Daily market analysis

December 1, 2021

Market Focus

Stocks dropped on Tuesday as volatility resumed after a brief rebound earlier this week, with investors contemplating the impacts of a new coronavirus variant and new comments from Fed Chair Jerome Powell. Both the S&P 500 and Nasdaq declined, and the Dow Jones plummeted about 650 points, or 1.9%, intraday on Tuesday. Shares of airlines, cruise lines and lodging companies considered to be some of the most exposed to virus-related disruptions each sank in early trading to reverse Monday’s gains.

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自動產生的描述

Powell’s appetite for a faster tapering of Federal Reserve stimulus is casting him in role financial markets haven’t seen since 2018 hawk.

Stocks slid, short-term interest rates rose and VIX surged Tuesday after the central bank chairman warned that elevated inflation could justify ending asset purchases sooner than planned. Buffeted also by anxiety around the coronavirus, the S&P500 just endured its worst stretch of turbulence in more than a year.

For investors, an urgent question becomes whether Tuesday’s congressional testimony was a watershed moment for the monetary policies that have helped the S&P 500 effectively to double since Christmas 2018. That’s when Powell’s last big pivot occurred — the dismantling of interest-rate hikes that made the fourth quarter of that year one of the worst for equities ever.

“Not only is he speaking in a more hawkish tone, but he’s dropping major policy implications almost without regard to how the markets may take them,” said Max Gokhman, chief investment officer at AlphaTrAI. “All of the predictability he’s previously tried to cultivate in terms of taper and liftoff scheduling is in question.”

 

Main Pairs Movement:

The greenback initially dropped in the European trading hours, but soon rebounded during the US session to reach weekly highs against most of its major peers. The U-turn of the dollar derived from the two main concerns yesterday – the newest COVID variant and the Fed Chair Powell’s testimony.

The euro pair is of the best performers against the greenback, now trading at around 1.1340. Cable, however, plummeted to a fresh 2021 low of 1.3194. Safe havens posted gains on Tuesday, with USD/JPY dropped 0.33% and closed the day at 113.15, and USD/CHF plunged near 0.5% to a fresh 2-week low of 0.9158. Commodity-linked currencies are the worst. Aussie is last seen at 0.7123, down 0.11% comparing to its open price, and Loonie trades at 1.2780, even once jumped to 1.2837 intraday.

Gold plummeted after briefly advancing beyond 1,800, now trading at $1,775 a troy ounce. Crude oil prices also fell, with WTI at $66.70 a barrel, and Brent at $70.10.

 

Technical Analysis:

EURUSD (4- Hour Chart)

After retreating from a weekly high to under 1.128 level, the pair EUR/USD gained heavy upside traction and rebounded sharply on Tuesday. The pair continued to be surrounded by bullish momentum most of the day, touching the highest level since November 16. However, the rebound witnessed in US dollar weighed on the EUR/USD, which currently losing 0.08% on a daily basis. The concerns about new Omicron variant and rising uncertainty on the potential impact on the global economy drag the US bond yields lower, therefore keeping the greenback under pressure. In Europe, the Eurozone Consumer Price Index jumps by 4.9% in November, which is higher than market expectations. But the dovish ECB and rising Covid-19 cases might cap the upside for the pair.

For technical aspect, RSI indicator 49 figures as of writing, suggesting that the downside appears more favored as the RSI is dropping below the midline. Looking at the MACD indicator, a diminishing positive histogram also indicates that the pair may experience some downward trend. But for the Bollinger Bands, the price is falling from upper band, therefore a downward trend could be expected for the pair. In conclusion, we think market will be slightly bearish as the pair failed to break the long as the 1.1374 resistance, and a break below 1.1186 could open the road for additional losses.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1263, 1.1186

 

GBPUSD (4- Hour Chart)

The pair GBP/USD declined on Monday, surrendering most of its intraday gains amid resurging US dollar. The pair was trading higher and touched a daily top near 1.337 in mid European session, but started to see heavy selling after Fed Chair Jerome Powell’s speech. At the time of writing, the cable stays in negative territory with a 0.52% loss for the day. During the speech, Powell said that it would be appropriate to consider wrapping up the bank’s QE taper a few months sooner. The Fed would also discuss speeding the QE taper at the 15 December FOMC meeting. This has lifted the greenback up sharply and put heavy pressure on the cable. Meanwhile, worries about the spread of the new coronavirus variant and the UK-EU impasse over the Northern Ireland Protocol might keep weighing on the cable.

For technical aspect, RSI indicator 32 figures as of writing, suggesting that the bearish momentum should persist for a while before there’s a trend reversal. Looking at the MACD indicator, a death cross is forming on the histogram, which also points that the pair may experience some downward trend. As for the Bollinger Bands, the price dropped out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think market will be bearish as the pair is eyeing a test of the 1.3188 support, a break below that level suggests more losses ahead for the cable.

Resistance: 1.3390, 1.3514, 1.3607

Support: 1.3188, 1.3106

 

USDCAD (4- Hour Chart)

The pair USD/CAD advanced to 1.283 area amid falling oil prices on Tuesday, regaining upside traction and stay in positive territory. The pair climbed to a two-month top near 1.281 level, but then pulled back moderately during European session. USD/CAD now rallies above 1.2800 on Powell’s hawkish remarks, currently rising 0.55% on a daily basis. Increasing risks of higher inflation and expectations for a faster bond taper act as a tailwind for the US dollar and push USD/CAD higher. On top of that, WTI oil drops below $66 amid deterioration in market sentiment, as Moderna’s CEO said that he believes the vaccine effectiveness would probably be less effective against the new variant. As for now, the dampened outlook for jet fuel demand will keep putting pressure on the commodity-linked loonie.

For technical aspect, RSI indicator 65 figures as of writing, suggesting that the bullish momentum should persist for a while before there’s a trend reversal. As for the Bollinger Bands, the price is from the moving average to upper band, therefore the upside traction could persist. In conclusion, we think market will be bullish as the pair is heading to test the 1.2849 resistance.

Resistance: 1.2775, 1.2849

Support: 1.2641, 1.2493, 1.2387

 

Economic Data

 

Currency

Data

Time (GMT + 8)

Forecast

AUD

GDP (QoQ) (Q3)

08:30

-2.7%

CNY

Caixin Manufacturing PMI (Nov)

09:45

50.5

EUR

German Manufacturing PMI (Nov)

16:55

57.6

GBP

Manufacturing PMI (Nov)

17:30

58.2

USD

ADP Nonfarm Employment Change (Nov)

21:15

525k

GBP

BoE Gov Bailey Speaks

22:00

 

USD

Fed Chair Powell Testifies

23:00

 

USD

ISM Manufacturing PMI (Nov)

23:00

61.0

       

USD

Crude Oil Inventories

23:30

-1.237M