Market Focus

Wall Street’s three major indexes rallied higher on Wednesday, as gains in the technology, basic materials and telecom sectors led stocks higher. In addition, the yield on the 10-year U.S. Treasury yield retreated from multi-year highs hit in the previous session, helping to stabilize global market sentiment and boosting demand for growth stocks. At the end of the market, the Dow Jones Industrial Average rose 0.86% to 35,768.06 points, the S&P 500 index gained 1.45% to 4,587.18 and the Nasdaq Composite Index added 2.08% to 14,490.37 points. On the other hand, the pan-European Stoxx 600 gained 1.7%, led by a 4.0% gain by automakers. Volkswagen was one of the index’s biggest gainers, up 6.1%, while its biggest investor, holding company Porsche, rose 8.2%.

The 11 sectors of the S&P 500 performed brightly. The biggest winner was the communication services sector, which rose 2.45%, followed by the real estate, information technology and materials sectors, which rose 2.38%, 2.31% and 2.13% respectively. The best performers on the Dow were Disney, which rose 3.33%. Meanwhile, Intel was up 2.25% and Microsoft was up 2.18%. The top performers in the S&P 500 were Omnicom, Enphase Energy and Chipotle, which were up 14.19%, 12.03% and 10.16% respectively. On Thursday, investors will be closely watching CPI data for clues on the Fed’s plans to raise interest rates. A surprisingly strong jobs report last week raised fears of more aggressive central bank moves.

Main Pairs Movement

A pullback in government bond yields weighed on the dollar, which ended mixed. The U.S. 10-year Treasury yield was around 1.93%, retreating from its weekly high of 1.97%.

Sterling and the euro were unchanged in intraday trade, keeping choppy in a consolidation range. The GBP/USD is trading around 1.35320, while the EUR/USD is swinging around 1.1420.

Commodity-related currencies were the best performers, with AUD/USD trading in the 0.7180 range, extending its three-day rally. USD/CAD also performed well, slipping to the 1.2670 area after BOC Governor Tiff Macklem made a confidence statement at the Canadian Chamber of Commerce that supply chain issues would subside soon.

Gold kept moving north and peaked at $1,835.86 an ounce. Meanwhile, oil prices finally found some support after a two-day losing streak. WTI closed at $90.00 a barrel and Brent at $91.68 a barrel.

 

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair edged higher on Wednesday, regaining some upside tractions and rebounding to the 1.1440 area amid US dollar weakness. The pair dropped to a daily low in the early European session, but then reversed its weakness and climbed above the 1.1440 mark heading into the American session. The pair was last seen trading at 1.1436, posting a 0.19% gain on a daily basis. EUR/USD stayed in the positive territory amid weaker US dollar across the board, as the falling benchmark 10-year US Treasury bond yield dragged the Greenback lower. However, expectations that the Fed would adopt a more aggressive policy might limit the losses for the Greenback and put pressure on EUR/USD. In Europe, ECB’s Governing Council Joachim Nagel said that he supports a rate hike in 2022 after ending bond purchases if the inflation picture doesn’t change by March.

On the technical side, RSI is at 59 as of writing, suggesting that the upside is more favoured as the RSI stayed above the midline. As for the Bollinger Bands, the price is crossing above the moving average, which indicates that the pair could retain its upside traction. In conclusion, we think the market will be slightly bullish as the pair might re-test the 1.1480 resistance althought it is staying in a consolidation phase.

Resistance: 1.1480, 1.1612

Support: 1.1360, 1.1284, 1.1132

 

GBPUSD (4-Hour Chart)

GBP/USD advanced on Wednesday, surrounded by bullish momentum amid risk-on market sentiment and a sharp pullback in the US Treasury bond yields. The pair touched a fresh weekly high above the 1.3585 level, then lost upside traction and surrendered some of its intraday gains. At the time of writing, Cable stays in positive territory with a 0.10% gain for the day, witnessing some fresh selling amid comments from BoE Chief Economist Huw Pill. He said that the outlook for bank rates beyond the coming months is uncertain. Meanwhile, inflation and output volatility could increase if the policy is miscalibrated. On top of that, the risk-on mood and retreating US dollar both acted as a tailwind for Cable. The market’s focus has now shifted to US CPI data, which might influence the Fed’s monetary policy and provide trading impetus to the GBP/USD pair.

On the technical side, RSI is at 52 as of writing, showing that there is no obvious direction for the pair. As for the Bollinger Bands, the price dropped from the upper band after crossing it, so downside momentum could be expected. In conclusion, we think the market will be bearish as the pair failed to break above the 1.3578 resistance. Also, traders might be reluctant to place aggressive bullish bets ahead of the US CPI report.

Resistance: 1.3578, 1.3608, 1.3739

Support: 1.3512, 1.3456, 1.3372

 

USDCAD (4-Hour Chart)

After the previous day’s rebound to 1.2710 area, USD/CAD failed to preserve its upside traction and remained under pressure today amid modest US dollar weakness. Despite bouncing back slightly in the early European session, the pair saw fresh selling again and dropped towards the 1.2680 mark, heading into the American session with a 0.19% loss. The sharp pullback in the US Treasury bond yields and the risk-on sentiment both decreased the demand for the safe-haven greenback. On top of that, crude oil inventories in the US tumble unexpectedly by 4.756 million barrels and pushed WTI to fresh daily highs above $89.00. But expectations that the 2015 nuclear deal will be agreed upon by US and Iran might weigh on crude oil prices and act as a headwind for the commodity-linked loonie.

On the technical front, the RSI is at 42 as of writing, suggesting bearish movement ahead. As for the Bollinger Bands, the price fell from the moving average towards the lower band, therefore the downside momentum should persist. In conclusion, we think the market will be bearish as long as the 1.2778 resistance line holds. And escalating fears of Russia’s attack on Ukraine might lend support to crude oil and undermine the USD/CAD pair.

Resistance: 1.2778, 1.2843

Support: 1.2637, 1.2575, 1.2462