Market Focus

Technology stocks drove the equity market to a record in a volatile session ahead of Friday’s options expiration. The S&P 500 notched its 66th all-time high of 2021, with the benchmark gauge poised for the second-biggest number of annual records ever — only behind 1995. The tech-heavy Nasdaq 100 outperformed as chipmaker giant Nvidia Corp. boosted its outlook, while Apple Inc. jumped after Bloomberg News reported the company is pushing to accelerate the development of its electric car. Macy’s Inc. and Kohl’s Corp. paced gains in retailers after signalling that consumer demand remains robust. Dow Jones dropped, down 0.17%.

The nonpartisan Congressional Budget Office has estimated that President Joe Biden’s signature economic package doesn’t contain enough tax increases to pay for itself — which counters White House claims but may not be enough to sink the bill.

The CBO found that the draft legislation, on which the House plans to vote late Thursday, contains $1.636 trillion of spending while raising $1.269 trillion in revenue over 10 years. That would add $367 billion to the U.S. budget deficits over the decade.

The score will, however, give ammunition to Republicans — who are already attacking the bill by arguing it will increase inflation, stifle job creation and foster dependency on the government, in addition to saying it will add to the national debt.

A key reason as to why the CBO finds that the bill does not pay for itself involves estimates of the possible increase in tax collection that can result from expanding the IRS’s budget. While the White House has projected that increasing the number of enforcement agents at the Internal Revenue Service would yield $400 billion in higher revenue, the CBO does not agree.

Main Pairs Movement

The US dollar continued to lose strength against most of its major rivals during Thursday’s trading hours. The dollar index dropped 0.3% to around 95.50, with EUR regaining its lost lands amid the dollar weakness, and the Japanese yen being the worst performer as the revived risk-on market mood weighed on the save haven.

The euro rebounded from its yearly low, surging 60 pips during the day and is trading at 1.1365 at the moment. Cable extended its previous gains, posting a modest 0.06% increase to around the 1.3500 key level. Loonie hovered around 1.2600 throughout the day, while high-[yielding pairs like the Aussie and Kiwi climbed 0.14% and 0.65% respectively. USD/JPY advanced on Thursday after yesterday’s plummet, closing the day at 114.25.

Gold consolidated around $1850-70 per troy ounce across the week as the upward momentum has come to a halt after last week’s skyrocketing. Crude oil prices posted mild gains, with WTI ending the day red at $78.85 a barrel, and Brent up to $81.05. US yields remained on the familiar levels, with the 10-year benchmark unchanged at 1.590.

 

Technical Analysis

EURUSD (4- Hour Chart)

Following the previous day’s rebound from 2021 lows near 1.126, EUR/USD continued to see some buying on Thursday amid US dollar weakness. Despite staying in negative territory in the late Asian session, the pair regained bullish momentum and extended further after the European session started, currently rising 0.32% on a daily basis. The risk-on market sentiment weighed on the safe-haven US dollar and lent some support to the EUR/USD pair, although better-than-expected US job data limited further gains for the pair as weekly initial jobless claims fell to a fresh post-pandemic low at 269K. In the Eurozone, the rising cases in Covid-19 and yesterday’s dovish ECB comments might cap the upside for the pair.

On the technical side of things, the RSI indicator is at 45 as of writing, suggesting tepid bear movement ahead. However, the MACD is now sitting above the signal line, which indicates a possible upward trend for the pair. Looking at the Bollinger Bands, the price crossed above the moving average after touching the lower band, therefore the upper band has become the profit target. In conclusion, we think the market will be bullish as the pair is eyeing a test of 1.1464 resistance. If the price breaks above that level, the rebound could extend further.

Resistance: 1.1464, 1.1617, 1.1692

Support: 1.1264, 1.1168

 

GBPUSD (4- Hour Chart)

GBP/USD edged higher on Thursday, continuing its five-day recovery from a yearly low. The pair touched a daily high in the early European session, but then failed to preserve its bullish momentum and dropped toward the 1.347 area. Cable has started to see fresh buying at the time of writing, rising 0.05% on a daily basis. A weaker US dollar across the board has pushed the cable higher, as sudden changes in the market mood dragged the US 10-year Treasury yield down to 1.582%. In the UK, concerns about the possibility that the UK government would trigger Article 16 of the Northern Ireland Protocol remains. Meanwhile, the deadlock over the post-Brexit fishing rights also acted as a headwind for the British pound.

For the technical aspect, the RSI indicator is at 56 as of writing, suggesting bullish movement ahead. But looking at the MACD indicator, the positive histogram also indicates a possible downward trend for the pair. As for the Bollinger Bands, the price is moving alongside the upper band, therefore a trend continuation could be expected. In conclusion, we think the market will be bullish as the pair is heading to re-test the 1.3607 resistance. A sustained strength beyond the 1.3500 level could attract bulls to position themselves for a further appreciating move for the GBP/USD pair.

Resistance: 1.3607, 1.3698, 1.3835

Support: 1.3417, 1.3353

 

USDCAD (4- Hour Chart)

After reaching a fresh monthly top above 1.264 level earlier on Thursday, USD/CAD pulled back to 1.262 area amid renewed US dollar weakness. The pair pared its intraday gains and turned into negative territory, currently losing 0.04% on a daily basis. The upbeat US job data failed to boost the greenback today, as the DXY index dropped further to 95.55 area. Rising crude oil prices provided some bullish momentum for the commodity-linked loonie and dragged the USD/CAD pair lower. Market focus has now shifted to Canada’s Retail Sales reports released on Friday, as investors are looking for some trading impetus.

On the technical side, the RSI is at 61 as of writing, suggesting bullish movement ahead. But looking at the MACD indicator, a death cross is forming on the histogram and a bearish trend could be expected. As for the Bollinger Bands, the price is falling from the upper band and is likely to touch the moving average. In conclusion, we think the market will be bearish as long as the 1.2648 support line holds.

Resistance: 1.2648, 1.2775, 1.2849

Support: 1.2493, 1.2387, 1.2288