Daily market analysis

December 3, 2021

Market Focus

After falling sharply for two consecutive days, the three major stock indexes finally rebounded strongly on Thursday. Main reason comes from the cyclical stocks have recovered some of their recent declines. The Dow Jones Industrial Average rose 617.75 points to 34,639.79 points, the S&P 500 index rose 1.42% to 4,577.10. The Nasdaq Composite Index, which is dominated by technology stocks, rose 0.8% to 15,381.32 points. However, the market is still facing doubts about the latest variant of COVID-19, Omicron, and the risk that the US government may shut down. In terms of data, as of the week of November 27, a total of 222,000 people had applied for initial jobless claims, which was better than expected, implying labor shortages, and employers’ willingness to lay off employees is getting lower and lower.

As price levels rise, labor shortages, and supply chains are blocked, the Fed no longer uses the term “temporary” to describe inflation, suggesting that the Fed may accelerate the pace of interest rate hikes.

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In terms of stocks, after the Chinese aviation authority issued the 737 MAX airworthiness directive, Boeing rose 3.5%, which will pave the way for the aircraft to resume service in China. Kroger Co rose 9.9% after the retailer raised its full-year sales and profit forecasts due to continued demand for groceries. In addition, Okta’s encouraging earnings increased by 11.66%, and retail company Duluth Holdings also rose 18.40% due to its outstanding revenue.

 

Main Pairs Movement:

The U.S. dollar gained some momentum on Thursday, thanks to optimistic data and the rise in the US government bond yields, putting concerns on hold for the time being. In addition, there is news that the Fed may need to reduce the scale of asset purchases faster than expected. Due to the virus, vaccines and financial support, inflation is rising faster than expected. On the other hand, ECB policymaker Fabio Panetta stated that inflation and the new pandemic wave are endangering the EU’s early recovery, although earlier this week he pointed out that there is no need to tighten monetary policy to control inflation because all this is “temporary”. Last but not least, the United States will release a Nonfarm Payrolls report on Friday, and investors should pay close attention.

The EUR/USD continued to stay above the 1.13000 level, but fell for two consecutive trading days. Basically, the currency pair is still in a downward trend. If the European Central Bank maintains a loose monetary policy, it will be difficult for the euro to rebound. After testing the 1.32210 level on Tuesday, the GBP/USD is currently hovering around 1.1330, but like the euro, it is in a weak and sharp downward trend, but it rose by 0.17% on Thursday.

Gold fell to a new one-month low of 1,761.87 and rebounded moderately before the close. Crude oil prices fell to a new low in several months but rebounded. WTI is currently trading at $66.10 per barrel.

 

Technical Analysis:

EURUSD (4- Hour Chart)

After previous day’s tepid slide to 1.130 level, the pair EUR/USD regained upside traction and rebounded above 1.133 area on Thursday. The pair was trading higher before pulling back to a daily low in early European session. During the American session, the pair saw fresh buying and continued to climb higher. The renewed US dollar weakness lend support to EUR/USD, which currently rising 0.02% on a daily basis. For the greenback, investors seems to have already digested Powell’s hawkish testimony on Wednesday, as the DXY index drops 0.15% despite a further strong US macro data. The Weekly Initial Jobless Claims showed a better-than-expected reading with 222K, but failed to support the greenback. In Europe, October’s Unemployment Rate in the euro area eased to 7.3%.

For technical aspect, RSI indicator 54 figures as of writing, suggesting tepid bull movement ahead. But looking at the MACD indicator, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price dropping slowly from the upper band to moving average, therefore the bearish traction could persist for a while. In conclusion, we think market will be slightly bearish as long as the 1.1374 resistance line holds.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1258, 1.1186

 

GBPUSD (4- Hour Chart)

Following the rebound from the lowest level since December 2020 under 1.320 level, the pair GBP/USD hold steady above 1.330 area amid mixed market sentiment on Thursday. The pair reached a daily top above 1.33 during European session, but it has pulled back and surrendered some of its intraday gains since then. At the time of writing, the cable stays in positive territory with a 0.25% gain for the day. The weaker US dollar across the board acted as a tailwind for the cable, as concerns about new Omicron variant seems to ease after WHO official said that some of the early indications showed that most cases are mild. Therefore market mood moderately improved and favored the risk-sensitive Sterling. On top of that, Brexit woes still remained as there are real gaps between the UK and European Union in their disagreement over the Northern Ireland Protocol.

For technical aspect, RSI indicator 48 figures as of writing, reflecting the pair’s indecisiveness in the near term. As for the Bollinger Bands, the price is falling from the moving average, indicating that the pair may experience some bearish momentum. In conclusion, we think market will be slightly bearish as long as the 1.3370 resistance line holds. Technical indicators for cable have lost directional strength, bears may have a chance if the pair break below the next support at 1.3195.

Resistance: 1.3370, 1.3514, 1.3607

Support: 1.3195, 1.3106

 

USDCAD (4- Hour Chart)

The pair USD/CAD advanced amid falling oil prices on Thursday, continuing its previous day’s rally to 1.283 area. The pair was trading lower during Asian session, but then rebounded moderately to a daily top in early American session. USD/CAD now remains steady under the 1.283 area amid improving risk appetite, currently rising 0.11% on a daily basis. The rebound witnessed in US dollar pushed the pair higher, as more Fed policymakers now favoring a faster taper and added to the hawkish list. Meanwhile, WTI Crude Oil posts a 0.01% loss today after OPEC+ agreed to go ahead with its planned 400K barrel per day output hike in January, acting as a headwind for the commodity-linked loonie.

For technical aspect, RSI indicator 61 figures as of writing, suggesting that the upside appears more favored as the RSI still above the midline. Looking at the MACD indicator, a golden cross just formed on the histogram, which indicated upward trend for the pair. As for the Bollinger Bands, the price is rising 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 eyeing a test of the 1.2849 resistance, and the next resistance sits at 1.2949.

Resistance: 1.2849, 1.2949

Support: 1.2645, 1.2493, 1.2387

 

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

EUR

ECB President Lagarde Speaks

16:30

GBP

Composite PMI (Nov)

17:30

57.7

GBP

Services PMI (Nov)

17:30

58.6

USD

Nonfarm Payrolls (Nov)

21:30

550K

USD

Unemployment Rate (Nov)

21:30

4.5%

CAD

Employment Change (Nov)

21:30

35.0K

USD

ISM Non-Manufacturing PMI (Nov)

23:00

65.0