Market Focus

US stock declined on Thursday, ending its three-day winning streak. Investors are now worried about the restrictions to stop the spread of the Omicron variant could harm the economic recovery. A study has found that the new Omicron is 4.2 times more transmissible than the delta variant in its early stages. On top of that, UK PM Boris Johnson announced that the UK would start to reimpose Covid-19 restrictions on everyday life and people are encouraged to work from home. Investors now await the key US inflation data on Friday, which might provide some clues on the pace of bond tapering.

The benchmarks, S&P 500 and Nasdaq both dropped on Thursday as market sentiment soured and the bearish news about rising Omicron fears acted as a headwind for the equity markets. S&P 500 was down 0.7% on a daily basis and the Nasdaq 100 declined with a 1.5% loss for the day. Nine out of eleven sectors stayed in negative territory as the consumer discretionary and real estate sectors are the worst-performing among all groups, losing 1.70% and 1.36%, respectively. The Dow Jones Industrial Average was little changed on Thursday.

In Asia, China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt, and the China authorities have made it clear that they have no intention of bailing out the Evergrande Group to prevent scenarios of a collapse. Moreover, the People’s Bank of China raised its foreign currency reserve requirement ratio for a second time this year.

Main Pairs Movement

The US dollar edged higher on Thursday, staying in positive territory amid risk-off market sentiment. The DXY index gained bullish momentum and touched a daily top above 96.3 level during the American session, but pulled back slightly and surrendered some of its intraday gains at the end of the day. Markets focus now shift to US Core CPI reports on Friday, as the Fed said it would be appropriate to discuss speeding the QE taper at next week’s meeting due to rising inflation pressure.

GBP/USD advanced on Thursday, climbing towards 1.322 area and recovered from yearly lows that touched earlier this week, despite the UK promoting the work-from-home culture on Omicron variant threat. Meanwhile, EUR/USD dropped to daily lows below 1.129 level and posted a 0.47% loss on a daily basis, as investors now await the ECB monetary policy meetings next week.

Gold dropped to $1775 area amid Covid-19 restrictions spurred by the Omicron variant’s rapid spread. The recovery witnessed in the Greenback also weighed on the precious metal, which slid 0.48% on a daily basis. WTI oil tumbled 2.78% for the day, ending its previous rally. Covid-19 restrictions and the spread of the omicron variant both decreased the oil demand, dragging oil prices lower.

Technical Analysis

AUDUSD (4- Hour Chart)

AUDUSD witness a turnaround from a two-week high as hawkish Fed expectations have renewed US dollar buying. Moreover, the US dollar regains strength after the economic data, initial jobless claims have shown a better-than-expected result. In the meantime, the latest US CPI report which will be released this Friday will heavily influence the US dollar price dynamics. From the technical perspective, the 4-hour outlook remains bullish as it has not yet fallen within the bearish channel. The pair fails to challenge the resistance of 0.7170, giving the pair potentials to consolidate in the range of 0.7170 and 0.7116. The downside momentum is limited as the RSI is clear from the overbought condition while the MACD is still positive. The pair needs to fall below the support of 0.7116 and the midline of the Bolliger Band to present a negative level.

Resistance: 0.717, 0.7227

Support: 0.7116, 0.6997

 

BTCUSD (Daily Chart)

The Bitcoin hash rate, which is a measure of computing power, has almost recovered to its level in May when the Chinese government started a crackdown on the mining industry. From the technical perspective. Bitcoin’s bulls have attempted to recover after hitting their support level at $46,510 last week, but it seems to hit a curb after reclaiming the psychological resistance at $50,000. The daily outlook looks bearish as it continues to trade below the ascending trendline, re-challenging its support at $46,510. Bitcoin’s bulls need to defend its support level in order to keep a further bullish correction alive. If it fails to defend, then the bearish momentum can go further toward the next support at $39,566. However, as the RSI indicator has almost reached the oversold territory, the bearish price action might fade soon. In the meantime, Bitcoin has reached the lower bounce of the Bollinger Band, suggesting a pullback. To the upside, Bitcoin needs to climb above the acceptance level at $55,103 in order to regain strength; otherwise, its daily outlook may remain bearish.

Resistance: 55,103, 58,000, 68,991

Support: 46,510, 39,566, 32,621

 

EURUSD (4- Hour Chart)

EURUSD declines below 1.1300 after the market is anticipating over a potential increase in the APP at its meeting next week. Dovish ECB headlines weigh on the euro and US dollar. At the same time, the US dollar rebounds amid a cautious mood on the new variant Covid. From the technical perspective, EURUSD trades below its 20 and 50- day SMAs, losing its positive momentum on the 4-hour chart, but still not yet claiming an upcoming decline as the MACD indicator is still positive, lending supports to bulls. In the same chart, if the currency pair remains below the SMAs, then it might head to the support at 1.1186 to extend its bearish mode. On the contrary, the pair needs to trade above the SMAs in order to reclaim and remain within positive levels.

Resistance: 1.1357, 1.1462, 1.1548

Support: 1.1186