Market Focus

The U.S. equity market enjoyed gains on broad-based indices on Thursday’s trading. The S&P 500 gained 1.7% to close at 4438.26, the DJIA gained 1.6% to close at 34912.56, and the Nasdaq gained 1.7% to close at 14823.43. Stocks were boosted by healthy corporate earnings and better-than-anticipated economic data. Goldman Sachs, BB&T, and PNC Financial Services Group will release their earnings on the 15th. Morgan Stanley topped expectations for Q3 and beat earnings estimates. Furthermore, Morgan Stanley reported a 25% jump in net income year over year, despite a slowdown in fixed-income trading revenue.

The U.S 10-year Treasury yield continues to decline, and the benchmark is currently sitting at 1.519, down 1.94% from the previous trading day.

The U.S. Initial Jobless Claims data for the week of October 9th dropped to a fresh pandemic low of 293,000, the lowest in 19 months. Importantly, labour demand seems to be on the rise as more people are coming off state unemployment rolls.

The Brent Crude spiked above $80 a barrel and is currently settling at $84.31 per barrel. Meanwhile, the WTI has also broken the $80 barrier to settle at $81.67 per barrel.

Main Pairs Movement

As Treasury yields held at the lower end of the weekly range, the Dollar remained weak. The yield on the 10-year US Treasury notes bottomed at 1.507%, ending the day nearby. The Greenback managed to post a modest intraday advance against the JPY, but lost to most of its major rivals.

Upbeat US data provided additional support to the market’s mood. The September Producer Price Index was up 0.5% MoM and 8.6% YoY, higher than the August readings though below the market’s expectations. Initial Jobless Claims for the week of October 8 printed at 293k, much better than the expected 319k.

EUR/USD lost the 1.1600 threshold, ending the day a few pips below the level. GBP/USD settled at 1.3670, while commodity-linked currencies were the best performers. AUD/USD regained the 0.7400 mark, while USD/CAD fell to 1.2355, a fresh low since early July.

Crude oil prices are up. The International Energy Agency said that record-breaking natural gas prices would boost demand for oil, although top oil producer Saudi Arabia dismissed calls for additional OPEC+ supply. WTI settled at $81.40 a barrel, while Brent traded over $84.00. Gold flirted with $1,800 per ounce and is hovering below that level at the moment.

Technical Analysis

USDJPY (4-hour Chart)

The US Dollar’s bullish attempts seen during the early US trading session has challenged resistance again at the 113.70 area, although the pair retreated to the mid-range of 113.00. The USD remains strong against a weaker yen, trading right below three-year highs at 113.80 following a 4% rally over the last four weeks.

The Japanese yen is trading lower against its main peers with positive market sentiment hurting safe-havens in favour of riskier assets. The world’s major stock indexes are posting significant gains on Thursday, as concerns about surging inflation and supply chain bottlenecks have taken a backseat.

Looking at the bigger picture, the pair remains steady near recent highs, and a further rally is anticipated, even though overbought shorter-term conditions could lead to a couple of days of consolidation first. The next resistance is at 114.02, and the strength of the USD is deemed intact as long as it does not drop below 112.00.

Resistance: 114.02, 114.55

Support: 112.57, 112.00, 109.15

EURUSD (4-hour Chart)

The Euro retreated from its daily high and lost the 1.16 threshold, ending the day a few pips below the level, and is trading at 1.1588, 0.04% down as of writing. Earlier in the Asian session, the currency rose to a fresh weekly high of 1.1624. Upbeat U.S. data provided additional support to the market’s mood. The September Producer Price Index is up 0.5% MoM and 8.6% YoY, higher than the Aug readings although below the market’s expectations, while Initial Jobless Claims for the week ended Oct 8 printed at 293K, a number that’s much better than expected.

On the technical side, the RSI index has reversed from a daily high near the overbought threshold, suggesting a slightly bullish movement in short term. For moving averages, the 15-long indicator has turned its slope to positive, and the 60-long has become a flat movement after the day market.

All in all, both critical indicators are suggesting that the Euro could be heading towards upward momentum. Moreover, if the 15-and 60-long MA indicators could hit the gold cross, it would provide a profound level of guidance. However, we foresee 1.16 thereabout being the main resistance as the neckline of a W pattern. If the Euro can penetrate immediate resistance cleanly, then expect it to head to a higher stage.

Resistance: 1.161, 1.166, 1.1675, 1.171

Support: 1.153, 1.15

USDCAD (4 Hour Chart)

The Loonie is trading at 1.237, down over 0.57% after falling from a high of 1.2445 to a low of 1.2354 on Thursday. The Loonie has strengthened to its highest level in more than three months against its U.S. counterpart, as the energy crisis underpins the nation’s biggest export industry. Oil prices followed upward traction as the International Energy Agency said that record natural gas prices would boost oil demand, while top oil producer Saudi Arabia dismissed calls for additional OPEC+ supply. Meanwhile, WTI is sitting at $ 81.43 per barrel as of writing. Gold flirted with $1800, ending the day just below the level.

From a technical perspective, the RSI indicator fell into oversold territory and is sitting at 25, suggesting bearish momentum in the short term. On the moving average indicator, the 15- and 60-long indicators still retain downside movement.

Since the Loonie broke through a critical level of support at 1.24, we expect the next pivotal support level will be 1.23. On the upside, the psychological level of 1.25 is still a pivotal resistance for the short-term, following 1.256.

Resistance: 1.2425, 1.25, 1.256

Support: 1.23