Market Focus

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.

Technical Analysis

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