Daily market analysis

August 27, 2021
   

Daily Market Analysis

Market Focus

U.S. equities fell Thursday as markets turned cautious after explosions in Afghanistan and ahead of a Federal Reserve gathering that may provide more clues about its approach to paring stimulus. The S&P 500 and Nasdaq slid as U.S. and civilian casualties were reported from blasts outside the Kabul airport, escalating tensions as the U.S. evacuates the area. Energy shares led the decline as crude oil fell. Dow Jones closed red as well, down 0.54%.

Escalating concerns about the crisis in Afghanistan added to the risk-off mood. The Pentagon confirmed on Thursday that an explosion took place at the Kabul airport, leaving an unconfirmed number injured or dead as the U.S. evacuation of the region continued.

Investors have also been awaiting the start of the Federal Reserve’s Jackson Hole symposium, which is being held as a virtual event due to the virus. Fed Chair Jerome Powell is set to give a closely watched speech on the economic outlook on Friday, which will divulge more of his and the central bank’s thinking about the timing and scope of tapering the Fed’s pandemic-era asset purchase program.

Some Fed officials have struck a more hawkish tone in recent remarks, however, adding to jitters that a shift away from accommodative monetary policy may come in the near-term. Esther George, the president of the Federal Reserve Bank of Kansas City, told Yahoo Finance in a recent interview that she was in favor of beginning the tapering process “sooner rather than later.”

           

Main Pairs Movement:

The US dollar bounced back on Thursday, ending its four-day losing streak. The DXY index is at 93.072 as of writing, posting a 0.27% gain on the day. The bullish momentum witnessed on US dollar might result from the fact that worries about Delta variant of the coronavirus has been dissipated. As the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech Covid-19 vaccine, which convinced investors that the Fed might still start bond tapering later this year. The focus now shifts to Powell’s speech at the Jackson Hole Symposium this Friday, as the Fed Chairman will talk about the recovery status of US economic.

GBP/USD and EUR/USD both declined on Thursday amid stronger US dollar across the board, trading at 1.3698 and 1.1750, respectively. EUR/USD reached a fresh weekly high then pulled back towards 1.1750 level during American session, losing 0.17% on a daily basis. The ECB Publishes Account of Monetary Policy Meeting was released earlier in the day, which showed that the ECB will continue the bond purchases and review its monetary policy at the September meeting. Hence, we may see further decline on EUR/USD.

USD/JPY consolidated on Thursday, hovering around 110.02. The pair is rising 0.01% on the day as of writing. AUD/USD was surrounded by selling pressure, losing 0.50% on a daily basis.

Gold edged higher on Thursday as the precious metal took a lift during American session, trading at 1792.24 with a 0.12% gain on the day at the time of writing. WTI Crude Oil, on the contrary, failed to continue its rally from Monday while posted a 0.21% loss on the day.

       

Technical Analysis:

AUDUSD (4-hour Chart)

The AUD/USD pair was trading lower on Thursday, touching a fresh daily low during American session. The pair is now trading at 0.7248 at the time of writing, losing 0.37% on a daily basis. The selling pressure witnessed in AUD/USD is attributable to US dollar’s strength across the board, as the greenback is now posting a 0.19% gain on the day. For technical aspect, if we take a look at MACD indicator, a near-zero MACD histogram suggests bear-movement ahead. For Bollinger Bands, the price is falling from the upper band and crossing below the moving average, which also indicates a selling signal and the lower band becomes the loss target.

In conclusion, we think market will be bearish as the pair is now testing the 0.7237 support line. If the price breaks below that level, it will open the door for additional near-term losses. And the next resistance is at 0.7201. On top of that, Covid-19 cases in Australia hit a new daily high on Wednesday as New South Wales reported 919 new infections, which can be negative for the Australian dollar.

Resistance: 0.7280, 0.7341

Support: 0.7237, 0.7201, 0.7107

    

GBPUSD (4- Hour Chart)

The GBP/USD pair declined on Thursday as it failed to persist a six-day rally, in spite of attempting to rebound during American session. The pair is now trading at a daily low of 1.3695 as of writing, losing 0.50% on a daily basis. Increase in the demand of US dollar and rising US Treasury bond yields put selling pressure around the cable. For technical aspect, the MACD indicator shows a death cross, which is considered as a selling signal. For Bollinger Bands, the price is now trading below the 20 SMA line and touching the lower band, suggesting that the market is bearish.

In conclusion, we think market will be bearish as the pair heads to test the 1.3691 support, further losses can be expected if price dig under that level. The next support sits at 1.3602. In addition to that, the epidemic situation in UK seems like not improving at all, despite the government’s successful vaccination program. New cases is over 35k a day now in UK.

Resistance: 1.3768, 1.3888, 1.3958

Support: 1.3691, 1.3602

     

USDCAD (4- Hour Chart)

The USD/CAD pair was trading higher in early trade on Thursday and preserved its bullish traction to gain further profits during American session. The pair is now trading at 1.2684 at the time of writing with an outstanding 0.75% gain on the day. USD/CAD surged on oil’s weakness, as the WTI crude oil is losing 0.77% on Thursday. For technical aspect, RSI indicator 55 figures as of writing, suggesting tepid bull-movement ahead. If we take a look at MACD indicator, a positive MACD histogram shows that the market is bullish.

In conclusion, we think market will be bullish as the Bollinger Bands shows that the price moves out of the upper band, which means a strong upward trend continuation can be expected. Moreover, the Canada Raw Materials Price Index (RMPI) will be released on Friday. It is a leading indicator of consumer inflation, and a higher-than-expected reading is positive for the Canadian dollar.

       

Resistance: 1.2731, 1.2834, 1.2949

Support: 1.2587, 1.2502

      

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

AUD

Retail Sales (MoM) (Jul)

9:30

-2.3%

USD

Fed Chair Powell Speaks

22:00