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