Market Focus

US stock advanced on Thursday amid risk-on market sentiment, closing at an all-time high and rising for a third day as investors considered that economic recovery can resist the impact of the Omicron coronavirus variant. On Thursday, Merck & Co.’s Covid-19 pill was cleared by US regulators, giving high-risk patients another option for emergency use. Early trials also suggest that Merck’s pill, called Molnupiravir, could reduce mortality and hospitalisation rates in at-home patients by as much as 50%. In fact, people infected with Omicron are 50% to 70% less likely than those with Delta to be admitted to hospitals. Therefore, the positive news about the Omicron variant and the announcement of the Merck & Co. approval both acted as a tailwind for the stock market. On top of that, the above news has also eased pressures on European authorities to lock down their economies in order to curb epidemic transmission.

The benchmarks, S&P 500, Nasdaq 100 and the Dow Jones Industrial Average all rose on Thursday as risk appetite in the US equities market has been boosted due to the news of the recent approval of two at-home Covid-19 treatment pills. Trading volume was low ahead of the Christmas holidays. The S&P 500 was up 0.6% and the Dow Jones Industrial Average also advanced with a 0.5% gain for the day. Nine out of eleven sectors stayed in positive territory as the consumer discretionary and industrials sectors are the best performing among all groups, rising 1.24% and 1.16%, respectively. The Nasdaq 100 climbed the most with a 0.8% gain on Thursday and the MSCI World index rose 0.8%. The S&P 500 CBOE volatility index fell another half a point and is trading at monthly lows close to the 18.00 level.

Main Pairs Movement

The US dollar declined on Thursday, staying in negative territory for the fourth consecutive day amid a risk-on market mood despite rising US bond yields. The DXY index reached a daily top in the late European session, then pulled back to near the 96.00 level while surrendering most of its intraday gains. The US Food and Drug Administration announced that it had approved a second Covid-19 treatment pill for at-home use, which helped stoke risk appetite on Thursday and weighed on the safe-haven Greenback. On the economic data front, US consumer sentiment increased in December and new homes sales also climbed to a seven-month high.

GBP/USD advanced 0.43% on Thursday amid bearish momentum witnessed in the US dollar across the board. The news that the UK was unlikely to implement tougher Covid-19 curbs after Christmas had lent support to the British pounds. Cable touched a daily high above the 1.343 level in the early American session and is now trading at 1.3409 at the time of writing. Meanwhile, the EUR/USD dropped to a daily low under 1.130 level but then rebounded modestly to offset some of its intraday’s losses. The pair was down 0.02% for the day.

Gold advanced and touched a daily top above $1810 during the American session, as the broad US dollar weakness continued to push the precious metal higher. Meanwhile, WTI oil surged almost 1.0% for the day amid optimism that the hit to oil’s demand from Omicron won’t be as bad as initially feared.

Technical Analysis

XAUUSD (4- Hour Chart)

The precious metal, gold, steadily trades above 1800, trading at 1809 as the time of writing. Gold looks to head toward the immediate hurdle at 1815, retest its monthly high on the 4- hour chart. The resistance at 1815 is considered as a strong static barrier as gold attempts it three times within 2 months, but it ends up failing to break through. Thus, a break through the level would likely signal firmer upward momentum. However, it would be difficult as the RSI has almost reached the overbought readings. On the downside, if gold falls below 1800, then it will turn to neutral mode from bullish mode. Overall, the risk is skewed to the upside as long as gold can hold above 1800.

Resistance: 1815, 1829, 1848

Support: 1800, 1782, 1770, 1765, 1753

NASDAQ 100 ( Daily Chart)

The major indices, including Nasdaq 100, rose for a third successive day as the market’s fears about Omicron abate and Christmas celebrations begin. From the technical aspect, a three consecutive day upside momentum has brought Nasdaq 100 back to a bullish stance on the daily chart as it trades above all 5, 10, 20, 60 SMAs, suggesting a bullish trend. Nasdaq 100 has overall reclaimed strength as the MACD is turning from negative to positive while the RSI is still far away from the overbought territory, entailing that buyers are in control. Most importantly, the double bottom pattern has been formed, which implies that sellers have given up and are unable to push prices downward. Consequently, the formation of a double bottom signifies a potential bullish reversal signal, heading to the next resistance at 16457, followed by the peak, 16796.

Resistance: 16457

Support: 15551, 14464. 14047

EURUSD (4- Hour Chart)

EURUSD remains under modest price action, slightly turning upside after the US Core PCE Inflation jumped to 4.7% in November. From the technical perspective, EURUSD is still stuck in the 1.1233- 1.1357 price range of the late November slide. In the near- term, the currency pair is leaning to the bullish side as it trades within the upper bounce of the Bollinger bands, suggesting a potential upside momentum. In the meantime, the price action continues to remain above the 20 and 50 SMAs. To the upside, EURUSD needs to climb above the resistance at 1.1357 to turn from neutral to bullish, followed by the resistance at 1.1462. On the flip side, the bearish case can gain momentum on a break below the SMAs and 1.1233, followed by the support at 1.1186.

Resistance: 1.1357, 1.1462, 1.1548

Support: 1.1233, 1.1186