Daily market analysis

September 14, 2021

Daily Market Analysis

Market Focus

US stocks advanced today, ending a five-day slide. Energy group gave a remarkable performance among all. Crude oil prices surged approximately 1.5% on Monday, which leads to a 2.94% gain for energy companies. OPEC Monthly Report released on Monday predicted a stronger demand for its crude oil on a combination of rising fuel consumption and output disruptions elsewhere. Industrial metals also rose, as the price of aluminum reached the highest level in 13 years at $3000 a ton.

Health care companies, on the contrary, are the worst performing group on Monday. Moderna Inc slipped 6.60% on a daily basis, which weighed on the Nasdaq 100 index and kept it in negative territory. On top of that, market sentiment soured over the past few weeks, as investors concerned about the spread of Delta variant around the world will obstruct economic growth. Retail and travel stocks declined.

Market focus now shift to US core CPI data, which is scheduled to be released on Tuesday. Investors will use the reading to assess expectations about the timing of bond tapering and interest rate hikes. The CPI measures price change from the perspective of the consumer. It is a keyway to measure changes in purchasing trends and inflation.

Meanwhile, President Joe Biden’s $3.5 trillion tax-and-spending plan faced challenges. House Democrats on Monday released a package of tax increases that falls short of President Joe Biden’s ambition. The Democratic proposal from the Ways and Means Committee would raise the top corporate tax rate to 26.5% and the top rate on capital gains to 25%, both less than what Biden had proposed. Including a 3.8% Medicare surtax on high earners, the top capital gains rate would be 28.8%.

In Asia, Chinese technology stocks plunged as Beijing officials wants to break up Alipay, the app owned by Ant Group which has more than 1bn users, and create a separate app for the company’s highly profitable loans business.

 

  

Main Pairs Movement:

Most USD based currency pairs saw declines on Monday, as the Greenback continues its strong upward momentum. The U.S. Dollar Index (DXY) saw a combined gain of 0.18% since last Friday, and a combined gain of 0.46% over the past week. A slower than expected economic recovery and the imminent release of CPI data this week has provided strong tailwind for the Dollar. As a key inflation signal, the CPI data release, scheduled for the 14th, will provide a clearer outlook to the Fed’s bond tapering schedule.

On Monday, house Democrats have pieced together their initial proposal for a new wave of corporate tax increases over the next few years. The Democrats are aiming for a 26% increase on corporate tax rates, to 26.5% compared to 21% currently, a 3% surtax on individuals earning over 5 million dollars a year, and a newly raised capital gains tax. This new tax bill proposal by the Democrats is their first step to achieving President Joe Biden’s tax agenda that he set during last year’s campaign.

This Tuesday’s scheduled U.S. core CPI release by the BLS will bring substantial volatility to the currency market. Inflationary sentiment will be highly related to this report, and investors will be looking for any clues about the Fed’s bond tapering schedule.

  

Technical Analysis:

GBPUSD (4-hour Chart)

The GBP/USD pair gained slightly on Monday, crawling back some of the losses on Friday; however, once American trading hours began, Cable saw a steap drop then a rapid recovery but saw resistance at 1.384. The greenback, supported by elevated producer price figures for August, remains bullish, suppressing Cable at its current price level and creating strong resistance at the 1.3895 price level, which has been unsuccesfully tested by Cable three times over the last month. Key CPI statistics are due on Tuesday, and if inflation remains high, the Federal Reserve could move up its bond tapering schedule.

For technical aspect, RSI indicates 51, as of writing, suggesting bullish sentiment. Currently, Cable sits at the center of the bollinger bands with no clear movement direction after hitting the upper band on the 10th.

Resistance: 1.3857, 1.3884, 1.3958

Support: 1.3756, 1.3680, 1.3602

  

USDCAD (4- Hour Chart)

The USD/CAD pair did not see much price movement during the European trading session, the pair hovered between 1.266 and 1.269; however, once the American trading session began, the pair saw strong selling pressure and dropped as much as 0.29% to the day’s low of 1.266 over the first three hours of trading. The pair recovered towards the end of the American trading session and gained back 0.25% and the pair is trading at 1.267, as of writing. The upward movement of WTI has provided some level of support for the loonie, but the strength of the greenback seems to offset the momentum provided by oil’s price rise.

For technical aspect, RSI indicates 55 figures, suggesting that there is some bullish buying. The pair currently sits at the middle of the Bollinger Bands and is trading above the 50, 100, and 200 day moving average.

Resistance: 1.2708, 1.2834, 1.2912

Support: 1.2581, 1.252, 1.2494

  

AUDUSD (4- Hour Chart)

The AUD/USD pair began the day dropping 0.13%, but quickly recovered after the American trading session began. The pair met resistance at around the 0.737 price level and has since retraced back to around the 0.735 price level, as of writing. The pair snapped its week long losing streak and has now found some support at the 0.735 prive level. The strong Dollar has supressed the pair’s growth, and this week could lead to more bulling greenback movements as CPI data for August is due this Tuesday. Higher than expected U.S. CPI data could, once again, bring strong downward pressure for AUD/USD.

For technical aspect, RSI indicator 44 figures as of writing, suggesting mild bearish sentiment ahead. Currently, the pair sits in the lower half of the Bolliner bands, while resistance for the pair sits at the middle of the Bollinger bands. As indicated earlier, higher than expected U.S. CPI data would put strong bearing pressure on the pair, thus lower support levels sit at 0.7285 and 0.7222

Resistance: 0.7468, 0.7534

Support: 0.735, 0.7285, 0.7285, 0.7222

  

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

GBP

Unemployment Rate (July)

14:00

4.6%

CHF

PPI (Aug)

14:30

USD

Core CPI MoM (Aug)

20:30

0.3%

USD

Core CPI YoY (Aug)

20:30

4.2%

USD

CPI MoM (Aug)

20:30

0.4%

CAD

Manufacturing Sales MoM (Jul)

20:30

-1.2%