their upward traction, with WTI going up to $83.30 a barrel, and Brent at $85.70. The US benchmark 10-year Treasury yield posted a fresh monthly high at 1.673% and was last seen trading at 1.650%.

Cryptos went crazy as the trading of the first Bitcoin ETF kicked off on Tuesday. Bitcoin marked an all-time high at $67,000, while Etherum breached the strong $4,000 resistance and is awaiting to beat its previous high. 

Technical Analysis

USDCAD (4-hour Chart)

Loonie consolidated at the start of the day but soon plummetted after Wall Street’s opening, losing nearly 0.4% and is approaching the key 1.2300 level at the time of writing. The recent dive may have derived from the sharp rise in energy prices, as the price actions of the pair has been in tandem with other commodity-linked currencies.

Domestic factors have also contributed to the move of the Loonie lately. The Bank of Canada (BoC) is set to taper bond purchases further to $1 billion Canadian dollars per week, and the whole QE program is anticipated to end in December as investors are betting that the BoC will announce a rate hike in 2022. The tighter job market and rising inflation appear to be supporting this kind of perspective.

On the technical front, the daily RSI has just breached the oversold territory, and the price actions have been one step ahead of the bottom of the Bollinger band, suggesting a short-term correction may come before further decline.

Resistance: 1.2480 (50% Fibonacci), 1.2750 (78.6% Fibonacci), 1.29490 (yearly high)

Support: 1.2273 (Bottom of Bollinger Band), 1.2232 (23.6% Fibonacci), 1.2010 (yearly low)

EURUSD (4-hour Chart)

The Euro keeps crawling higher against a somewhat softer U.S. dollar on Wednesday, and is on track to complete a three-day recovery. The pair confirmed above 1.16 earlier today to ease negative pressure, before hitting the resistance level right below October’s peak, at 1.167. In the background, the U.S. dollar index has retreated further from the one-year high of 94.5 last week, reaching session lows at 93.5 area, 1% below last week’s top. The positive market sentiment has been reflected in moderate advances in Wall Street.

On the technical side, the RSI moved whereabout 60.2 figures, a slight change compared to yesterday, suggesting slightly bullish movement in short term. For moving averages, the 15-long indicator has expedited its upside traction and the 60-long indicator is turning its head towards slightly upward momentum.

In light that the current price has penetrated the 1.165 level, which we expected to be a critical resistance for up-traction before, it seems that the pair could continue its bullish movement if it could hold above the threshold. On the upside, we expect the immediate resistance will be the psychological level at 1.1675, which is a 2-month-long resistance for the current price action.

Resistance: 1.1675, 1.171

Support: 1.153, 1.161, 1.165

USDJPY (4 Hour Chart)

The U.S. dollar has pulled back after hitting fresh five-year highs at 114.7 on Wednesday, to consolidate in the lower range of 114. The pair has turned negative on daily charts, although the near-term trend remains positive after having rallied nearly 5% over the last four weeks. Investor optimism and the pause on U.S. bond yields’ rally have dented demand for the dollar, allowing most majors to post moderate recoveries. Meanwhile, a consecutive widening gap between U.S. and Japan has squeezed the yen’s attractiveness for the investors.

From a technical perspective, the RSI indicator reversed from overbought sentiment at 56.6, suggesting bullish momentum in short term. For the moving averages indicator, both the 15- and 60-long indicators still retain upside traction.

While the yen has stood above the 114 level solidly for days, it seems to have lost driving momentum or further fundamental-triggering news currently. Therefore, the 114 level is still an important support level for buy-side investors.

Resistance: 115

Support: 114.02, 112.57, 112

20211021
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The world’s largest cryptocurrency, Bitcoin, rose back toward record above $64,000, as…

The world’s largest cryptocurrency, Bitcoin, rose back toward record above $64,000, as the first related US ETF debuted on Tuesday

20211020
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Market Focus

US markets headed north on Tuesday as major companies continued to report strong Q3 earnings, easing concerns of persistent pandemic cases and inflation. The Dow Jones Industrial Average climbed 0.6%; the S&P 500 rose 0.7%; while the Nasdaq Composite advanced 0.7%. Notably, the S&P 500 is back in rally mode, sitting less than 1% from its all- time high, mainly driven by the impact of supply-chain snarls and higher commodity prices.

The world’s largest cryptocurrency, Bitcoin, rose back toward record, above $64,000, as the first related US ETF debuted on Tuesday. It is the first Bitcoin ETF to trade in the US on a regulated exchange, which comes after many years of the cryptocurrency industry hoping to get one that provides traders safe access to Bitcoin exposure.

The International Monetary Fund has downgraded its 2021 economic outlook for Asia. The outlook is down 1.1% to 6.5% from 7.6%, after highly infectious pandemic cases continue to hurt some regions in Asia. “The global COVID-19 pandemic is still ravaging the region,” said a report from CNBC.

Main Pairs Movement

The Greenback closed in the red against most of its major rivals on Tuesday, although it experienced a modest rebound after the Wall Street opening. The macro calendar has been uneventful during the day, causing traders to depend on sentiment for direction. The Dollar Index dropped nearly 0.23% amid the broader risk-on market mood.

The EUR/USD pair is trading around 1.1640, while GBP/USD hovers around the 1.3800 level. The antipodean pairs are the best performers, with AUD/USD surging 80 pips to 0.7475, and NZD/USD soaring over 1% to 0.7170. USD/CAD has settled around 1.2360, and USD/JPY was last seen at 114.300.

Gold climbed to $1,785 a troy ounce during the European session, but soon fell back after the New York trading hours, ending the day with modest gains at around $1,770.00. Crude oil failed to hit fresh highs and fell back to the familiar levels. WTI settled at $82.80 a barrel, and Brent at $84.90.

The spotlight is now on the UK inflation data, as the Bank of England has hinted at a possible rate hike in the case that inflation continues rising, and hits above the desired levels. 

Technical Analysis

EURAUD (4-Hour Chart)

The EUR/AUD cross plummeted during the New York session, losing over 0.6%, and is trading at 1.5550 as of writing. Though the Reserve Bank of Australia (RBA) unveiled their unwillingness to raise rates in the near term, investors seemed to have increased expectations of a 2022 interest rate hike as the Bank of England and other developed economies are seeing their central banks switching towards a normal monetary policy.

Looking forward, with the approach of the French Presidential election next year and the tensions regarding the rule of law between the EU, Poland and Hungary may weigh on the EUR. Meanwhile, the AUD may continue benefitting from the rises of the commodities, both of which could extend the pair further south.

On the technical front, the 4-hour RSI is one step ahead of the oversold territory, and the price actions have already breached the bottom of the Bollinger bands, suggesting a short-term correction may come before further decline.

Resistance: 1.5616, 1.5719

Support: 1.542, 1.525

EURUSD (4-hour Chart)

The Euro has extended its recovery on Tuesday, fueled by a positive market mood, reaching the upper range of 1.1600 for the first time since late September. The pair pulled back afterwards to consolidate well above 1.16, putting some distance from the 15-month low that was hit last week, at the 1.152 area. Meanwhile, Euro gains were capped by dovish signals from ECB chief economist Philip Lane. On the macroeconomic front, U.S. building activity has shown a contraction in September, demonstrating that shortages in raw materials and labour are starting to squeeze the construction market, which may have a negative impact on the third quarter’s economic growth.

On the technical side, the RSI was hovering around 58.7 figures, a small change compared to yesterday, suggesting slightly bullish movement in short term. For moving averages, the 15- long indicator has expedited its upside traction, while the 60-long indicator is turning it head to slightly upward momentum.

Because the current price has penetrated the 1.161 level, which we expected as a critical resistance for upward traction before, it seems that the Euro could continue its bullish movement if it can hold above the threshold. On the upside, we expect the immediate resistance will be the psychological level at 1.165, with 1.1675 following.

Resistance: 1.165, 1.1675, 1.171

Support: 1.153, 1.15, 1.161

USDJPY (4 Hour Chart)

The Japanese yen retreated from a three-year high at 114.45 on Monday and hit session lows at 113.85 before bouncing back and returning to the 114.3 area. The yen’s rebound, however, has been short-lived. The yen is particularly sensitive to monetary policy differentials and remains heavy while the market positions for the imminent announcement that the Fed will be starting to taper its massive stimulus programs. These expectations have been widening the Treasury yield gap between the U.S. and Japan, whose central bank maintains a near-zero 10-year note through a yield control curve which is crushing investor’s appeal for the yen.

From a technical perspective, RSI indicator rebound reversed from over bought sentiment at 62.8, suggesting bullsish momentum in short term. On moving average indicator, the 15- and 60-long indicators still retains upside traction.

While the yen has stood above 114 level solidly for days, it seems to have lost driving momentum or further triggering fundamental news currently. Therefore, the 114 level still a important support level for buy-side investors.

Resistance: 115

Support: 114.02, 112.57, 112

20211020
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