Market Focus

After falling sharply for two consecutive days, the three major stock indices finally rebounded strongly on Thursday. The main reason comes from the fact that cyclical stocks have recovered some of their recent declines. The Dow Jones Industrial Average rose 617.75 points to 34,639.79; the S&P 500 rose 1.42% to 4,577.10; while the Nasdaq Composite Index, which is dominated by technology stocks, rose 0.8% to 15,381.32 points. However, the market is still facing doubts about the latest variant of COVID-19, Omicron, and the risk that the US government may shut down. In terms of data, as of the week of November 27, a total of 222,000 people had applied for initial jobless claims, which was better than expected, implying a decreasing rate of labour shortage and lowered willingness for employers to lay off staff.

As price levels rise, available labour lessens, and supply chains are blocked, the Fed has ceased using the term “temporary” to describe inflation. This suggests that the Fed may accelerate the pace of interest rate hikes.

In terms of stocks, after the Chinese aviation authority issued the 737 MAX airworthiness directive, Boeing rose 3.5%, which will pave the way for the aircraft to resume service in China. Kroger Co rose 9.9% after the retailer raised its full-year sales and profit forecasts due to continued demand for groceries. In addition, Okta’s encouraging earnings increased by 11.66%, and retail company Duluth Holdings also rose 18.40% due to its outstanding revenue.

Main Pairs Movement

The U.S. dollar gained some momentum on Thursday, thanks to optimistic data and the rise in US government bond yields, putting concerns on hold for the time being. In addition, there is news that the Fed may need to reduce the scale of asset purchases faster than expected. Due to the virus, vaccines and financial support, inflation is rising faster than expected. On the other hand, ECB policymaker Fabio Panetta has stated that inflation and the new pandemic wave are endangering the EU’s early recovery, although earlier this week he pointed out that there was no need to tighten monetary policy to control inflation because all this is “temporary”. Last but not least, the United States will release a Nonfarm Payrolls report on Friday, and investors should pay close attention.

The EUR/USD continued to stay above the 1.13000 level, but fell for two consecutive trading days. Basically, the currency pair is still in a downward trend. If the European Central Bank maintains a loose monetary policy, it will be difficult for the euro to rebound. After testing the 1.32210 level on Tuesday, GBP/USD is currently hovering around 1.1330. Like the euro, it is in a weak and sharp downward trend, although it rose by 0.17% on Thursday.

Gold fell to a new one-month low of 1,761.87 and rebounded moderately before the close. Crude oil prices fell to a new low in several months but rebounded. WTI is currently trading at $66.10 per barrel.  

Technical Analysis

EURUSD (4- Hour Chart)

After the previous day’s tepid slide to 1.130 level, EUR/USD regained upside traction and rebounded above the 1.133 area on Thursday. The pair was trading higher before pulling back to a daily low in the early European session. During the American session, the pair saw fresh buying and continued to climb higher. The renewed US dollar weakness is lending support to EUR/USD, which is currently rising 0.02% on a daily basis. For the Greenback, investors seem to have already digested Powell’s hawkish testimony on Wednesday, as the DXY index dropped 0.15% despite strong US macro data. The Weekly Initial Jobless Claims showed a better-than-expected reading with 222K, but failed to support the Greenback. In Europe, October’s Unemployment Rate in the euro area eased to 7.3%.

On the technical front, the RSI indicator is at 54 as of writing, suggesting tepid bull movement ahead. But looking at the MACD indicator, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price has dropped slowly from the upper band to the moving average. Therefore, the bearish traction could persist for a while. In conclusion, we think the market will be slightly bearish as long as the 1.1374 resistance line holds.

Resistance: 1.1374, 1.1464, 1.1608

Support:1.1258, 1.1186

 

GBPUSD (4- Hour Chart)

Following the rebound from the lowest level since December 2020 under the 1.320 level, GBP/USD is holding steady above 1.330 area amid mixed market sentiment on Thursday. The pair reached a daily top above 1.33 during the European session, but has pulled back and surrendered some of its intraday gains since then. At the time of writing, Cable remains in positive territory with a 0.25% gain for the day. The weaker US dollar across the board acted as a tailwind for the cable, as concerns about the new Omicron variant seemed to ease after WHO officials said that some of the early indications showed that most cases are mild. Therefore market mood moderately improved and favoured the risk-sensitive Sterling. On top of that, Brexit woes still remain as there are real gaps between the UK and European Union in their disagreement over the Northern Ireland Protocol.

On the technical side of things, the RSI is at 48 as of writing, reflecting the pair’s indecisiveness in the near term. As for the Bollinger Bands, the price is falling from the moving average, indicating that the pair may experience some bearish momentum. In conclusion, we think the market will be slightly bearish as long as the 1.3370 resistance line holds. Technical indicators for Cable have lost directional strength, bears may have a chance if the pair break below the next support at 1.3195.

Resistance: 1.3370, 1.3514, 1.3607

Support: 1.3195, 1.3106

 

USDCAD (4- Hour Chart)

USD/CAD advanced amid falling oil prices on Thursday, continuing its previous day’s rally to 1.283 area. The pair was trading lower during the Asian session, but then rebounded moderately to a daily top in the early American session. USD/CAD now remains steady under the 1.283 area amid improving risk appetite, currently rising 0.11% on a daily basis. The rebound witnessed in the US dollar pushed the pair higher, as more Fed policymakers now favour a faster taper, adding to the hawkish list. Meanwhile, WTI Crude Oil posted a 0.01% loss today after OPEC+ agreed to go ahead with its planned 400K barrel per day output hike in January, acting as a headwind for the commodity-linked Loonie.

On the technical side, the RSI indicator is at 61 as of writing, suggesting that the upside appears more favoured as the RSI is still above the midline. Looking at the MACD indicator, a golden cross just formed on the histogram, which indicated an upward trend for the pair. As for the Bollinger Bands, the price is rising from the moving average to the upper band, therefore the upside traction could persist. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.2849 resistance, with the next resistance sitting at 1.2949.

Resistance: 1.2849, 1.2949

Support: 1.2645, 1.2493, 1.2387