Daily market analysis

November 29, 2021

Market Focus

Global equities plummeted on Friday, with a new COVID variant discovered in South Africa rising concerns that new lockdown policies could be imposed and hindered the recovery of the economy once it gets widely spread. In Asia, Japan’s Nikkei 225 dropped 2.53%, and Hong Kong’s HSI slumped 2.67%; in the US, Dow Jones slid 2.52% to 34900.79, and the Nasdaq Composite declined 2.23% to 15491.66.

The World Health Organization is urging caution after two South African health experts, including the doctor who first sounded the alarm about the omicron variant, indicated that symptoms linked to the coronavirus strain have been mild so far.

“Understanding the level of severity of the omicron variant will take days to several weeks,” WHO said in a statement Sunday, adding that “there is currently no information to suggest that symptoms associated with omicron are different from those from other variants.”

The latest variant wreaked havoc in global markets on Friday, and early signs in Asia suggest an uneasy start to the new week as traders digest omicron’s initial impact and spread. Equity futures for Japan, South Korea and Australia pointed lower, while currencies were generally steady. The South African Rand strengthened.

The U.K. government will convene an urgent meeting of Group of Seven health ministers on Monday to discuss the latest developments, according to the country’s Department of Health. In the U.S., President Joe Biden will give an update also on Monday, the White House said.

Main Pairs Movement:

After a warm and cozy Thanksgiving holiday, the global forex market got smashed as the unexpected fresh panic toward the new founded COVID variant frustrated sentiments. Commodities plunged harshly amid the American trading hours, especially the crude oil down more than 10%, and the dollar index dropped 0.74% due to concerns that Fed may propone rate hike schedule to July from June 2022.

Benefitting from the weakness of the greenback, most major currencies posted gains against their American peer. Cable ended its weeklong decline and gained mildly 0.14% to 1.3337, and the euro pair even surged around 100 pips to regain 1.1300. Safe-haven currencies are the best performers during the Friday’s chaos, with USD/CHF plummeted 1.21% and USD/JPY dived 1.82% which once breached the key level 113.00. On the flip side, commodity-linked currencies got left behind as the crash of the oil price. AUD/USD went down 1.04%, while USD/CAD surged 1.11%.

Gold price got a roller-coaster ride on Friday, as the price first stretched to the north on the Europe session, and then rolled down accordingly after the US dollar’s fall amid the dismal Wall Street opening. Oil price got wrecked the most, as both WTI and Brent nosedived more than 10%, back to the price levels two months ago. WTI closed the day at $68.16, and Brent at $72.86.

Technical Analysis:

EURUSD (4- Hour Chart)

The pair EUR/USD advanced and gathers upside traction on Friday, continuing its previous rebound from 2021 lows under 1.119 level. The pair started to see heavy buying in early European session and touched a fresh weekly high near 1.130 area at the time of writing. EUR/USD was supported by US dollar weakness, currently rising 0.87% on a daily basis. The falling US dollar is mainly due to the resurgence of coronavirus concerns, as a new variant appeared in Southern Africa. Investors now worry that if new Covid-19 variant does spread globally and damages the global economic recovery, this will leaves the greenback more vulnerable to a dovish Fed policy expectations. But gains for the EUR/USD pair seems to be limited, as the dovish ECB and rising Covid-19 cases both act as a headwind.

For technical aspect, RSI indicator 62 figures as of writing, suggesting that the bullish momentum should persist for a while before there’s a trend reversal. The MACD is also sitting way above the signal line, which means a strong upward trend for the pair. Looking at the Bollinger Bands, the price rose out of the upper band, therefore a trend continuation could be expected. In conclusion, we think market will be bullish as the pair is eyeing a test of the 1.1374 resistance.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1186, 1.1115

GBPUSD (4- Hour Chart)

After dropping to a yearly low near 1.328 area, the pair GBP/USD rebounded slightly back on Friday. The pair was trading lower and struggled in negative territory during Asian session, but then surrounded by bullish momentum after European session started. At the time of writing, the cable reverses its intraday loss with a 0.02% gain for the day. The GBP/USD gained some bullish traction today amid weaker US dollar across the board, as the benchmark 10-year US Treasury bond yield is falling nearly 7% and weighing heavily on the greenback. Meanwhile in UK, after new Covid-19 variant appeared in Southern Africa, the British Health Secretary Sajid Javid announced on Friday that flights from six African countries will be banned from now on.

For technical aspect, RSI indicator 39 figures as of writing, suggesting that the downside appears more favored as the RSI still holding below the midline. As for the Bollinger Bands, the price is falling after touching the moving average, therefore the downward trend should remain. In conclusion, we think market will be bearish given that its technical correction today could be temporary, since the fundamental outlook doesn’t yet point to a steady recovery.

Resistance: 1.3390, 1.3514, 1.3607, 1.3698

Support: 1.3188

USDCAD (4- Hour Chart)

Following its previous three-day slide, the pair USD/CAD rebounded sharply to 1.278 area on Friday amid falling oil prices. The pair continued to climb higher most of the day and touched the highest level since September 22. USD/CAD had pulled back since then and surrendered some of its intraday gains, currently rising 0.86% on a daily basis. Despite the greenback tumbled 0.75% today, USD/CAD still rallied amid risk-off market mood. The new South African Covid-19 variant, which have more mutations and evade vaccines, are pushing countries across the world to start implementing travel restrictions. Therefore the concerns about fuel demand sent the oil prices below $70, meanwhile underpinned the USD/CAD pair.

For technical aspect, RSI indicator 66 figures as of writing, suggesting the bullish momentum should persist for a while before there’s a trend reversal. Looking at the MACD indicator, the MACD is now sitting above the signal line, which means a upward trend for the pair. As for the Bollinger Bands, the price moved out of upper band and dropped immediately back inside the band, therefore the suggested strength is negated. In conclusion, we think market will be bearish as long as the 1.2828 resistance line holds. The pair is likely to experience technical correction after accelerating the upward move.

Resistance: 1.2828

Support: 1.2645, 1.2585, 1.2493

Economic Data