Daily market analysis

September 22, 2021
   

Daily Market Analysis

Market Focus

US stocks declined near the end of trading on Tuesday, edging lower for the day. Investors are now evaluating the risks from China’s strict regulations on the real-estate sector and this week’s Federal Reserve meeting. Markets await Wednesday’s update from the Fed as well as details about how the China government will respond the Evergrande crisis.

The benchmarks, S&P 500 and Dow Jones both dropped on Tuesday. The S&P 500 was down 0.1% on a daily basis, continuing its bearish traction for a fourth day. The index was opened higher but had a high volatility the whole day. The industrial, communicate service and utilities sectors are the worst performing among all groups, dropped 0.7%, 0.33% and 0.24%, respectively. The Nasdaq, on the contrary, posting a 0.1% gain for the day.

Investors are watching from the sidelines for the two-day Fed meeting that stared Tuesday, the potential timeline for bond tapering and any shifts in expectations for raising interest rates will both be pivotal for global stock market.

In Asia, Evergrande tumbles further after S&P Global Ratings says default is likely. Despite concerns about broader contagion still remain, things are looking up as Wall Street believes that China has it under control. Investors expect China will save its biggest real-estate firm, either directly or indirectly, from being like a Lehman saga. Evergrande Chairman and the International Monetary Fund’s (IMF) Chief Economist Gita Gopinath also sound optimistic in his latest speech and supported the brighter concerns.

  

Main Pairs Movement:

China’s Evergrande declined further on Tuesday’s trading, but the broad equity and currency markets bounced back on fresh dollar strength and investors are now turning their attention to Wednesday’s FOMC press conference and the Fed’s interest rate decisions. Despite spending returning to pre-pandemic level, the U.S. still posted fewer job gains, less than expected inflation in August, and some economic fatigue brought on by the resurgence of the Delta variant; thus, analysts are predicting that the September FOMC meeting would not result in a tapering commitment, rather analysts are expecting the Fed to remain dovish and the FOMC would keep quantitative easing measures intact for the near term.

Most USD based currencies declined for a second straight trading session as the Greenback gained fresh strength. Cable rebounded slightly at the beginning of today’s trading, but would decline once the North American trading session began. USD/CAD slipped during the European session, but recovered swiftly as the American trading session began. AUD/USD was also able to repair some of the losses from the previous trading day, but would lose ground as the American trading session began.

  

Technical Analysis:

GBPUSD (4-hour Chart)

Cable found support at around 1.3641 at the start of the trading day, and the pair continued to repair loss ground from yesterday’s trading. However, as the American trading session began and U.S. equity markets rallied, Cable once again traded lower as the dollar gained strength throughtout the American trading session.

From the technical aspect, Cable met resistance at the 1.3687 price level and was unsuccesful at breaking through it before the pair began trading lower. As of writing, Cable is trading at the lower bound of the bollinger bands, while RSI for the pair sits at 32.21, indicating some over selling in the market. Cable is trading below the 50, 100, and 200 day SMA.

Resistance: 1.3687, 1.381, 1.3851

Support: 1.3641, 1.3603

  

USDCAD (4- Hour Chart)

USD/CAD was unable to keep yesterday’s gain, instead, the pair slipped, as much as, 0.8% for the most part of Tuesday’s trading sessions, before finding support at around the 1.275 price level. Prime Minister Justin Trudeau successfully defended his, historical, third term, despite not winning a majority in the parliament and the popular vote. During his campaign, Prime Minister Trudeau has pledged to raise taxes on financial institutions and to impose stricter emission rules for the oil and gas sector.

From the technical aspect, USD/CAD continues to be rejected from the 1.2834 resistance level, but the pair has found higher levles of support at the 12752 price level. As of writing, USD/CAD is trading at the upper half of the bollinger bands and RSI for the pair indicates 60.11, suggesting mild over buying in the market. USD/CAD is trading above the 50, 100, and 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2752, 1.2635, 1.2586

  

AUDUSD (Daily Chart)

AUD/USD gained during the European session, the pair climbed to a session high of 0.7283 before the American trading session began. As the Greenback gained strenth, AUD/USD entered negative territory and is trading lower towards our estimated support level of 0.7222. The RBA Minutes, released today, failed to boost demand for the Aussie dollar. The Minutes showed the RBA’s continued dovish stance and no reversal in the RBA’s bond purhcasing program in light of weaker job postings in August.

From the technical aspect, AUD/USD has met new resistance at the 0.728 price level. As of writing, AUD/USD is trading at 0.7233, above our estimated support of 0.7222. The pair is trading at the lower bound of the bollinger bands, while RSI for the pair indicates 39.77, indicating mild under buying in the market. AUD/USD is trading below the 50, 100, and 200 day SMA.

Resistance: 0.728, 0.7332, 0.7375

Support: 0.7222, 0.7117

  

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

CNY

PBoC Loan Prime Rate

09:30

JPY

BoJ Monetary Policy Statement

10:00

ZAR

Core CPI (MoM) (Aug)

16:00

0.2%

USD

Crude Oil Inventories

22:30

-2.4M