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