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Weaker than expected retail sales figures from the U.K., with FOMC’s press…

Weaker than expected retail sales figures from the U.K., with FOMC’s press conference nearing, Cable faces strong downward pressure

Market Focus U.S. equity markets continued their losses on the last trading day of the week. The Dow Jones industrial average slid 1.3% to close at 34,265.37, the …

20220124
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Market Focus

U.S. equity markets continued their losses on the last trading day of the week. The Dow Jones industrial average slid 1.3% to close at 34,265.37, the S&P 500 lost 1.89% to close at 4,397.94, and the Nasdaq lost 2.72% to close at 13,768.92. The Nasdaq was heavily drawn down mainly due to fears caused by Netflix and Peleton. The two companys’ share prices enjoyed healthy gains throughout 2021, as consumers demanded in-home entertainment. However, with people returning to pre-pandemic entertainment outlets and the Fed reserves’ imminent monetary tightening, these two companies are in desperate need of adjusting their operating strategies as 2022 unfolds. Share prices of Netflix have dropped in excess of 23% since the beginning of this trading week.

The benchmark U.S. 10 year treasury yield declined slightly to 1.771%, while the 30-year Treasury yield slid to 2.085%.

Looking ahead at next week’s economic docket, Thursday the 27th will be packed with the FOMC press conference, U.S. quarterly GDP data release, and U.S. initial jobless claim figures. These three events will have great impact on how the markets will close out the first month of 2022.

Main Pairs Movement

With U.S. Treasury yields receding, the Dollar index faltered as well. The DXY closed 0.14% lower after Friday’s trading but was still able to close the week with a 0.67% gain against a basket of major foreign currencies.

Cable slid 0.33% over the course of Friday’s trading. Weaker than expected retail sales figures from the U.K. sent the Sterling tumbling against the Greenback. With FOMC’s press conference nearing, Cable faces strong downward pressure.

The Euro gained 0.3% against the Greenback on Friday. The Greenback’s across-the-board weakness allowed the Euro to recoup some of its intra-week losses.

Gold lost 0.26% on Friday but ended the week with a solid near 1% gain. The precious metal continues to embody positive sentiment as inflationary pressure around the world continues to rise.

Technical Analysis

GBPUSD (Daily Chart)

GBP/USD broke out to fresh weekly lows on Friday and has continued to press lower as the US trading session has gotten underway, with the Sterling succumbing to weak data and risk-off flows that are weighing broadly on risk-sensitive currencies. Data released by the UK’s ONS on Friday showed that headline Retail Sales dropped 3.7% MoM, much larger than expectations for a 0.6% MoM decline. At current levels just above the 1.3550 mark, GBP/USD is now trading about 0.3% lower on the day, taking on the week losses to about 0.9%.

On the technical front, with the latest drop taking the pair back below the 20 DMA for the first time since this time last month, Cable’s bulls will be concerned that GBP’s near-term momentum has turned negative. The main area of support for Cable traders to now keep an eye on is at the 1.3500 level, as a breach of that level indicates that the pair will return to its past downtrend. The RSI for Cable has dropped drastically, from its 60s to around the average line.

Resistance: 1.3733 (200 DMA), 1.3830, 1.3900

Support: 1.3600, 1.3400, 1.3200

EURUSD (Daily Chart)

The euro pair is rising on Friday, and after the beginning of the American session, it peaked at 1.1361 and then pulled back. The US dollar is posting mixed results across the board, ahead of the weekend. The upside lost momentum amid risk aversion. Equity prices on Wall Street are falling again, with the Dow Jones losing 1.30% and the Nasdaq 1.89%. The negative tone is boosting Treasuries. The 10-year yield stands at 1.762%, while the 30-year is at 2.076, both at one-week lows.

On the technical side, the shared currency’s price action is back into the previous consolidation range seesawing around the 23.6% Fibonacci. The RSI indicator reads 49.54, showing no obvious traction from either side. If the pair manages to rise back above 38.2% Fibonacci the outlook would improve. On the downside, a solid break under 23.6% Fibonacci should clear the way for more losses and to a test of the bottom of the retracement lines.

Resistance: 1.1380, 1.1440,1.1500

Support: 1.1300, 1.1200

XAUUSD (Daily Chart)

Gold prices slid a bit to the south during today’s trading, closing the week at $1,835 a troy ounce which is the second straight week it has ended in positive territory. The ongoing conflict between Russia and Ukraine, the People’s Bank of China’s efforts to loosen their policy amid worsening economic outlook and the steep drop seen in Wall Street are the main drivers for gold’s recent rally. However, on Wednesday, the Fed will announce its policy rate decision and release the Monetary Policy Statement following its two-day meeting. A decision to increase the reductions in monthly asset purchases or 50 bps rate hike in March or worse, both, could weigh hugely on the demand of the bright metal.

From the technical perspective, the RSI bias remains above the average line, after breaking the $1830 area on Wednesday. Since the next resistance lies $25 above the current price level, there’s still room for the gold’s traction. As previously mentioned, we expect the short-term uptrend to reach the critical $1,860 resistance, though the downside risk will gradually increase during its climb.

Resistance: 1860, 1900

Support: 1830, 1800, 1765

20220124
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U.S. initial jobless claims unexpectedly jumped to 286,000 for the week of…

U.S. initial jobless claims unexpectedly jumped to 286,000 for the week of Jan. 7, the highest level since late October

20220121
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Market Focus

Wall Street’s major indexes continued their sharp losses on Thursday, especially late in the session as investors considered whether stocks were cheap after a sell-off at the start of the year while the Nasdaq slipped into correction territory. In addition, the S&P 500’s plummet was largely driven by a slump in consumer discretionary stocks and renewed weakness after tech stocks failed to hold on to their intraday gains for the second day in a row. At the end of the market, the Dow Jones Industrial Average fell 0.89% to 34,715.39 points, the S&P 500 index lost 1.10% to 4,482.73 and the Nasdaq Composite Index dropped 1.3% to 14,154.02 points.

10 of the 11 major sectors in the S&P 500 ended lower, with the consumer discretionary sector down 1.9%, followed by the materials sector, down 1.43%, and the lone winner was utilities, which edged up 0.1%. Consumer discretionary stocks were led lower by Amazon, Garmin and VF Corporation, which lost 1.30%, 6.05% and 5.73%, respectively. On the other hand, the Dow’s worst intraday performances were Dow Inc. down 3.39%, Intel Corp down 2.95% and Home Depot down 2.81%.

Main Pairs Movement

Disappointing U.S. jobs-related data weakened the dollar in the U.S. session, with initial jobless claims unexpectedly jumping to 286K for the week of Jan. 7, the highest level since late October. However, as the three major indexes plummeted, the dollar index began to soar and reached around 96.

Sterling was down just 0.1% at the end of the day. A lack of specific data was released, but the pair gained 0.6% intraday as the Greenback weakened. However, the pound then fell as the Greenback strengthened. On Friday, core retail sales data and comments from BOE members may provide some direction on the way forward.

A similar situation occurred with the euro, which rose first and then fell against the dollar. ECB President Christine Lagarde is due to speak later in the day, but a rate hike remains less likely.

Gold settled little-changed at around $1,840 an ounce but managed to hit a fresh two-month high of $1,847.92. Meanwhile, crude prices surged to fresh multi-year highs, with WTI hitting $87.08 a barrel and Brent hitting $89.46 a barrel.

Technical Analysis

GBPUSD (Daily Chart)

Cable made a mild slide in the Asian session but jumped fiercely at the start of the European trading hours, extending further north after dismal US job data was released, which weighed heavily on the dollar’s demands. The pair now trades around 1.3645, posting 0.23% gains during the intraday trades. The rate competition between the hawkish Bank of England and the Federal Reserve will continue to be the main driver to Cable’s future price actions, as the Fed has announced its rate hike timetable that has been priced in by the market, we expect that GBP/USD to climb further once new BoE hawkish policies being announced. Investors’ eyes are now on the February 3rd BoE meeting.

On the technical front, the RSI for Cable remains around 60, and the pair has settled above its 20 and 50 DMA, and is eyeing the critical 200-day one. Cable is lingering around the 1.3640-50 level at the moment. On the upside, if the pair break through its 200 DMA, the next resistance will be at 1.3830, then 1.3900; on the flip side, if the pair failed to cling on the 1.3600 level, the next effective support will appear at 1.3400, followed by 1.3200, where the one-year lows lie.

Resistance: 1.3734 (200 DMA), 1.3830, 1.3900

Support: 1.36600, 1.3400, 1.3200

EURUSD (Daily Chart)

The euro pair is holding the lower ground below 1.1350 as the US dollar attempts a bounce in tandem with the Treasury yields amid a risk-on mood. The sentiment on Wall Street has improved quite a bit, in anticipation of corporate earnings reports. That fuelled a fresh sell-off in the US Treasuries, which in turn, prompted the yields to resume their uptrend. The upturn in the yields lifted the sentiment around the dollar at the euro’s expense. The escalating Russia-Ukraine crisis, with has seen the US imposing sanctions on four Ukrainian officials and accusing them of destabilizing Ukraine, also boosted demand for the safe-haven US dollar.

On the technical side, the EUR/USD pair’s price action has shifted to the south, heading to the next retracement line at around 1.1300. The RSI for the pair continues to fall and is now reading 47.74, showing a stronger downside pressure weighing on Euro. As previously mentioned, the pair could fall over the 1.1300 support and then season lows around the 1.1200 support. The pair is still capped by its 20 and 200 DMA, slightly above the 50 DMA.

Resistance: 1.1380, 1.1440,1.1500

Support: 1.1300, 1.1200

XAUUSD (Daily Chart)

Gold price remains almost unchanged on the day around $1,841 a troy ounce, as it fades its uptick from fresh two-month highs of $1,848. The latest leg down in gold price could be associated with a tepid bounce seen in the US Treasury yields, which helps put a fresh bid under the dollar. Additionally, a broad rebound across markets fuels risk-on flows, dulling gold’s appeal as a safe-haven asset. Despite the pullback, the yellow metal remains supported by soaring inflation globally and negative real returns, along with escalating geopolitical tensions surrounding the US, Russia and Ukraine amid a probable invasion by the Kremlin of the latter.

From the technical perspective, the RSI bias continues to point to the upside, after breaking the $1830 area on Wednesday. Since the next resistance lies $20 above the current price level, there’s still room for the gold’s traction. As previously mentioned, we expect the short-term uptrend to reach the critical $1,860 resistance, though the downside risk will gradually increase during its climb.

Resistance: 1860, 1900

Support: 1830, 1800, 1765

20220121
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Bitcoin has fallen back below 42,000, more than a 35% drop from…

Bitcoin has fallen back below 42,000, more than a 35% drop from its November 2021 high

20220120
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Market Focus

The broad U.S. equity markets continued to fall on Wednesday’s trading. The Dow Jones industrial average lost 0.96% to close at 35,028.65, the S&P 500 lost 0.97% to close at 4532.76, and the Nasdaq composite lost 1.15% to close at 14,340.25. The benchmark U.S. 10-year Treasury yield continues to edge higher and is currently sitting at 1.865%. Meanwhile, the 30-year Treasury yield inched higher as well and is currently at 2.169%.

With earnings seasons well underway, Bank of America and Morgan Stanley have both reported better-than-expected earnings results. However, the broad equity market is already bracing for the Fed’s imminent rate hike. Among the 11 sectors that make up the S&P 500, only consumer staples and utilities were able to post moderate gains.

Meanwhile, the cryptocurrency market suffered as well. Bitcoin has fallen back below 42,000, more than a 35% drop from its November 2021 high. Ethereum lost 2.53% against the dollar and is currently trading at 3114.36.

Main Pairs Movement

The Dollar Index, which measures the Greenback against a basket of major foreign currencies, dropped 0.11% over the course of yesterday’s trading.

Cable gained 0.13% over the course of yesterday’s trading. Britain’s CPI data indicated the largest inflationary pressure in nearly 30 years. Market participants interpreted this information as a possible trigger for the BOE increase interest rates once again.

The Euro gained against the Dollar amid broad-based Dollar weakness. With interest rate divergence on the horizon, upward momentum for the Euro remains weak.

Gold enjoyed a 1.48% gain against the dollar over the course of yesterday’s trading. With inflation rising globally, market participants have once again turned to the precious metal as a hedge against inflation.

Technical Analysis

GBPUSD (Daily Chart)

Cable regained traction and rebounded on Wednesday, signalling an end of a three-day retreat, triggered by a double rejection at 200 DMA (1.3736) last week. Sterling was boosted by UK CPI data, which showed that inflation in Britain continues to rise and has hit the highest level in nearly 30 years in December, hammering policymakers’ general view of the transitory process and boosting hopes for another BoE’s rate hike on its February 3rd meeting.

On the technical front, owing to the fundamental supports, the RSI indicator bounced back to 60, suggesting a recovery in the bulls’ strength. Cable has jumped above the 1.3600 resistance and is heading to the critical 200 DMA pressure level at the moment. A breakthrough of that level indicates that there’s more room for Pound to appreciate, eyeing on 1.3830.

Resistance: 1.3736 (200 DMA), 1.3830, 1.3900

Support: 1.3500, 1.3400, 1.3200

EURUSD (Daily Chart)

The EUR/USD pair is following its British peer’s rally with a modest 0.2% gain, which has barely regained about a quarter of its Tuesday’s decline. However, considering the weak outlook of the monetary policy divergences between the two central banks, and the risk of losses on Russia and Ukraine tensions, it is expected that the pair will eventually break under 1.1300 in the near term, and potentially post a fresh 2-year low as the Fed’s tightening cycle kicks off.

From a technical perspective, if the Euro pair doesn’t recover to the 38.2% Fibonacci during today’s trading, it shows that its intraday gains are nothing but a mild correction. The RSI for the pair marks 49.47, indicating the shared currency remains under selling pressure. On the downside, the pair could fall over the 1.1300 support and then season lows around the 1.1200 support. The pair is still capped by its 20 and 200 DMA, slightly above the 50 DMA.

Resistance: 1.1380, 1.1440,1.1500

Support: 1.1300, 1.1200

XAUUSD (Daily Chart)

Gold’s upside momentum has waned in recent trading, with prices trading in more of a subdued manner near $1842 after bursting above resistance in the $1830s for the first time in over two months. The speed of the pair’s latest advances, especially between the $1830 to $1840 area, is suggestive of a stop run, as many short traders may have had their stop loss sat somewhere in the $1830s. However, it is unlikely that spot gold can resist the advances of the US dollar and US real yields forever, and expectations for a very hawkish Fed in 2022 suggest continued upside risks for both.

From the technical perspective, though gold’s intraday hike, the pair’s mid-term bearish tractions are still above the price action. Gold is now trading above all its moving averages, and the RSI indicator reads 62.12, suggesting a bullish outlook. We expect the short-term uptrend to reach the critical $1,860 resistance, though the downside risk will get bigger and bigger during its climb.

Resistance: 1860, 1900

Support: 1830, 1800, 1765

20220120
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