Daily market analysis

July 20, 2021

Daily Market Analysis

Market Focus

Stocks slumped around the world as investors rushed into haven assets after the delta coronavirus variant cast a pall over the economic recovery, while tension between the U.S. and China escalated. In a reversal of the reopening trade that has powered this year’s equity rally, cyclical companies bore the brunt of the rout on Monday. Commodity, financial and industrial shares led losses in the S&P 500, which fell the most in two months. The Dow Jones Industrial Average had its biggest decline since October, while small caps extended a slide from March’s peak to nearly 10%. After recently plunging to pre-pandemic levels, the CBOE Volatility Index, or VIX, soared.

The resurgence of Covid-19 is unsettling global investors, who are considering whether new lockdown restrictions will sap the economic rebound and reverse an equity rally that had driven stocks to a record. Matt Miskin, co-chief investment strategist at John Hancock Investment Management, told Bloomberg Television that the move to “higher-quality assets” such as Treasuries is justified. Americans should avoid traveling to the U.K. because of a surge in that nation’s spread of Covid-19, U.S. government and health officials warned.

“Risk aversion is firmly in place as the Delta Covid variant spread is triggering a flight to safety,” wrote Edward Moya, senior market analyst at Oanda. “Equities were ripe for a pullback given Wall Street was in agreement that this is ‘as good as it gets’ for peak earnings, economic growth, monetary stimulus. It is hard to hold risky assets over the short-term now.”

Geopolitical jitters also resurfaced on Monday after the U.S., the U.K. and their allies said the Chinese government has been the mastermind behind a series of malicious ransomware, data theft and cyber-espionage attacks against public and private entities — including the sprawling Microsoft Exchange hack earlier this year.

     

Main Pairs Movement:

The dollar index flirts with the 93.00 level amid the spreading risk-off sentiment across global markets. The greenback beat most of its major rivals except for JPY, which also boosted by the risk aversion. The upcoming Summer Olympics on Friday may also be a strong catalyst.

The euro pair slumped during the early European session and regained some of its losing grounds after the opening of the American trading hours, closing the day with a mild loss; commodity-linked currencies plummeted as the poor performance of stocks and commodities. Both antipodean pairs dropped over 0.5%, while Loonie surged over 1% as CAD being weighed by the severe decline in the oil price.

Cable experienced a huge plunge yesterday mostly due to the pessimistic Brexit news. News over the weekend suggested that the UK will demand the EU more flexibility over the Northern Ireland Protocol. UK Brexit Minister David Frost is said to be preparing an announcement on the matter this week. When asked about the protocol, Frost said that it will always have to be a treaty due to the special situation of Northern Ireland, adding that “the question is what is the content.”

US 10-year Treasury Bond Yield dropped below 1.200%, the first time since February. Gold price was volatile, with the yellow metal once priced below $1800 a troy ounce but ended the day with mild gains. Crude oil prices plunged amid the dismal market mood and the announcement of the OPEC+, which finally reached a deal to increase output, coupled with slowing demand. WTI trades at $66.30 a barrel, and Brent settles at $68.90.

       

Technical Analysis:

GBPUSD (4-hour Chart)

Sterling once fell to the daily lowest at 1.3654, the level was last spot in Feb 2021. At the moment, the dollar hovered momentum from its safe-haven demand as market worry the variant virus is getting out of hand, while UK is suffering from Brexit woes. News over the weekend suggested the UK will demand the EU more flexibility over the North Ireland Protocol. Furthermore, UK has reported rougly 40K new contagions and 10 death as country lfted most Covid-10 restriction in freedom day. For technical aspect, RSI indicator has drop below 30 that showing sterling steeping in a diabolical over sought sentiment. On the other side, 15- and 60-long SMAs has death cross in earlier session that also cripple the bull side.

If market continuously go down, we expect the next down side support will found in 1.36 as pyscholigically spot. However, as the overly plummet in a day market and reached the over sought territory, we can’t rule out the market will gain a slightly robound. Therefore, the first resistance is setting at price cluster zone at 1.3745 which also a critical support level during the last consolidation pattern.

Resistance: 1.3745, 1.3896

Support: 1.3665, 1.36

       

AUDUSD (4- Hour Chart)

Aussie got struck badly by risk-off sentiment by variant virus then the lowest point in more than seven months after governor extended lockdown measires to contain pandemic outbreak, and pan-commodities market were having a oneruos condition as well. Copper future market has slumped over 2.8% intraday and other industrial metals also downbeat. From the technical perspective, despite RSI indicator was record 31.6 figure, pair remaining a vital situation. Meanwhile, 15 and 60 long SMA retaining descending way to lower low. To the downside, if pair fails to trade above recently low at .7323 level, it could hand over the fist to next lower stage over even below .7300 level.

Resistance: 0.7415, 0.7492

Support: 0.7323, 0.73

     

USDJPY (4- Hour Chart)

Japan yen once dipped to 109.06 level, which last time seen since May 26, as market were driven by risk aversion mode while variant worries rose. At the same time, the Dow Jone shed over 900 points, its largest one-day for the year, as heating U.S. inflation fueled speculation the Fed will revoke monetize support ealier than expect. U.S. Treasuries yield overwhelming to 1.176 with contraction -1.2% rougly in daily. Japan will release National inflation data during the upcoming Asian session.

For technical side, RSI indicator show 35 figure that hover some upside momentum for short term, yet still under bearish expectation. Other than this, 15 and 60 long SMAs indicators are retaining downward slope. In the light of suggestion, we still expect yen will extend the bearish movement at least for short run. On the downside, we foresee 109.36 will be the first immediately support, if break throught the first pivot support, yen wound hobble move to the 109.04 level

Resistance: 109.713, 110.1571

Support: 109.36, 109.04

       

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

AUD

RBA Meeting Minutes

09:30

N/A

CNY

PBoC Loan Prime Rate

09:30

N/A

USD

Building Permits (Jun)

20:30

1.7M