Daily market analysis

May 5, 2021

Daily Market Analysis

Market Focus

Volatility gripped financial markets as a rout in some of the largest tech companies dragged down stocks. The dollar rose.

Mega cap such Apple Inc., Tesla Inc. and Amazon.com Inc. sent the Nasdaq 100 slumping, while the S&P 500 pared losses amid gains in commodity, financial and industrial shares. Treasury Secretary Janet Yellen rattled markets with a comment economist regarded as self-evident — that rates will likely rise as government spending ramps up and the economy responds with faster growth. Later in the day, Yellen said she wasn’t predicting or recommending rate hikes.

The debate on whether government spending could boost inflation comes at a time when stock valuations are hovering near the highest levels in two decades. Hedge funds have been bailing from equities at a pace not seen since the financial crisis, while shares have struggled to gain traction despite blowout corporate earnings.

Earlier Tuesday, a sharp drop in equity futures left traders scrambling for an explanation. Some of them speculated on military tensions between China and Taiwan, Singapore’s tougher coronavirus restrictions and Ferrari NV’s decision to postpone financial targets.

Investors also monitored the latest economic readings, with the U.S. trade deficit widening to a new record in March. Meanwhile, a senior White House economic aid demurred on the question of whether President Joe Biden will nominate Fed Chair Jerome Powell for a second four-year term, saying the decision on selecting the next central bank chief will come after a thorough “process.”

Treasury Secretary Janet Yellen said spending may spur modest rate hikes

Main Pairs Movement:

The U.S. dollar extended gains to the highest in two weeks and outperformed all of its Group-of-10 currency peers as Treasury Secretary Janet Yellen said interest rates may have to rise “somewhat” to prevent the economy from overheating. Stocks slipped amid a risk-off bias in the broader markets, while the New Zealand and Australian dollars led losses among counterparts.

EUR/USD -0.4% to 1.2017; euro crossed below $1.20 for the first time since April 22. Shared currency weighed down by EUR/JPY and option-related selling; one-month risk reversals least bullish in nearly a month and nearing par.

AUD/USD -0.8% to 0.7702; fell as much as 1.13%, the most since March 23. Fell below the 100-DMA of 0.7707. NZD/USD -0.9% to 0.7138; dropped as much as 1.2% to 0.7116, the lowest since April 14.

USD/JPY +0.2% to 109.27; earlier rose as much as 0.4%. USD/JPY 3-month implied vol touched a session high of 6.0725% after Yellen’s comments on rates.

Technical Analysis:

EURUSD (4 hour Chart)

Euro fiber once slipped below 1.2 for the first time in nearly two week notwithstanding the pair recovery a portion of daily weakness near market close, it still held negative 0.3%; trading at 1.2016 as of writing. What drive the pair losses amid DXY index gained traction in day market with it fueled by safe-haven demand in risk-aversion sentiment. For RSI side, indicator shows 39 figures, suggesting a room for bearish momentum at least for short term interval. On average price view, 15-long SMA is maintaining a negative slope and 60-long SMA turned it slope to flatter movement intraday market.

Overall, we foresee market will continue whipsaw or choppy in a range between first support and resistance as it tamp down from 1.213 which is a top pattern at current stage. On slid side, we see 1.199 to 1.2 has a strong support level which form by multi-month-long price cluster area where also a neckline for last bottom pattern. If market extend it downside traction, next support will eyes on 1.19-1.192 around

Resistance: 1.2105, 1.213, 1.22

Support: 1.199, 1.19

USDJPY (4 Hour Chart)

Japan yen have found a support as U.S. share market risk-on mode been trigger that ratch up by risk hedging demand, yen trading at 109.296 as of writing, while market inched up to recent high on 109.6 level. Market participants also await important U.S. macro data on Wednesday. For RSI side, indicator shows 56 figures, which suggest a slightly-bullish market sentiment. On the other hands, 15 and 60-long SMAs indicator are retaining it ascending movement notwithstanding seems to lose accelerating traction.

Overall, we expect 109 still be a powerful support level as yen has successfully denfended intraday. If yen could consecutive stand above first support level, we believe it could been deemed as a bull movement ahead. For upward favour, 109 level is immediately need to be defend naturally and 108.37 following

Resistance: 110.412

Support: 109, 108.37, 107.936

USDCAD (Daily Chart)

Loonie had breakthrough 1.23 level, in which was led by broad-base USD strength, and reached its highest level in nearly a week at 1.235. As of writing, the pair was drop down to 1.23 nearby. Meanwhile, WIT crude oil try to tested last peak at 66-67 level, edged up 2.55% in the day and close at 66.11. For RSI side, indicator correction from neutral area to 45.9 figure which suggest a bearish momentum ahead for short term. On averaging price perspective, 15-long SMA indicator turn it slope to upward movement while 60-long SMA indicator remaining descending slope.

Sum up above, we expect market will sourround in consolidation between 1.2269 to 1.238 as market seems misdirection with blurred price momentum. Albeit, if market doesn’t stand above the first resistance at 1.238 level, we believe it remain bearish momentum for long term.

Resistance: 1.238, 1.246, 1.2491

Economic Data