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After the two-day FOMC meeting, Fed has turned more hawkish, and is…

After the two-day FOMC meeting, Fed has turned more hawkish, and is expected to reduce bond purchases in November at the earliest

Market Focus US stocks advanced on Thursday amid risk-on market sentiment as investors embraced the Federal Reserve’s bullish economic outlook. After the two-day FOMC meeting, Fed has turned …

20210924
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Market Focus

US stocks advanced on Thursday amid risk-on market sentiment as investors embraced the Federal Reserve’s bullish economic outlook. After the two-day FOMC meeting, Fed has turned more hawkish, and is expected to reduce bond purchases in November at the earliest. Generally, a hawkish Fed should be bearish for the equity market. But surprisingly, the hawkish tone from the Fed has been welcomed by investors as it was seen as a confirmation of substantial progress in economy recovery. Additionally, gold declined and oil rose.

The benchmarks, S&P 500, Dow Jones, and Nasdaq all rose on Thursday as they rode the wave of positive risk sentiment. S&P 500 was up 1.2% on a daily basis as the index registered its biggest two-day gain since July. Nine out of eleven sectors posted a gain as the energy and financials sectors were the best performing among all groups, rising 3.41% and 2.50%, respectively. Real estate .and utilities were the only major groups to end lower on the day. The Dow Jones gained the most, at 1.5%.

On top of that, the Bank of England moved closer to raising interest rates after officials said developments appear to have strengthened the case for modest tightening. Therefore, the British pound rallied on Thursday.

In Asia, Financial regulators in Beijing instructed China Evergrande Group to avoid a near-term dollar bond default. China is also said to have told the company to focus on completing unfinished properties and repaying individual investors. For now, there is no indication that regulators offered financial support to Evergrande Group for the bond payment yet, and concerns of an Evergrande failure continues.

Main Pairs Movement

The 2-day long Fed meeting concluded with signals from the FOMC that tapering, and a revised rate hike schedule should start relatively soon. This could begin by as early as 2022. Besides the FOMC minutes, markets were also moved by a report that Chinese authorities signaled reluctance to bail out Evergrande despite the Chinese Government’s continued effort to inject more cash into the financial system. Furthermore, Chinese regulators have instructed Evergrande to avoid near-term defaults on bonds. The combination of the two events boosted investor sentiment and a risk-on investing scene as most U.S. indices continues to rise for the second day in a row.

Cable rose against the dollar, as the Greenback weakened due to investors redirecting funds into a “risk on” equity market environment. The Pound was also fueled by the increasingly hawkish stance of the BoE. The redirecting of funds and “risk on” sentiment hurt gold, as the precious metal tumbled throughout the trading day.

Technical Analysis

GBPUSD (4-hour Chart)

Cable traded lower during the European trading session, but the pair would rebound significantly once the Asian and American trading sessions began. Broad Greenback weakness and risk-on sentiment in equity markets have propelled Cable to its 3-day high. The BoE’s increasingly hawkish tone also added to the Pound’s strength against the Dollar. As of writing, Cable has broken through our previously estimated resistance level of 1.3687 and the pair is trading at 1.3747.

From the technical standpoint, Cable successfully defended the 1.36 support level and quickly broke through the 1.3687 resistance level. Near-term resistance for Cable will sit at around the 1.378 price level. RSI for the pair sits at 61.5, indicating modest overbuying in the market. As of writing, Cable is trading above the 50, 100, and 200 day SMA.

Resistance: 1.3687, 1.381, 1.3851

Support: 1.3627, 1.3603

USDCAD (4- Hour Chart)

USD/CAD reversed course for the day as the Dollar lost steam, brinigng the pair below our previously estimated support level of 1.2752. During the earlier part of the trading session, USD/CAD was able to repair some losses from the previous trading day, but the pair quickly lost ground once the American trading session began. Canadian July retail sales declined, although actual figures fared better than analyst estimates.

From a technical viewpoint, USD/CAD broke through the 1.2752 support level and is currently trending towards the nearest support level of 1.2635. RSI for the pair is at 35.47, indicating modest overselling. As of writing, the pair is trading at the lower bound of the bollinger bands, and the pair is trading below its 50, 100, and 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2752, 1.2635, 1.2586

XAUUSD (4- Hour Chart)

XAU/USD tumbled as equity markets heated up. Furthermore, a weaker Dollar did not help the pair, as investors adopt the “risk-on” sentiment. The increasingly hawkish tone from the Fed and BoE also did little to help gold as U.S. bond yields soared and flows redirected away from the non-yielding precious metal. Cash injection by the People’s Bank of China further eased equity investors’ concerns.

For the technical aspect, XAU/USD has found some support at the 1748 price level, but, if investors continue to move away from the safe haven asset, XAU/USD could trend down towards its next immediate support level of 1725. RSI for the pair sits at 36, as of writing, indicating modest overselling. The pair is trading below its 50, 100, and 200 day SMA.

Resistance: 1778.52, 1804.06, 1830.72

Support: 1748.82, 1725.47

20210924
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A potential rate hike projected to start as early as 2022 –…

A potential rate hike projected to start as early as 2022 – so long as the Fed’s employment and inflation goals continue to be met

20210923
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Market Focus

US stocks advanced on Wednesday even though Federal Reserve officials signaled that bond tapering would probably start in November at the earliest. During a press conference, Fed chairman Jerome Powell also said that mid-2022 could be the end of tapering. This means that if Fed announces tapering in November, it will create an eight-month tapering process. However, the stock markets ignored Fed’s tapering hints amid mixed details. On top of that, gold and oil both rose as the decline in crude oil inventories was more than expected.

The benchmarks, S&P 500, Dow Jones and Nasdaq, all rose on Wednesday. S&P 500 was up 1% on a daily basis as the index rebounded from a two-month low and recorded the biggest climb since July. Wednesday was also the first time S&P 500 finished in positive territory in five trading sessions. Nine out of eleven sectors posted a gain, with the energy and financial sectors the best performing among all groups having rose 3.16% and 1.58% respectively. Meanwhile, Nasdaq gained the most at 1.02%.

The Federal Reserve kept interest rate was unchanged at 0.25%, same as the market’s expectations. But the policymakers are divided over the rate hike, and are now expecting a start from either 2022 or 2023 versus the previous support for 2023. For investors now, the timeline of bond tapering and any shifts in expectations for rate hikes are crucial information.

In Asia, stock markets declined on Wednesday amid concerns about Evergrande group’s debt crisis. But China avoided a major selloff after the country’s central bank boosted its injection of short-term cash into the financial system. In Japan, the BOJ left its interest rate policy unchanged while the Japanese yen dropped.

Main Pairs Movement

Despite the lingering effects from China’s Evergrande credit issue, markets advanced during Wednesday’s trading as investors turned their attention to the Fed’s bond tapering timetable and interest rate projections. As of writing, all major U.S. indices have gained from yesterday’s slump. The two-day meeting of the FOMC yielded a marginally more hawkish tone from the Fed, and a potential start date for scaling back pandemic-era monetary measures. The minutes of the meeting also indicated a potential rate hike projected to start as early as 2022 – so long as the Fed’s employment and inflation goals continue to be met.

The U.S. dollar index slipped at the release of the FOMC minutes, thus benefiting most currency pairs against the dollar. However, when Fed chair Jerome Powell gave his speech, market sentiment changed quickly, causing the dollar to soar, hurting currencies against the dollar.

Technical Analysis

GBPUSD (4-hour Chart)

Cable began trading lower at the start of the European session, but the pair will find support at around the 1.362 price level. Cable quickly rebounded from the session’s low once the American trading session began, and the pair saw a quick boost once the FOMC minutes were released. The dollar weakened against the backdrop of the Fed’s newly-found hawkish tone despite its commitment to keep near term bond purchsing measures unchanged.

From a technical standpoint, Cable traded below our estimated support level of 1.3641 for the first half of the trading day, but the American trading session brought the pair back to positive territory. The near-term resistance level of 1.3687 remains unbroken. However, Fed chair Jerome Powell’s speech, scheduled for later today, might compromise that resistance level if the Greenback continues to weaken against the pound. RSI for the pair indicated a neutral 42, as of writing. Cable is currently trading above the 50, 100, and 200 day SMA.

Resistance: 1.3687, 1.381, 1.3851

Support: 1.3627, 1.3603

USDCAD (4- Hour Chart)

An upbeat market sentiment has strengthened the Loonie against the dollar. Ahead of the FOMC minutes release, USD/CAD was, once again, rejected from the resistance level of 1.2834. However, once the minutes were released, the dollar weakened and brought the pair below our previously estimated support level of 1.2752.

From a technical viewpoint, USD/CAD continues to see downward pressure near the 1.28 price level. The 1.2752 support level did not hold for the pair as the dollar continues to weaken on the back of the FOMC’s announcements. As of writing, RSI for the pair sits at 52, indicating neutral buying. Furthermore, the pair is trading above the 50, 100, and 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2752, 1.2635, 1.2586

AUDUSD (4- Hour Chart)

AUD/USD continues to be range-bound between 0.722 and 0.728. The FOMC minutes release brough a short spike to AUD/USD, but the spike was not sustainable and the pair is again trading lower as of writing. The Aussie dollar continues to be depressed due to poor employment figures and the strong economic ties between China and Australia. The increasingly hawkish tone of the Fed also provides a negative outlook for the pair.

From a technical viewpoint, AUD/USD successfully defended the 0.7222 support level in the early part of the trading session. However, this support level will be tested again as the dollar begins to gain strength after Fed chair Jerome Powell’s speech. As of writing, RSI for AUD/USD sits at 42, and the pair is trading below the 50, 100, and 200 day SMA.

Resistance: 0.728, 0.7332, 0.7375

Support: 0.7222, 0.7117

20210923
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Markets await Wednesday’s update from the Fed as well as details about…

Markets await Wednesday’s update from the Fed as well as details about how China’s government will respond to the Evergrande crisis

20210922
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Market Focus

US stocks declined near the end of trading on Tuesday, edging lower for the day. Investors are now evaluating the risks from this week’s Federal Reserve meeting, and China’s strict regulations on the real-estate sector. Markets await Wednesday’s update from the Fed as well as details about how China’s government will respond to the Evergrande crisis.

The benchmarks, S&P 500 and Dow Jones both dropped on Tuesday. The S&P 500 was down 0.1% on a daily basis, continuing its bearish traction for a fourth day. The index opened higher, but experienced high volatility throughout the day. The industrial, communication services, and utilities sectors are the worst performing among all groups, dropping 0.7%, 0.33% and 0.24%, respectively. The Nasdaq, on the contrary, posting a 0.1% gain for the day.

Investors are watching from the sidelines for the two-day Fed meeting that stared Tuesday as the potential timeline for bond tapering and any shifts in expectations for raising interest rates will both be pivotal for the global stock market.

In Asia, Evergrande tumbles further after S&P Global Ratings say default is likely. Despite concerns about broader contagion remaining, things are looking up as Wall Street believes that China has it under control. Investors expect that China will save its biggest real-estate firm, either directly or indirectly, from being like the Lehman saga. International Monetary Fund’s (IMF) Chief Economist Gita Gopinath also sounded optimistic in her latest speech, citing that China has “the tools and the policy space to prevent this turning into a systemic crisis.”

Main Pairs Movement

China’s Evergrande declined further on Tuesday’s trading, but the broad equity and currency markets bounced back on fresh dollar strength, and investors are now turning their attention to Wednesday’s FOMC press conference and the Fed’s interest rate decisions. Despite spending returning to pre-pandemic level, the U.S. still posted fewer job gains, less than expected inflation in August, as well as some economic fatigue brought on by the resurgence of the Delta variant. Thus, analysts are predicting that the September FOMC meeting would not result in a tapering commitment. Rather, analysts are expecting the Fed to remain dovish as the FOMC keeps quantitative easing measures intact for the near term.

Most USD-based currencies declined for a second straight trading session as the Greenback gained fresh strength. Cable rebounded slightly at the beginning of today’s trading but would decline once the North American trading session began. USD/CAD slipped during the European session but recovered swiftly as the American trading session began. AUD/USD was also able to repair some of the losses from the previous trading day but would lose ground as the American trading session began.

Technical Analysis

GBPUSD (4-hour Chart)

Cable found support at around 1.3641 at the start of the trading day, and the pair continued to repair lost ground from yesterday’s trading. However, as the American trading session began and U.S. equity markets rallied, Cable once again traded lower as the dollar gained strength throughtout the American trading session.

From a technical perspective, Cable met resistance at the 1.3687 price level, and was unsuccesful at breaking through before the pair began trading lower. As of writing, Cable is trading at the lower bound of the bollinger bands, while RSI for the pair sits at 32.21, indicating some overselling in the market. Cable is trading below the 50, 100, and 200 day SMA.

Resistance: 1.3687, 1.381, 1.3851

Support: 1.3641, 1.3603

USDCAD (4- Hour Chart)

USD/CAD was unable to keep yesterday’s gains. Instead, the pair slipped as much as 0.8% for the most part of Tuesday’s trading sessions before finding support at around the 1.275 price level. Prime Minister Justin Trudeau successfully defended his historical third term, despite not winning a majority in the parliament and the popular vote. During his campaign, Prime Minister Trudeau has pledged to raise taxes on financial institutions and to impose stricter emission rules for the oil and gas sector.

From a technical position, USD/CAD continues to be rejected from the 1.2834 resistance level, but the pair has found higher levles of support at the 1.2752 price level. As of writing, USD/CAD is trading at the upper half of the bollinger bands and RSI for the pair indicates 60.11, suggesting mild overbuying in the market. USD/CAD is trading above the 50, 100, and 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2752, 1.2635, 1.2586

AUDUSD (4- Hour Chart)

AUD/USD gained during the European session as the pair climbed to a session high of 0.7283 before the American trading session began. As the Greenback gained strength, AUD/USD entered negative territory and is trading lower towards our estimated support level of 0.7222. The RBA Minutes, released today, failed to boost demand for the Aussie dollar. The Minutes showed the RBA’s continued dovish stance and no reversal in the RBA’s bond purhcasing program in light of weaker job postings in August.

From a technical viewpoint, AUD/USD has met new resistance at the 0.728 price level. As of writing, AUD/USD is trading at 0.7233, above our estimated support of 0.7222. The pair is trading at the lower bound of the bollinger bands, while RSI for the pair indicates 39.77, indicating mild underbuying in the market. AUD/USD is trading below the 50, 100, and 200 day SMA.

Resistance: 0.728, 0.7332, 0.7375

Support: 0.7222, 0.7117

20210922
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