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The Greenback extended its previous gains, with the dollar index reaching fresh…

The Greenback extended its previous gains, with the dollar index reaching fresh 2021 highs around 96.55

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Market Focus

U.S. shares rose on the back of gains in cyclicals, while the technology sector extended losses as rising Treasury yields damped the outlook for growth stocks. The S&P 500 ended the day higher, after swinging between gains and losses in the last of trading. The tech-heavy Nasdaq 100 slid, building on Monday’s last-hour selloff. Video meeting corporation Zoom tumbled on signs of slowing growth.

After weeks of apparent hesitation, and amid months of market speculation, President Joe Biden has decided to stick with Jerome Powell for the position of the Fed’s chair. He does this despite clear indications that this will anger the left in his party. Some liberals in the closely-divided Senate have already promised to oppose Powell — who was first selected by Donald Trump — when his nomination comes to a vote in the chamber. However, Biden has opted for stability in the Federal Reserve at a time when rising interest rates and continued Covid-related challenges put the US economy in a precarious position.

The president may consider Powell the safe choice, with some Republicans already offering their support, but if Senate Democrats fracture over the nomination, it may create obstacles to a cohesive vote on Biden’s Build Back Better social spending legislation — a development that could have grave political consequences for their party.

Traders pruned bets for a dovish-for-longer Federal Reserve after Jerome Powell was selected for a second term. The chair himself sought to strike a balance in his policy approach, saying the central bank would use tools at its disposal to support the economy as well as to prevent inflation from becoming entrenched.

Main Pairs Movement

The Greenback extended its previous gains, with the dollar index reaching fresh 2021 highs around 96.55. The dismal mood of the equity markets and the higher government bond yields fueled demand for the safe-haven dollar.

EUR/USD bottomed for the day at 1.1226, while GBP/USD fell to 1.3342 amid worrying labour shortage and inflation issues. Bank of England head Andrew Bailey said that the bank may not return to offering a hard form of guidance, according to Reuters. However, it was not “off the table” that they give no guidance at all on rates, with decisions to be made meeting by meeting, the governor added, before stating that the UK labour market is very tight.

Commodity-linked currencies performed well on Tuesday with the help of the rebound in commodity prices. AUD/USD successfully defended its rates against the soaring US dollar, while USD/CAD dropped 0.25% amid a strong pullback of the oil prices.

Gold declined for a fourth consecutive day, failing to find support at the key level of $1800, and now trading at $1792 a troy ounce. The US 10-year benchmark yield soar to its monthly high at 1.685. Crude oil prices surged significantly, with WTI up 2.65% to $78.50 a barrel, and Brent up 3.5% to $82.20.

Technical Analysis

EURUSD (4- Hour Chart)

After the previous day’s slide to a sixteen-month low, EUR/USD rebounded moderately and stayed in positive territory on Tuesday. The pair climbed higher and touched a fresh daily high in the early European session, but then pulled back towards the 1.124 area. EUR/USD surrendered its modest intraday gains and is currently rising 0.27% on a daily basis at the time of writing. In Europe, the flash German Manufacturing PMI released today came in at 57.6, which was better than market expectations. The upbeat data showed that the manufacturing sector activity in the Eurozone continues to expand, underpinning the EUR/USD pair. On top of that, concerns about rising Covid-19 cases and the reimposition of lockdown measures continues acting as a headwind for the Euro.

On the technical side, the RSI indicator is at 38 as of writing, suggesting bearish movement ahead. As for the MACD indicator, a golden cross has just formed on the histogram, which means a short-term upward trend for the pair. Looking at the Bollinger Bands, the price rose from the lower band, therefore the upward trend is likely to persist. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.1374 resistance, but the prospects for an early policy tightening by the Fed might keep a lid on any meaningful recovery for the EUR/USD pair.

Resistance: 1.1374, 1.1464, 1.1609

Support: 1.1226, 1.1168

GBPUSD (4- Hour Chart)

The pair GBP/USD declined on Tuesday, continuing to stay under pressure for the third day. The pair touched a daily top near 1.341 in the early European session, but then failed to preserve its bullish traction and dropped below the 1.335 level. At the time of writing, Cable has rebounded slightly amid weaker US dollar across the board, currently losing 0.09% on a daily basis. Despite an upside surprise from the UK flash Manufacturing PMI report, which rose to 58.2 in November, Cable remains underminned by the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights. As the UK threatens to trigger Article 16, which may worsen relations with the European Union and potentially lead to a trade war.

On the technical side, the RSI indicator is at 39 as of writing, suggesting bearish movement ahead. Meanwhile, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend could persist. In conclusion, we think the market will be bearish as the pair is now testing the 1.3353 support, a drop below that level could extend the recent downfall to under 1.3300 area.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3353, 1.3188

USDCAD (4- Hour Chart)

Following its previous rebound from two-week lows near 1.25 area, USD/CAD preserved its bullish momentum and advanced on Tuesday. The pair was trading higher to a daily top above 1.274 during the European session but now has pulled back amid renewed US dollar weakness. USD/CAD was last seen trading at 1.2708, currently posting a 0.05% gain on a daily basis. Oil prices climbed higher to the $78.00 level despite the official announcement by the White House that it will release crude oil reserves. The resurging oil prices have lent support to the commodity-linked Loonie and dragged the USD/CAD pair lower, offsetting most of its intraday gains.

For technical analysis: the RSI indicator is at 69 as of writing, suggesting that the pair is in the overbought zone, a trend reversal could be expected. Looking at the MACD indicator, the diminishing positive histogram indicates that the pair could experience a bearish trend. As for the Bollinger Bands, the price moved out of the upper band first, and dropped right back inside the band, therefore the trend is negated. In conclusion, we think the market will be bearish as long as the 1.2775 resistance line holds.

Resistance: 1.2775, 1.2849

Support: 1.2585, 1.2493, 1.2387

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Biden appointed Jerome Powell as the chairman of the Federal Reserve for…

Biden appointed Jerome Powell as the chairman of the Federal Reserve for his second term, U.S. stocks rose to a record high, the price of gold plummeted

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Market Focus

As investors cheered on the appointment of Federal Reserve Chairman Jerome Powell for his second term, U.S. stocks rose to a record high, and the S&P 500 index surged to a high of the day immediately after the opening of the U.S. market. However, the S&P 500 Index closed lower on Monday as Wall Street expects banks to raise interest rates in 2022. In addition, rising U.S. Treasury yields put pressure on major growth stocks such as Amazon and Alphabet, which fell -2.83% and -1.92% respectively. Moreover, following the surge in US Treasury yields, the S&P 500 Bank Index rose as investors priced in tightened policy in the first half of 2022. Wells Fargo Bank (WFC.N) is one of the strongest banks on Wall Street.

At the close of the market, the S&P 500 Index fell 15.38 points or 0.32% to close at 4,682.88 points, the Nasdaq Composite Index fell 202.68 points or 1.26% to 15,854.76, and the Dow Jones Industrial Average rose 17.28 points, or 0.05%, to 35,617.83.

Tesla is also one of the biggest gainers, rising 1.74%. Earlier on Monday, Tesla CEO Elon Musk said on Twitter that the Model S Plaid may arrive in China “around March.”

Main Pairs Movement

The US dollar led the way and became the overall winner. In 2021, it set a new high against the euro and a multi-month high against other major competitors. Most of the dollar’s strength comes from US President Joe Biden, who HAS nominated Jerome Powell for re-election as chairman of the Federal Reserve.

The US 10-year bond yield finally rose by nearly 9 basis points to 1.62% in intraday trading. The current yield has returned to its highest level since last Wednesday and is currently only about 3 basis points lower than last week’s high of 1.65%. With the rise in yields, the US dollar index has also continued to roll to the year’s high of 96.502, and its upward trend seems to be endless.

The EUR/USD is currently hovering near 1.12400 and is in a sharp downward trend because it continues to suffer from the severe wave of Covid-19, and the dovish state is also the main key to the weakness.

The price of gold plummeted due to the strengthening of the U.S. dollar, trading at $1,803.00 per ounce. Crude oil prices are rising, and WTI is currently hovering around US$76.70 per barrel. 

Technical Analysis

EURUSD (4- Hour Chart)

After touching the lowest level since July 2020 under the 1.126 level, EUR/USD continued its bearish traction on Monday amid US dollar strength. The pair flirted with 1.128 level most of the day, but then dropped towards 1.124 area, currently losing 0.14% on a daily basis at the time of writing. The White House announced on Monday that Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden. The news provided strong support to the US dollar and sent the DXY index above the 96.4 level. In Europe, concerns about rising Covid-19 cases acted as a headwind for the Euro, as some countries in Europe may reimpose a full lockdown or bring back restrictions to tackle rising infections.

On the technical side, the RSI indicator is at 30 as of writing, suggesting that the pair is in the oversold zone, a trend reversal could be expected. Looking at the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend is likely to persist. In conclusion, we think that the market will be bearish as the Greenback is kept strong by hawkish Fed expectations. A potential move lower towards 1.1200 seems possible as the pair has broken the previous support.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1168

GBPUSD (4- Hour Chart)

Following last Friday’s slide, GBP/USD declined for the second day on Monday. The pair was trading in a range near the 1.344 area during the Asian and early European sessions, but started to see heavy selling after the announcement of Powell’s renomination as Fed chair. Cable rebounded slightly after touching a two-week low, currently losing 0.28 on a daily basis. The latest dovish comments from BoE governor Andrew Bailey over the weekend put some downward pressure on the GBP/USD pair. Moreover, the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound.

From a technical perspective, the RSI is at 41 as of writing, suggesting tepid bear movement ahead. Meanwhile, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price has moved out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think that the market will be bearish as the pair is eyeing a test of the next support, which is at 1.3353. Given that there aren’t any major market-moving UK macro data today, investors await Tuesday’s UK PMI reports for trading impetus.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3353, 1.3188

USDCAD (4- Hour Chart)

After a five-day rebound from 1.25 area, USD/CAD climbed higher on Monday amid stronger US dollar across the board, now targeting at 1.27 level. The pair jumped to a monthly top after Powell’s renomination, paring its initial intraday losses. USD/CAD was last seen trading at 1.2695, currently posting a 0.45% gain on a daily basis. Even though WTI crude oil has risen 1.15% for the day, the resurging oil prices failed to underpin the commodity-linked loonie. On top of that, expectations that the Fed will hike rates by the middle of 2022 also acted as a tailwind for the pair, as hawkish Fed speculations were reinforced by elevated US Treasury bond yields.

For technical analysis: the RSI is at 75 as of writing, suggesting that the pair is near the overbought zone, a trend reversal could be expected. But looking at the MACD indicator, the MACD is now sitting above the signal line, which means that the upward trend could persist. As for the Bollinger Bands, the price has moved out of the upper band, therefore a strong trend continuation could be expected. In conclusion, we think the market will be bullish as the pair already broke the previous 1.2648 support, a break above 1.2775 could intensify the bullish tone.

Resistance: 1.2775, 1.2896

Support: 1.2585, 1.2493, 1.2387

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The U.S. Inflation is expected to breach the 4.1% YoY record in…

The U.S. Inflation is expected to breach the 4.1% YoY record in October, up from the previous 3.6%

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Market Focus

Stocks looked set to fall Monday, weighed by growing concerns over nationwide COVID-19 lockdowns in Europe that have raised fears about new restrictions beyond the continent, and the risk of a faster withdrawal of Federal Reserve stimulus. The Treasury yield curve was near the flattest since the pandemic’s onset. Stocks ended mixed on Friday, Dow Jones slid 200 points, or 0.6%, settling at its lowest levels in 3 weeks and down 1% on the week, while the S&P 500 notched a slim daily gain, 0.32% throughout the week. However, the Nasdaq Composite set a fresh record, bolstered by rallying technology shares.

Former Credit Suisse Group AG bankers have told criminal investigators that the bank is still helping U.S. clients hide accounts from the Internal Revenue Service, even after the firm paid $2.6 billion in penalties in 2014 and promised to stop the practice.

The latest allegations of wrongdoing come during a tumultuous year for the Zurich-based bank, which lost $5.5 billion in the blowup of family office Archegos Capital Management and had to unwind client funds that were managed with collapsed lender Greensill Capital. It is also happening weeks after the U.S. Justice Department vowed to crack down on corporations that repeatedly violate the law.

The bankers who came forward said that Credit Suisse opened accounts for South American clients who held dual citizenship, but bank documents failed to indicate they were U.S. citizens, according to people familiar with the matter. Some of the accounts held were in the tens of millions of dollars, the people said. U.S. taxpayers are supposed to pay taxes on income earned anywhere in the world and disclose their offshore accounts to the Treasury Department, even if they have dual citizenship.

Over the summer, those bankers were interviewed by U.S. tax prosecutors, IRS criminal agents and U.S. Senate investigators, the people said. Credit Suisse still faces fallout from the 2014 guilty plea of its main banking unit, which admitted helping thousands of Americans evade taxes.

Main Pairs Movement

The Greenback may remain its robust northern momentum in the week ahead as markets turn to important macro risks from the U.S. Inflation has been a hot topic in the country, with headline price growth at its most aggressive since the early 1990s using YoY timeframes. Now, the Federal Reserve’s preferred gauge of inflation, core PCE, is in focus.

It is expected to breach the 4.1% YoY record in October, up from the previous 3.6%. That would be the fastest pace since January 1991. Ongoing elevated price readings above the central bank’s target would likely continue to keep Fed policymakers on their toes. Still, the broader argument from the central bank remains that the recent bout of inflation is ‘transitory’.

EUR/USD closed on Friday with another dip below the 1.1300 threshold, while GBP/USD also dropped hard to around 1.3440. Commodity-linked currencies slumped severely as well, as USD/CAD regained 1.2650, AUD/USD fell to the 0.7230 level, and erased its gains on Thursday, again falling underneath 0.7000. The Japanese yen was the top performer among the majors, outplaying the vigorous US dollar amid lower US yields and falling equity prices。

Amid the strength of the US dollar, gold price slipped to $1845 a troy ounce, and crude oil prices savagely plummeted over 3%, with WTI plunging 4.07% to $75.30, and Brent diving 3.23% to $78.45.

Technical Analysis

EURUSD (4- Hour Chart)

EUR/USD declined on Friday amid US dollar strength, ending its previous rebound from 2021 lows near 1.126. The pair flirted with the 1.136 level during the Asian session, then started to see heavy selling in the early European session. At the time of writing, EUR/USD has rebounded moderately and pared some of its losses, currently losing 0.50% on a daily basis. The stronger US dollar across the board is mainly due to risk-off market sentiment, as the DXY index touched a yearly high above 96.2. In Eurozone, the German PPI report today showed that Producer Prices rose more than expected in October at a monthly 3.8%. But ECB’s Chairwoman Lagarde kept her dovish tone, saying that there was no rush to tighten the current monetary conditions, which put the EUR/USD pair under pressure.

On the technical side, the RSI indicator is at 38 as of writing, suggesting tepid bear movement ahead. For the MACD indicator, a diminishing positive histogram also indicates a downward trend for the pair. Looking at the Bollinger Bands, the price has moved out of the lower band first and moved immediately back inside the band, which means a bull movement. In conclusion, we think the market will be bearish as the greenback’s appreciation should keep weighing on the pair. If the price breaks below the 1.1250 support, the slide could extend further to 1.1168, which was touched in June 2020.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1250, 1.1168

GBPUSD (4- Hour Chart)

In line with EUR/USD’s price movement today, GBP/USD also declined on Friday and dropped to a fresh daily low under 1.341 in the early European session. Despite trying to rebound back above the 1.347 level, the pair still stayed in negative territory and is currently losing 0.17% on a daily basis. The UK Retail Sales data released today showed that retail sales in October rose by 0.8% on a monthly basis, better than the market’s expectation for an increase of 0.5%. But the upbeat data failed to support the cable, as the risk-off market mood underpinned the safe-haven US dollar and dragged the cable lower.

As for the technical analysis, the RSI indicator reads 52 as of writing, suggesting tepid bull movement ahead. As for the Bollinger Bands, the price crossed above the moving average after rising from the lower band, and is moving alongside the upper band, therefore an upward trend continuation could be expected. In conclusion, we think the market will be bullish as the pair might attract some dip-buyers and re-test the 1.3514 resistance. A break above that level should clear the way towards the 1.3607 mark.

Resistance: 1.3514, 1.3607, 1.3698, 1.3834

Support: 1.3397, 1.3353

USDCAD (4- Hour Chart)

After the previous day’s pullback from monthly highs, USD/CAD saw heavy buying and advanced on Friday amid falling oil prices. The pair remained its bullish traction and touched the highest level since October 1 near 1.266 area, currently posting a 0.32% gain on a daily basis. WTI crude oil dropped below $76, weighing on the commodity-linked loonie and pushing the USD/CAD pair further. The falling oil prices were caused by the increasing global oil supply and concerns about resurging Covid-19 cases. On top of that, recent strength witnessed in the US dollar also lifted the pair higher.

On the technical side, the RSI indicator is at 68 as of writing, suggesting that the pair is near the overbought zone, a trend reversal could be expected. But looking at the MACD indicator, the MACD is now sitting above the signal line, which means that the upward trend could persist. As for the Bollinger Bands, the price rose from the moving average and now sit near the upper band, therefore the bullish tone remained. In conclusion, we think the market will be bullish as the pair is testing the 1.2648 resistance.

Resistance: 1.2648, 1.2775, 1.2849

Support: 1.2493, 1.2387, 1.2288

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