Daily market analysis

September 16, 2021
   

Daily Market Analysis

Market Focus

US stock advanced on Wednesday, recording the highest gain in three weeks. The stock market was benefitted from the fact that concerns about a slowdown in economic growth has eased. Crude oil and treasury bond yields both rose. Gold price, on the contrary, declined on Wednesday.

The benchmarks, S&P 500, Dow Jones and the NASDAQ all rose on Wednesday. S&P 500 posted a 0.9% gain on a daily basis, the index was closed in positive territory for only second time in eight trading sessions. The energy and industrial sectors are the best performing among all groups, rose 3.81% and 1.12%, respectively. The energy sector was supported by the bullish momentum witnessed in US crude oil prices, as US inventories run low and storms disrupt US production. Therefore, it’s a rapidly tightening market for crude oil.

On top of that, even though the US CPI data released on Tuesday could be seen as reducing pressure on the Fed to start pulling back on loose monetary policy and meanwhile, increasing the uncertainties about the timeline of bond tapering. Investors are still worried about the rising costs on economic reopening and the impact of the Delta variant around the world.

In Asia, stocks declined after reports showed that China’s economy was damaged in August from rigorous virus controls and tight curbs on property. Casino companies fall on China regulation concern, as Macao plans to strengthen the regulation on casino firms.

  

Main Pairs Movement:

Lingering effects of a weaker, than expected, U.S. CPI figure are still felt today in foreign exchange markets. Both the U.S. 10-year and 30-year treasury yield fell on Wednesday. The Canadian CPI rose more than 10% in August to 4.1%, compared to 3.7% in July; however, the BOC still remains dovish and believe that inflation should be transitory. The U.K. CPI for August beat estimates and showed a 0.7% growth, month over month.

Cable repaired some of the losses from the previous trading day and is trading at 1.38446, as of writing. Better than estimated CPI data has helped boost the pound. The loonie rose against the dollar as the Canadian CPI also reported better than estimated results. The Aussie, however, fell against the greenback as Covid and inflationary concerns continue to plague any upward movement from the pair AUD/USD.

  

Technical Analysis:

GBPUSD (4-hour Chart)

The U.K. CPI for August set the record for the largest ever recorded increase in the CPI National Statictic 12 month inflation series. U.K. core CPI rose to 112.1, compared to 108.8 in August of 2020. The service industry, including restaurants, hotels, recreation and culture, and food and non alchoholic beverages, is the major driver for August price rises. Cable began the day trending lower, but, as U.K CPI data released, the pair quickly gained more than 0.4% to hit the session high of 1.38537. Speculators will be eyeing the BOE policy meeting, which will happen on the 23rd of September.

For technical aspect, GBP/USD reversed yesterday’s downward trend and gained more than 0.2% during the European trading session. Despite falling through our previous support level estimate, Cable found support at the 1.38 price level and was met with resistance at around the 1.383 price level. RSI for the pair sit at 49.7, as of writing. GBP/USD has trended towards the middle of the bollinger bands and is trading above the 50 day SMA.

Resistance: 1.3905, 1.3937, 1.3958

Support: 1.3813, 1.3755, 1.368

  

USDCAD (4- Hour Chart)

USD/CAD gained during the European trading session, but slipped once the August CPI data released and the American trading session began. Post CPI release, the loonie gained, as much as, 0.4%, and dragged USD/CAD to a session low of around 1.263. The BOC maintains its view that price surges in August remains transitory, but stronger than expected CPI figures will temp BOC to keep forward guidances unchanged, especially in light of poor growth figures. Speculators will be eyeing the housing starts figure, which will be released on Thursday, and the U.S. initial jobless claims report, also releasing on Thursday. The loonie is also riding the strong tailwind fueled by increasing oil prices and commodity prices.

For technical aspect, USD/CAD is still contained by our previous resistance estimates. Strong selling pressure still exists around the 1.2708 price level, evident from the pair’s quick price movement reversal after closing in on that resistance level. RSI sits at 45.55, suggesting some under buying. The pair sits at the lower half of the bollinger bands and is trading below the 50, 100, and 200 day SMA, as of writing.

Resistance: 1.2708, 1.2834, 1.2912

Support: 1.2589, 1.252, 1.2494

  

AUDUSD (4- Hour Chart)

The Australian unemployment rate will be due tomorrow, with analysts estimating a 4.9% target. The central bank of Australia has committed to tapering plans– reducing bond buying purchasees from 5 billion AUD per week to 4 billion AUD per week, but extending quantitative easing measures into February of 2022. The Delta variant is still a strangling factor on Australia’s economy, as confirmed cases have continued to rise over this month. AUD/USD continued its downward trend as trading began for the day, but was able to gain back some group once the American trading session began.

For technical aspect, RSI indicates 42.2, suggesting weaker buying sentiment. AUD/USD successfully defended our previously estimated support level of 0.731, but the pair met resistance at around 0.7335. Currently, the pair trades at the upper bound of the Bolliner bands, and the pair is trading below the 50, 100, and 200 day SMA.

Resistance: 0.7379, 0.7468

Support: 0.731, 0.7285, 0.7285, 0.7222

  

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

NZD

GDP (QoQ)

06:45

1.3%

AUD

Unemployment Rate

09:30

4.9%

USD

Initial Jobless Claims

20:30

330K

USD

Philadelphia Fed Manufacturing Index (Sep)

20:30

18.8