Daily market analysis

September 28, 2021
   

Daily Market Analysis

Market Focus

There were both ups and downs in US stock market on Monday, as 10-year treasury bond yields rising sharply amid investors’ expectations about monetary tightening. Investors now pull the possible timeline of rate hike forward after Fed Chair Jerome Powell announced that the Fed could start bond tapering in November at the earliest. A decline in bonds sent the yields briefly above 1.55, which is the highest level in June, and caused some of the world’s biggest technology companies continued to sell off.

The benchmarks, the S&P 500 and the Nasdaq both declined on Monday. The S&P 500 was down 0.3% on a daily basis, ending in negative territory for the first time in recent three trading sessions. The real estate sectors continued its bearish momentum, dropping 1.71% on Monday. The energy and financials sectors are the best performing among all groups, climbed 3.43% and 1.31%, respectively. The Dow Jones, on the contrary, posting a 0.2% gain for the day.

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自動產生的描述

The higher yields weighed especially on the overstretched growth stocks in the technology sector, which have low dividend yields. On top of that, Brent oil closed at the highest level since 2018, as supply-chain disruptions forced energy companies to pull large amounts of crude out of stockpiles and resulted in global energy crunch.

In Asia, stock market was mixed on Monday as risk sentiment improved on contained China’s Evergrande Group default risk. Additionally, news about the releasing of Meng Wanzhou, daughter of Huawei’s founder and the CFO of the company, has indirectly eased the tension between the US and China and favor the market sentiment.

  

Main Pairs Movement:

The broad U.S. equity market wavered on Monday, as the U.S. 10-year treasury bond yield rose to 1.494%, the highest intraday level since June. Major Asia benchmark indices were mixed on Monday. The Hang Send Index edged up 0.1%, while the Shanghai Composite Index lost 0.8%. Germany voted for a new chancellor over the weekend, but analysts are suggesting the leadership change would not affect Germany’s fiscal stance.

Risk on sentiment combined with increasingly hawkish global central banks have caused money to flow from safe haven assets to higher yielding asset classes. Despite the dollar index advancing on Monday, Cable and the Loonie both rose against the dollar. Gold made small gains against the dollar as the U.S. 10-year treasury yield rose to a 3 month high, but gains are limited for the precious metal as investors look for higher yielding assets

  

Technical Analysis:

GBPUSD (4 Hour Chart)

After losing more than 0.3% on Friday’s trading, Cable has found solid support at around the 1.3665 price level and has repaired most of its losses from Friday’s trading. The BoE’s hawkish decision on Thursday has helped bouy the Pound against a strong Dollar. However, a recent truck driver shortage, which has brought on a supply disruption of petrol in 90% of U.K. gas stations, poses as a near term threat to the U.K.’s economic recovery.

From the technical perspective, Cable has lost most of its gains since late September, but the pair has found support at the 1.3665 price level. As of writing, Cable is trading at 1.37111, with the nearest level of resistance at around the 1.3747 price level. RSI for the pair sits at 54, a neutral buying signal. Cable is currently trading below its 50, 100, and 200 day SMA.

Resistance: 1.3747, 1.381, 1.3851

Support: 1.3665, 1.36

  

USDCAD (4 Hour Chart)

USD/CAD continued its down trend since last Friday, and the pair is continuing to edge lower to test our previously estimated support level of 1.2635. The pair’s recent down trend is attributed to the renewed “risk on” sentiment leading to renewed Dollar weakness on Monday, and the rising cost of commodities— specifically oil as it is Canada’s largest exposrt item. WTI, on Monday, reached and broke its 3 month high of 75 dollar per barrel.

From the technical perspective, risk on sentiment combined with rising commodity costs has brought USD/CAD below our previously estimated support level, but this level remains relevant as the pair seems to have found support near this region, as of writing. RSI for pair sits at 39, suggesting mild under buying. USD/CAD is trading above its 50, 100, 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2635, 1.2586, 1.2509

  

XAUUSD (4 Hour Chart)

Gold continued its climb against the Dollar at the start of a new trading week; however, the upward momentum is hampered by the “risk on” sentiment of equity investors and the recovering Dollar. Rising U.S. bond yields could further strengthen the dollar and pose strong downward pressure on the safe haven asset. Despite hawkish signals from global central banks, China’s Evergrande Group still looms over global markets and has helped Gold from suffering further losses.

From the technical perspective, XAU/USD met resistance at around the 1759 price level and has reversed its upward course. RSI for the pair sits at 43, indicating a neutral market. XAU/USD is trading below its 50, 100, and 200 day SMA.

Resistance: 1759.27, 1779.04, 1808.42

Support: 1742.39, 1725.51

  

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

JPY

Monetary Policy Meeting Minutes

07:50

AUD

Retail Sales (MoM) (Aug)

09:30

-2.5%

BRL

BCB Copom Meeting Minutes

19:00

EUR

EBD President Pagarde Speaks

20:00

USD

Goods Trade Balance (Aug)

20:30

USD

CB Consumer Confidence (Sep)

22:00

114.9

USD

Fed Chair Powell Testifies

22:00