Market Focus

The S&P 500 and Nasdaq 100 indices once again set a record closing. This marked the close of six records of the two indexes in the past six trading days. The S&P 500 index rose 0.42% to close at 4680 points, while the Nasdaq 100 index rose 1.25% to close at 16346. The Dow Jones Index fell slightly by 0.1%, but it was still above the 36000 level. The CBOE Volatility Index (VIX), often referred to as the fear indicator on Wall Street, stabilised above 15.00, not far from the post-pandemic low of around 14.00 set in June.

The Philadelphia Semiconductor Index surged 3.5% with strong gains from Qualcomm, which rose strongly by 12.7%, causing the Philadelphia Semiconductor Index to soar 3.5%. Despite severe disruptions in the global supply chain, its business is still booming. Moreover, technology stocks benefited from the sharp drop in U.S. Treasury yields, whose decline was mainly catalysed by the dovish attitude of the Bank of England. This triggered a historic decline in UK yields, which has spread to the international markets.

The Wall Street Journal reported that Tesla and Hertz are now negotiating how quickly the car rental company can receive deliveries for a large order for 100,000 Tesla vehicles. This has caused the automaker’s shares to rise slightly by 16.05 US dollars, or 1.3%, to $1,229.91.

Meanwhile, after British health regulators approved the Covid-19 drug developed jointly by Ridgeback Biotherapeutics and Merck, the latter’s stock price rose 1.86 US dollars, or 2.1%, to 90.54 US dollars. After lowering its forecast for the delivery of the Covid-19 vaccine for the full year of 2021, Moderna’s stock price plummeted by US$61.90, or 18%, to US$284.02, citing the longer delivery cycle of international transportation.

Main Pairs Movement

On Thursday, the US dollar was the overall winner, regaining its gains and setting new weekly highs against high-yield opponents. On the other hand, safe-haven assets rose slightly against the U.S. dollar but did not break through any key levels.

Meanwhile, the Bank of England’s (BoE) monetary policy meeting and subsequent decision to keep the interest rate unchanged at 0.1%, has disappointed the market, which had expected a rise in interest rates, further boosting demand for the dollar. The GBP/USD exchange rate plummeted to 1.3470 and closed around 1.3500.

After the announcement of the PMI on Thursday, the data was lower than expected and could not provide any momentum for the euro against the dollar. Therefore, EUR/USD faced pressure near 1.1615 for the third consecutive day, causing bulls to give up, which tested the previous support at 1.1527.

Technical Analysis

GBPUSD (4- Hour Chart)

GBP/USD tumbled on Thursday amid a dovish Bank of England, dropping to the lowest level since October 1. The pair was trading lower in the early Asian session, then declined sharply right after the BoE announcement. GBP/USD is currently sitting just above 1.350, hoping to rebound back from today’s slide. The Bank of England released their latest rate decision and monetary policy statement today. It has decided to keep UK’s interest rate unchanged at 0.10%. The dovish decision not to hike rates surprised the market and dampened investors’ expectations of the coming BoE rate hike cycle. On top of that, the stronger US dollar also weighed on the cable, as the DXY index preserved its upside momentum and climbed further above 94.00 level.

From a technical standpoint, the RSI indicator is at 25 as of writing, suggesting that the pair is in the oversold zone, and investors should be aware of a trend reversal. The MACD indicator showed a death cross on the histogram, which means the pair is likely to experience downward momentum. If we take a look at the Bollinger Bands, the price action is moving out of the bands, so a strong trend continuation can be expected. In conclusion, we think that the market will be bearish as the pair is now heading to test the 1.3412 support.

Resistance: 1.3698, 1.3751, 1.3535

Support: 1.3412

 

USDJPY (4- Hour Chart)

After rising above 114.20 level on Thursday, USD/JPY failed to preserve its bullish momentum and started to see fresh selling during the European session. After the American session began, the pair declined further and touched a daily low under 113.55. USD/JPY was last seen trading at 113.69, posting a 0.26% loss for the day. Despite the renewed US dollar strength, USD/JPY are still being dragged down by the top performer, the Japanese yen. The lower US 10-year yields also weighed on the pair. Market focus has now shifted to the Nonfarm Payrolls report, as strong results may send the USD/JPY pair higher.

From a technical standpoint, the RSI indicator is at 42 as of writing, suggesting tepid bear movement ahead. As for the MACD indicator, a death cross just formed on the histogram, therefore bearish momentum is likely to persist. Looking at the Bollinger Bands, the price has dropped below the moving average and is now moving toward the lower band, which indicates a bear market. In conclusion, we think that the market will be bearish as long as the 114.44 resistance line holds. If the pair drops below the 113.26 support, some additional near-term losses can be expected.

Resistance: 114.44, 114.70

Support: 113.26, 111.53, 110.82

 

USDCAD (4- Hour Chart)

USD/CAD advanced on Thursday, extending its recovery for the second day as WTI oil pulls back from a daily top around 83.50. Oil prices have dropped sharply due to an output hike plan from OPEC+, which has agreed to increase output by 400K barrels per day/month in December. The bearish momentum witnessed in oil continues weighing on the commodity-linked Canadian dollar. On top of that, a stronger US dollar across the board also lifted the pair further.

On the technical side of things, the RSI indicator is at 70, suggesting that the pair is in the overbought zone, and investors should be aware of a trend reversal. The MACD is now sitting above the signal line, which indicates a bull market. As for the Bollinger Bands, the price is moving out of the bands so a strong trend continuation can be expected. In conclusion, we think that the market will be bullish as the pair is trying to test the 1.2499 resistance.

Resistance: 1.2499, 1.2648, 1.2775

Support: 1.2378, 1.2288