Daily market analysis

August 25, 2021

Daily Market Analysis

Market Focus

U.S. equities rose to record highs as strong corporate earnings and a rally in commodity prices outweighed lingering concerns about the threat of Covid-19 to the global economy.

The S&P 500 and Nasdaq 100 gained as Best Buy Co. became the latest U.S. retailer to report robust consumer demand while the price of oil and iron ore similarly gained on improving sentiment.

Energy, consumer discretionary and materials stocks were among the best performers as investors also awaited insights from Federal Reserve Chairman Jerome Powell’s address from Jackson Hole this week.

While markets started the week with a strong global rally, equities in the U.S. and Europe remain volatile on concern over the spread of the delta variant and tighter monetary policy. Economic data so far this week have painted a mixed picture, with manufacturing purchasing managers’ indexes in Europe and the U.S. showing continued growth, though slowing from last month’s levels.

Earlier in the session, a rebound in Chinese tech stocks drove gains in global equities after solid results at JD.com Inc. drew in investors including Cathie Wood. Iron ore climbed on expectations additional support from the Chinese government will boost demand. WTI crude rallied to above $67 a barrel. Treasuries fell and the dollar was weaker.

 

      

Main Pairs Movement:

The US dollar edged lower on Tuesday, reaching the lowest level since August 17. At the time of writing, the greenback is losing 0.08% on the day at 92.897. Markets now await the Jackson Hole Symposium that begins this Thursday, a hawkish tone from the Fed chairman Jerome Powell could support the US dollar. The Fed is expected to start bond tapering later this year after July’s FOMC meeting minutes released.

GBP/USD and EUR/USD both posted a gain on Tuesday, trading at 1.3727 and 1.1754, respectively. GBP/USD recorded a daily high at 1.3747 but pulled back toward 1.3700 during American session. EUR/USD continues to climb higher amid US dollar’s weakness, rising 0.10% on a daily basis.

USD/JPY touched a fresh weekly low at the beginning of the American session, but then rebounded and recovered some of its losses. The pair is now trading at 109.65, losing 0.03% for the day.

Gold lost its positive traction after reaching its highest level since August 5 during American session, pulling back to 1803.68 at the time of writing. Gold is now losing 0.09% on a daily basis. WTI continues its rally from Monday, surged 3.32% for the day.

   

Technical Analysis:

EURUSD (4-hour Chart)

The EUR/USD pair advanced on Tuesday, reaching a one-week high during American session. The pair is now trading at 1.1747 at the time of writing with a total 0.03% gain for the day. EUR/USD continues to benefit from a weaker US dollar across the board. For technical aspect, RSI indicator 59 figures as of writing, suggesting bull-movement ahead. If we take a look at MACD indicator, a positive MACD histogram shows that the market is bullish. For Bollinger Bands, the price is now trading above the 20 SMA line, which also indicates a bull market.

In conclusion, we think market will be bullish as long as the 1.1784 resistance line holds. If the price breaks above that level, it will open the door for additional near-term profits. And the next resistance is at 1.1805. On top of that, the German Ifo Business Climate Index, a data that rates the current German business climate, is scheduled to be released on Wednesday. A higher-than-expected reading should be taken as bullish for the Euro.

Resistance: 1.1784, 1.1805

Support: 1.1724, 1.1694, 1.1664

    

AUDUSD (4- Hour Chart)

The AUD/USD pair climbed to fresh weekly high during American session on Tuesday, but then retreated modestly back from that, now trading at 0.7253. The pair is rising 0.68% on a daily basis. For technical aspect, RSI indicator 63 figures as of writing, which means the market is near the overbought zone, and the buying pressure is relatively stronger. If we take a look at MACD indicator, a positive MACD histogram indicates that the market is bullish.

In conclusion, we think market will be bearish, as the pair is now testing the 0.7270 resistance line. Meanwhile, the Bollinger Bands shows that the price moves out of the bands first, and then move immediately back inside the band, which is considered as a selling signal. In addition to that, the assist governor of Reserve Bank of Australia Luci Ellis will speaks on Wednesday, investors can try to find some clues about Australia’s future monetary policy.

Resistance: 0.7270, 0.7319, 0.7389

Support: 0.7218, 0.7106

      

USDCAD (4- Hour Chart)

The USD/CAD pair declined on Tuesday, reaching its lowest level since August 17 during American session. USD/CAD continues to fell as crude oil prices rise more than 3%. The pair is now trading at 1.2595 and losing 0.4% for the day. For technical aspect, RSI indicator 32 figures as of writing, suggesting that the selling pressure is relatively higher, traders should pay attention to buying signals. If we take a look at MACD indicator, a negative MACD histogram shows that the market is bearish. For Bollinger Bands, the price is now trading below the 20 SMA line, which also indicates a bear market.

In conclusion, we think market will be bearish as it heads to test the 1.2584 support line. A break below that level could leads the pair to edge lower, and the next support is 1.2490. The forecast of the USD/CAD pair remains negative with the oil’s strength. Moreover, US Crude Oil Inventories, which influences the price of petroleum product, will be released on Wednesday. This data is likely to impact the demand of crude oil, as well as the commodity-linked loonie.

Resistance: 1.2664, 1.2834

Support: 1.2584, 1.2490, 1.2422

      

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

EUR

German Ifo Business Climate Index (Aug)

16:00

100.4

USD

Core Durable Goods Orders (MoM) (Jul)

20:30

0.5%

USD

Crude Oil Inventories

22:30

-2.683M