Daily market analysis

August 17, 2021
   

Daily Market Analysis

Market Focus

Stocks recovered earlier losses on Monday to narrowly eke out fresh record levels as investors looked past geopolitical and growth concerns. S&P 500 turned slightly positive in the final hours of trading, logging a record high. Dow Jones also reached a record close, gaining 0.31% (or 110.02) during the day, while Nasdaq held lower, dipped 0.20% (or -29.13).

Desperate scenes played out at Kabul’s international airport on Monday as thousands rushed to exit Afghanistan after Taliban fighters took control of the capital, with the Associated Press reporting at least seven people were killed in the melee.

With land borders now under the control of the militant group, the airport is the last remaining exit point and there are fears that option may close soon. Videos circulating on social media showed hundreds of people swarming the tarmac as countries including the U.S. seek to evacuate their diplomats and other nationals.

The panic in Afghanistan’s largest city reflects the Taliban’s rapid territorial advance, returning the fundamentalist group to power two decades after the U.S. military invaded and kicked it out.

President Joe Biden addressed Americans from the White House as criticism mounted over his handling of the crisis. Biden said the U.S. mission in Afghanistan was never supposed to be “nation building,” only protecting America from a terrorist attack.

   

Main Pairs Movement:

The dollar posted uneven gains against high-yielding rivals but edged lower against safe-haven ones as risk-aversion dominated financial markets at the beginning of the week. Poor Chinese data, tensions in the Middle East, the spread of the Delta coronavirus variant in the US and soft macroeconomic data, were behind the dismal mood.

The euro pair bounced off 1.1800 and settles around 1.1770 as of writing, while Cable stabilized around 1.3840. Commodity-linked currencies suffered the most, with CAD depreciated 0.5% against the greenback, Aussie dropped nearly 0.5% to around 0.7335, and NZD/USD traded at the 0.7025 level.

Gold price continued its last week’s recovery, ending the day at $1,787 a troy ounce. Crude oil prices rebounded from daily lows but still finished the day in the red, with WTI currently trading at $67.40 a barrel, and Brent at $69.60.

The macroeconomic calendar was scarce, with the focus on US Retail Sales, to be out on Tuesday. A depressing number could further spur a market panic.

    

Technical Analysis:

EURGBP (4-hour Chart)

EUR/GBP remains pointing lower but has been unable to make a strong break below 0.85180. The UK consumer price index releasing on Wednesday is expected to show inflation easing back from the levels seen in June but still above the BoE’s target of 2%. Also, the Office for National Statistics will release the latest employment and unemployment data. These releases will have the ability to move Sterling if they differ from market expectations.

For technical aspect, RSI indicator 58 figures as of writing, suggesting tepid bull-movement ahead. If we take a look at Stochastic Oscillator, it is approaching the overbought zone and a golden cross shows that the pair may climb further.

In conclusion, we think market will be mildly bullish, and the pair may have a chance of breaking the 0.8524 resistance line. However, a break below the August low at 0.8450 may well see the pair slide further lower.

Resistance: 0.8524, 0.8558

Support: 0.8450

   

USDCAD (4- Hour Chart)

USD/CAD climbed to multi-day tops, around the 1.2572 region in the last hour. A combination of factors assisted the USD/CAD pair to catch some fresh bids on the first day of a new trading week. As for CAD specifically, its correlation to oil prices is a probable factor leading to weakness in the currency. This, along with a modest pickup in the US dollar demand, provided a modest lift to the major.

For technical aspect, RSI indicator 69 figures as of writing, suggesting the market is rising rapidly, the trend may reverse in the near future and traders should look for opportunities to sell. As for the Stochastic Oscillator, a fast line exceeds 70 shows that the market is in a strong position.

In conclusion, the market will be bearish as long as the 1.2590 resistance line holds. For this week, the focus will be on July’s inflation data in Canada where traders will be looking for signals that will leave the Bank of Canada on track to end its asset purchase programme by the end of the year.

Resistance: 1.2590

Support: 1.2489, 1.2423

    

XAUUSD (4- Hour Chart)

After edging lower toward $1,770 at the start of a new week, the XAU/USD pair regained its traction during the U.S. trading hours on Monday and was last seen rising 0.4% at $1,786. Additionally, a 5.8% decline was witnessed in the benchmark 10-year US Treasury bond yield put additional weight on the greenback’s shoulders. As time of writing, the 10-year US T-bond yield is staying flat at 1.270, helping the USD stay resilient against its rivals. The disappointing consumer confidence data from the US triggered a USD selloff last Friday which made XAU/USD rebounded off critical support at the yearly lows last week.

For technical aspect, RSI indicator 71 figures as of writing, suggesting the market is rising rapidly, so traders should evaluate whether the trend will reverse downwards. As for the Stochastic Oscillator, a fast line exceeds 90 shows that the market is in a strong position.

For current stage, the pair XAU/USD is in an upward trend, trying to reach the $1,800 level. On the other hand, the downward correction could extend to $1,760. A daily close below that level could open the door for additional losses toward $1,750.

Resistance: 1790, 1831

Support: 1762, 1750, 1717, 1690

    

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

AUD

RBA Meeting Minutes

09:30

GBP

Average Earnings Index +Bonus (Jun)

14:00

8.6%

GBP

Claimant Count Change (Jul)

14:00

USD

Core Retail Sales (MoM) (Jul)

20:30

0.1%

USD

Retail Sales (MoM) (Jul)

20:30

-0.2%