Daily Market Analysis

Market Focus

US equities fell amid upbeat economic data, and investors are growing concern that strong data may push the Federal Reserve to withdraw from the easy monetary policy sooner than expected. Tech shares led the decline with the Nasdaq 100 index dipped 1.07% on Thursday. In the S&P 500, Utilities and Consumer Staples stocks both gained around 0.5%, while Consumer Discretionary had even worse performance than Techs.

President Joe Biden proposed a 15% minimum tax on US corporations along with strengthen IRS enforcement efforts as a way to fund a bipartisan infrastructure package. The new proposal sets aside his previous plan to raise corporate income from 21% to 28%. The offer does not mean that Biden is ditching his larger ambitions to raise taxes on corporations, the proposal as simply a bid to find common ground in the Capito talks, according to a person familiar with the discussions.

Russia may move away from dollar dominated oil contracts if President Joe Biden’s administration continues to impose sanctions on the oil rich nation. Meanwhile, Russia is said to reduce its $186 billion National Wealth Fund to 0. Russian Finance Minister Anton Siluanov told reporters on Thursday that instead of investing in dollar assets, the NWF will seek alternatives like Euro, Yuan, and gold assets. These changes are expected to take place next month. Once completed, share of euro assets in the fund is expected to stand at 40%, the yuan at 30% and gold at 20%.

Main Pairs Movement:

Dollar soared 0.65% to 90.49 amid strong US economic data on Thursday. ADP research report showed there were 978,000 new jobs in the US, beating expectation of an increase of 650,000 jobs. The ADP figure finally came above economists’ forecasts, which have been downbeat for three-months in a row, therefore rising the prospect for upcoming official Non-farm Payroll on Friday. Jobless claims in the US were declining in the last week of May, the figure came slightly better than anticipated 390,000, printed 385,000. Lastly, the ISM Services PMI came out at 64, refreshed the highest number in decades, the reopening is bringing the crowd back from lockdowns and social restrictions as CDC announced on May 13th that fully vaccinated people don’t need to wear a face mask in most areas.

Multiple forex pairs are finally stepping outside of their consolidation zone, such as EURUSD, AUDUSD, and USDJPY. However, they are not completely out of the woods yet, we still need to see NFP numbers to get a clear picture on where the Fed might be heading. If US jobs market is improving in line with or exceed Fed’s expectation, then monetary officials will soon kick off their talks in tapering. If not, then we are back in the wait-and-see game, where the US government needs to find a fix for labour shortage caused by decreased incentive to work and lack of child-care resources.

Gold plummeted nearly 2%, the largest one-day loss since late February where the selloffs were brutal. Traders are exiting their positions in early indication of better jobs market in the US. Rumors suggest the Besel III update on June 28th may potentially remove non-allocated gold as tier-1 asset, which could cause a squeeze on bullion banks, and benefits large physical gold holders like central banks. If this event were to materialize, Gold should be in a upward trajectory in the long run.

Technical Analysis:

XAUUSD (Daily Chart)

Much to our surprise, XAUUSD stumbled and fell under its upward trajectory before the NFP release, as the U.S. ADP Employment Change data well beat Wall Street’s consensus. Gold fell around $30 earlier today, traded at $1871.75 as of writing. Despite the massive chaos caused by the previous data, the incoming Fed’s Chair Powell speech and NFP are still the main dishes, providing us about the Fed’s attitude toward tapering and the U.S.’s pace of recovery.

The pair now encounters a fork in the road. On the upside, gold may surge back to $1900, and challenge resistances like $1930 and $1960; on the downside, however, the instant defense will be at $1860, and once breached, gold may experience a severe adjustment, leading it back to mid-May’s level at $1810, even worse at $1756, the price level in late April.

Resistance: 1900, 1930, 1960

Support: 1860, 1809, 1756

USDCHF (Daily Chart)

Swissy broke its two-week silence right after the U.S. upbeat macros and solidly breached the 0.9 fences that the pair failed to take down in past attempts. The rebound may seem unexpected, but there have been several hints from the technicals. RSI suggests a rekindled buying power since May 7th, while MACD histogram just formed a golden cross last week.

Looking to the Fibonacci, the pair has just hit the 23.6% level and is challenging 38.2% as of writing. In cases of accelerating inflations and delayed Fed’s tapering or other serious macro incidents, Swissy may plunge to its 2-week low at 0.893, or worse, yearly low at 0.876.

Resistance: 0.903, 0.92, 0.947

Support: 0.893, 0.876

AUDUSD (Daily Chart)

Aussie just plummeted over its lowest price since mid-April, traded 0.7654 as of writing. Before that, the pair have stocked in a relatively small interval, 0.767 to 0.79, for about one and a half months, with not much exciting news between the two countries. The main reason for this breakthrough still springs from the abovementioned cheering US data and the following speculation of about-to-come tighter monetary policy.

Compared to that, the dull economic performance of Australia seems to provide downside tractions as technical indicators appear bearish. RSI is at its monthly low of 40.84, while MACD is negative. The estimated support line for the pair may be its previous lower bound of 0.767 and the yearly low of 0.756, whilst the resistance awaits the unlikely rebound at the monthly high of 0.79, followed by the yearly high of 0.8005.

Resistance: 0.79, 0.8005

Support: 0.767, 0.756

Economic Data

Daily Market Analysis

Market Focus

US equities rose on Wednesday amid mixed investment sentiment. The three big indices closed in the positve territory. The S&P 500 edged 0.14% higher with Energy stocks continue to outperform, and Materials shares lagged. Meme stocks are making a comeback. AMC Entertainment Holding Inc. soared as much as 125% to 40.23 and marked a disturbing 3520% price appreciation since January.

President Joe Biden plans to amend Trump’s China blacklist this week. Under the amended order, Treasury department will add a number of companies to the existing list that could face financial penalties for their connection to China’s defense and surveillance technology sectors, people familiar with the matter said.

BlackRock CEO Fink said investors may be underestimating the potential for a spike in inflation. He further commented that “most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-over years.” Fink along with other well-known economists criticized President Joe Biden’s infrastructure plan could risk the US economy running into hyperinflation.

Main Pairs Movement:

USDJPY climbed little 0.08% on Wednesday. Seiji Adachi, a board member from Bank of Japan, signaled the bank’s readiness to act if Fed’s tapering could trigger unexpected spikes in Yen. In normal circumstances, US greenback should strengthen when the Fed winds down asset purchases. It is somewhat odd to see BoJ officials prepared to defend the Yen this early when the Fed is still talking about talking about tapering, or perhaps Japenese policy makers already spotted something peculiar in the market.

GBPUSD was playing tug-of-war as virus narrative diverged between Indian variant spreading concern and record low death numbers. Britain recorded a day without deaths, for the first time since the pandemic. It is interesting to see how scientists are assigning Greek alphabet to various virus variant. The B.1.617.2 COVID-19 strain, aka Indian variant, was given a new name of Delta variant. The UK variant is labelled as Alpha, whereas South African variant is named Beta.

Gold rallied 0.42% to the highest close in almost five months. Investors are waiting for the big non-farm payroll report on Friday while assessing the Federal Reserve’s views on growth and inflation. The Fed highlighted in its Beige book report on Wednesday that US recovery picked up somewhat in April and May, though price pressures mounted. The report also cited companies struggled with higher input prices, supply chain disruptions and a shortage of workers.

Technical Analysis:

USDJPY (Daily Chart)

USDJPY lost traction during late EU sessions, giving back all daily gains. Upside was rejected by 109.85 resistance, and is moving toward a five-months ascending trendline. The dynamic upward support line survived multiple breakouts attempts since April, but will be under stress once again if US treasury yields move lower. Friday’s NFP will provide the catalyst that Forex market desperately needs to move forward, if we were to see another downside surprise to US labor market, USDJPY will collapse to 107.9, or possibly to 106.7 in the near term.

Resistance: 109.7, 111, 112.1

Support: 107.9, 106.7

USDCAD (Daily Chart)

USDCAD remains heavily depressed amid rising oil prices. OPEC+ group was quite optimistic on oil price outlook, and they will gradually bring back oil supply. Even Iran’ potential revival of its oil output could hurt oil price, it would just be a hiccup in a longer-term process. Overall, the bearish trend will still be dominant until we see a much lower price, like 1.162, but it must go through 1.1925 and 1.18. Weekly RSI of 23 is flagging an extreme oversold condition.

Resistance: 1.23, 1.24, 1.264

Support: 1.1925, 1.18, 1.162

EURUSD (Daily Chart)

Today’s move in EURUSD very much resembles the one from last Friday, where it plunged and recovered, creating a long tail wick. Demand for the euro remains relatively strong as bidders are showing dedication in defending the horizontal support at 1.217, which coincides with SMA20 on the daily chart. However, this pair is still in a limbo zone between 1.217 and 1.225 given the current uncertainties in Fed’s responses to mixed economic figures. As of current, we still hold a bullish view on EURUSD unless there is a something new coming out from the Federal Reserve.

Resistance: 1.225, 1.235, 1.246

Support: 1.217, 1.195, 1.17

Economic Data

Daily Market Analysis

Market Focus

US equities edged lower despite upbeat US Manufacturing number came out on Tuesday. The S&P 500 index lost 0.05% with Energy shares led the gain, while Health Care stocks performed the worst. OPEC+ group agreed to gradually ease production cuts in June and July. In accordance with its April decision, the group will allow to supply 2.1 million barrels per day between May and July. The group is also seeking to balance pick up in demand with the possible increase in Iranian output. Iran is in negotiation with six world powers to bring back its oil output at a cost of suspending the nation’s nuclear program.

Financial institutions in Japan must accelerate efforts to prepare for the transition away from Libor as the expiry of the benchmark could affect financial contracts worth trillions of dollars. Akira Otani, the head of BoJ’s financial markets department, stated “we’re no longer at a stage to wonder whether it’s doable or not, we’re at the stage where we have to get it done.” The country will face big challenge at the end of this month with a local deadline for phasing out use of the benchmark in new transactions.

Reserve Bank of Australia kept cash rate unchanged at 0.1%, here are Bloomberg’s key takeaways from RBA’s monetary statement:

Main Pairs Movement:

Euro dollar climbed as much as 0.23% amid decent German employment data, but all gains was erased later in the day, leaving the pair essentially unfazed. German unemployment numbers declined 15,000 in May, beating forecast of 9,000. The economic activities in manufacturing sector continue to improve in German with Manufacturing PMI came marginally higher than expected, printed 64.4. A similar data came out on the other side of the pond, US ISM Manufacturing PMI ring to 61.2 from 60.7 in April, showing a steady recovery from the pandemic.

Cable tried to break above 1.42 hurdle, but failed to capitalize its earlier gains and closed 0.4% lower at the end of the day. Downbeat Manufacturing PMI in the UK just happened to be the factor weighing down on the Sterling, the figure came slightly under expectation of 66.1, printed 65.6. With concerns of the spreading India variant, UK authorities are speeding up their vaccination campaign, aiming to vaccinate 75% of the population by the end of the month.

Crude Oil look to close above two-year high, Brent and WTI crude futures settled around $71.17 and $68.65 respectively. It is somewhat surprising to see USDCAD is holding up quite well despite rising fuel prices, but still range bounded between 1.2133 and 1.2025.

Technical Analysis:

XAUUSD (Daily Chart)

After 2 mouth’s uprise, XAUUSD seems to be blocked by a cap price out of nowhere. In nearly a week’s consolidation, gold took 3 attenpts to break the $1910 resistence but failed, including the one yesterday, and it traded at $1902.79 as of writing. However, gold remains its uptrend and has backed by its 20-day SMA since mid-Apirl. The fundimentals are still in favor of gold: greanback is still weak, the reflation threat still haunt the whole market, and U.S. pace to recovery is still unclear. Gold may run up toward its upside tractions around $1930, further challenge the yearly top at $1960.

The instant support for gold may be the psycholocial $1900, under that we have 10-day SMA level which is around $1890, followed by 20-day SMA’s $1860.

Resistance: 1910, 1930, 1960

Support: 1900, 1894, 1867

USDCAD (Daily Chart)

Loonie has again broken its record yesterday, once traded at 1.2005, its lowest level in nearly six years. The renewed bearish pressure may derive from the rising oil prices that capitalized the commodity-sensitive CAD, and the contunued weakness of the greenback also add fuel to the bears. Meanwhile, investors is looking forward to the NFP and Canada Unemployment Rate data released on Friday to provide further instructions.

For a possible rebound, the instant resistence may be at 1.215 which has not been breached for two weeks, followed by 1.225, the past support level from February, 2018, and 1.237, the monthly low in March, 2021; however, if the downward trajectory continues, the last baricade for the loonie may be at 1.192, an ancient support from May, 2015.

Resistance: 1.215, 1.225, 1.237

Support: 1.20, 1.192

EURUSD (Daily Chart)

EURUSD has held a bullish tone since the beginning of April, coincided with the start of the greenback’s fall. Recently, the dollar index lingered around its four-month lows, as the Fed’s dovish reaction toward the emerging reflation. Last Thursday, despite Fed implies a tapering discussion at upcoming meetings, but with substantial progress unlikely to be achieved until late 2021, the US dollar continues to behave weaker even after President Joe Biden announced his fiscal 2022 budget, which should be a huge boost to bucks. Back to technical, EURUSD is traded at 1.2215 as of writing, with its upward trend challenged by the resistance level of 1.225. The MACD histogram shows a bull-bear fight, while RSI indicator has not reached the overbought territory, giving the pair more rooms to extend further north. An obvious support for the potential downturn may appear at 1.217, which has been tested several times last week, followed by 1.205, the period low after the Mother’s Day. (U.S.)

Resistance: 1.225, 1.235

Support: 1.217, 1.205

Economic Data

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Daily Market Analysis

Market Focus

US stocks market is closed for Memorial Day holiday, but futures was still open to trade. Futures on the three big equity indices declined as traders await fresh catalysts. This Friday’s Non-farm Payroll report will be crucial as it could materially changes Fed’s views on inflation and job market. “Policy makers have committed to accepting a higher level of inflation, higher volatility in inflation and as that happens you will see inflation moving structurally higher,” said Mixo Das, JPMorgan Asia equity strategist.

Germany’s inflation rate reached the peaking point since October 2018. The termination of lockdowns played a major part in reviving German economy. We are also seeing consumer prices picked up in Spain and Italy, a report for the euro area on Tuesday is expected to show inflation rising to 1.9%.

The world’s biggest meat supplier was the target of a cybersecurity attack Sunday. These ransom-ware attacks are getting wild, and are mostly claimed by a hacker group named DarkSide. The most noticeable attack forced Colonial Pipeline Co. to stop the flow of fuel for several days earlier this month, causing severe gasoline shortages in many cities.

Main Pairs Movement:

Dollar is on the back foot amid thin liquidity in the market, with the dollar index dipping 0.23%, currently trading 89.85. Euro was the best performer among the G-7 space, rose 0.29% on Monday. Tuesday will be a busy day as the economic docket is packed with releases from several major economies. Traders will be closely watching any policy shifts from Reserve Bank of Australia.

Cable also edged 0.15% higher despite possible postpone of reopening. UK may halt the next and last phase of Britain’s reopening due on June 21. Health experts have been calling on the government to react to the strain first identified in India by postponing this loosening. In the meantime, authorities have settled for accelerating the vaccination campaign.

Gold continues to head higher, climbed 0.16% on Monday. Recent rally in Gold may be contributed by a short squeeze in Europe, and exploding demand from China. According to GoldMoney.com, European bullion bank trading desks were under instructions to close their Comex positions and not roll them, because of the new Basel 3 regulations imposed upon them from end-June. The elimination of players in the Swaps category by Basel 3 regulations is a growing threat to Comex liquidity, leaving the shorts effectively trapped. On the other hand, Reuters reported over the weekend that gold exports from Switzerland to China and India have picked up, with 40.2 tonnes sent to China in April — more than the previous 14 months combined. Bernard Sin, regional director, Greater China at MKS, said “banks will continue to steadily import gold in May, as PBOC wants to manage the pace of RMB appreciation.” Pent-up demand for gold luxuries is also making a come back after depressed household spending back in 2020.

Technical Analysis:

GBPUSD (Daily Chart)

Cable climbed 0.11% as price clings to 1.42. Due to UK and US’s holiday on Monday, trading signals could be misleading given the thin volume in the market. Nonetheless, the bulls are eager to break above this hurdle, which has been capping price from advancing for two weeks. Traders were frustrated by the heavy sideline trading within an impossible tight range between 1.411 and 1.425, if a breakout is about to happen, we expect some big moves coming. Further on the north, the nearest resistance sits at 1.437, next to 1.464.

Resistance: 1.42, 1.437, 1.464

Support: 1.4, 1.382, 1.369

USDCHF (Daily Chart)

USDCHF is aiming to extend its correction further in the north. The first attempt to break above SMA 20 resulted in failure on last Friday. It is currently revisiting 23.6% Fibonacci at 0.8988, if it could find solid support around this level, then we could see a potential breakthrough from SMA20. Worth noting that this pair has constructed an inverted head-and-shoulder pattern, which echoes with our hypothesis. Conversely, if bidders fail to defend the support line, then bears could threat to take price further south, likely hitting 0.884.

Resistance: 0.9081, 0.9156, 0.9231

Support: 0.8988, 0.884

NZDJPY (Weekly Chart)

NZDJPY is well placed on an upward trend, gained 0.3% to 79.69 on Monday. This pair has reversed a longer-term bearish trend last November and marked an eye-popping 33% recovery since last year’s low at 59.76. The bulls spent few months struggling to overcome 76.4% Fibonacci level at 78.15, and finally nailed it last week. The overall sentiment remains bullish for NZDJPY given a hawkish RBNZ and concerning virus spread in Japan. In the north, the nearest resistance sits around 81.08, next to 82.3. RSI is very sticky to the overbought zone, but we still expect strong fundamental to overcome technical.

Resistance: 81.08, 82.3

Support: 78.15, 74.59, 71.71

Economic Data

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Daily Market Analysis

Market Focus

US equity market edged higher amid President Biden’s generous fiscal spending budget announcement of $6 trillion in 2022. The tech heavy Nasdaq 100 index up 0.2% and the Dow Jones Industrial Average index marched 0.3% on the last trading day in May, trading session will be closed next Monday as US is on Memorial Day. The S&P 500 index climbed 0.12%, with Real Estate and Utility share led the gain.

In more than 1700 spending proposal, the budget illustrates Biden’s ambitious vision to restore the nation’s infrastructure, expand the social safety net and combat income inequality with an overwhelming $6 trillions. This spending will come at a cost of significant tax increase on corporations and top earners. Former Treasury Secretary Lawrence Summers criticized Biden’s budget is built on outdated economic forecasts and risks overheating US economy.

Bitcoin wiped out most of this week’s gain as BoJ’s Governor Haruhiko Kuroda warned about the token’s volatility and speculative trading. The leading cryptocurrency lost 8% to trade around $35,400. He commented that Bitcoin is ‘barely used as a means of settlement.’ Crypto space has been under pressure from regulators’ criticism around the world, especially in China, where Bitcoins have been mined the most.

Main Pairs Movement:

The US dollar index jumped as much as 0.32% amid President Joe Biden’s 2022 budget release, but momentum quickly ran out of gas, all gains were pared in the end. Inflation in the US advanced forward, with annual Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, jumped to 3.1% from 1.9% and surpassed the market consensus of 2.9%.

Aussie remains subdued given China’s attempt to repress commodity prices, losing 0.5%. The iron ore prices tracked by Bloomberg has indicated a 23% retracement from its high. The commodity index numbers have been moderated but remain close to recent high.

The Cable retreated 0.13% and is still unable to 1.421 hurdle yet. There are concerns that UK won’t be able to fully re-open its economy later in June. Investors need to pay close attention to potential Indian variant that could derail the full reversal from lockdown schedule for June 21st.

Technical Analysis:

GBPJPY (Weekly Chart)

Can anything stop the GBPJPY rally at all? The pair is on another rampage after taking a breather around 149.4 support, climbed 4.14% in the past five weeks. It is currently trading at 2018’s high of 155.67, though it will not be taking down this roadblock this week, but nothing is guarantee for next week. Given recent strong fundamental from the UK and quite the contrary in Japan, there is really little for GBPJPY to holdback, not even the overheating signal from RSI at 75. Looking upward, it could run into 160.18 and 163.9 resistance lines dated back to 2016.

Resistance: 160.18, 163.9

Support: 149.43, 152.83, 145.9

EURUSD (Daily Chart)

Euro dollar attempted to launch another attack to the 1.2175 support, but was quickly fended off. The downsides were heavily guarded by bidders, resulted in a long tail wick on the daily chart. Seeing a huge rejection to the downside, trader may just decide to abandon their shorts and ride with the upward wave. This pair has been residing within the upper Bollinger band since early April and will continue to do so unless we a break lower from the mid-line, which marks SMA20. On the upside, bulls look to contest 1.235.

Resistance: 1.235

Support: 1.2175, 1.195, 1.171

XAUUSD (Daily Chart)

Price of Gold just refuses to backdown, currently clinging to the $1900 handle. The resilience in the precious metal is attributed to institutional inflows like hedge funds and ETFs, we are seeing a bottom-out in Gold ETF holdings. If the sideway trading carries on for another week or so, there is a chance that market is brewing for some radical moves given the recent concerns in the money market, the initial reaction could be a spike, followed by opposite plunges. On the upside, there are quite some open spaces to capitalize on, the nearest resistance lays around $1955, next to a big round $2000. Overheating condition in the RSI continues.

Resistance: 1955, 2000

Support: 1847, 1815, 1782

Economic Data

Daily Market Analysis

Market Focus

US equity market was in a good mood overall as data showed US jobless claims dropped to fresh pandemic low. The S&P 500 and Dow Jones Industrial Index advanced 0.39% and 0.79% respectively, and the Nasdaq 100 index declined 0.06%. Industrials and Financials share led the gains in the S&P 500, while Utilities stocks lagged. Equities was lifted by a report suggesting President Joe Biden will unveil a budget that would boost Federal spending to $6 trillion in 2022.

We are seeing some bizarre actions in the Reverse Repo market recently. Demand for the key Federal Reserve facility used to control short-term rates surged to the highest on record. According to Bloomberg, fifty participants on Thursday parked some $485.3 billion in the overnight reverse repurchase facility. The total amount already surpassed previous record high of $474.6 billion from December 31st, 2015. The return of the Fed facility is close to 0%, but demand has been increasing as a flood of cash overwhelms funding market and have left investors wondering what is happening to the system.

US Treasury Secretary Janet Yellen said high inflation will be here to stay until the end of the year. She noted the spiking inflation was caused by price changes driven by consumer-spending shifts related to the pandemic and supply-chain bottlenecks. While the Republicans blame Biden’s plan could accelerate prices, Yellen rejected the idea of long-term spending on infrastructure would spur inflation.

Main Pairs Movement:

Cable jumped 0.62% on Thursday as policy maker from the BoE signals possible early rate hike. Gertjan Vliedhe, a member of BoE’s Monetary Policy Committee, is optimistic on UK’s economic recovery, saying “it would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a risk in Bank Rate could be appropriate soon after, along a slightly steeper path than in my central case.” Although it is not an official statement from the central bank, nonetheless it is the third central banks pathing toward monetary normalization. With more central banks joining the taper party, it will be interesting to see where the Federal Reverse stands, the wait-and-see game is getting boring for investors.

USDJPY surged 0.63% as the Japanese government plans to extend lockdown to June 20th. Japanese Prime Minister Yoshihide Suga said he will decide on whether to extend a virus emergency in Tokyo and other major cities after consulting with experts on Friday. The emergency measure in placed is set to expire on May 31, but the infections cases resist to backdown given there is little progress in Japan’s vaccine distribution. Time is running out for the Japanese government to keep virus cases under control, and they will be hosting the Summer Olympics in less than two months.

We are also seeing rising infections number in Australia. Australian government announce a seven-day lockdown in Victoria, the second-largest state. There is little trading reaction to the negative headline, Aussie is unfazed for the day.

Technical Analysis:

GBPUSD (Daily Chart)

Cheers for the Cable bears did not last long as price bounced on unexpected hawkish sentiment from one of BoE policy makers, climbed 0.42% to 1.4177. Though we are quite bullish on the Sterling, we thought the correction could be deeper into 1.4 handle, but today’s disruptive move further solidifies the upward trend for Cable. There is a chance for a prominent break higher in coming days, with the bulls look to take out 1.42 hurdle. Further on the north, the nearest resistance sits at 1.437, next to 1.464.

Resistance: 1.42, 1.437, 1.464

Support: 1.4, 1.366

USDJPY (Daily Chart)

USDJPY was soaring back to 110 amid extension of another emergency lockdown in Japan. We mentioned the rising infections cases in Japan could be weighing down on the Japanese Yen in previous analysis. This is exactly what the market needs in order to move out of that tight trading range. By overcoming 109.7 resistance, the bulls are moving onto yearly high of 111. The renewed lockdown could severely undermine Japanese Yen given its threat to delay the Olympics game, and all the economical merits. MACD on the daily chart indicates a bullish trend.

USDCAD (Daily Chart)

USDCAD struggled to find demand as WTI crude oil futures look to close around 67, the highest price in three years. Sellers are showing no mercy for this pair, price plunged upon touching SMA20 at 1.214 and completely wiped-out yesterday’s gains. Support at 1.2024 will be under pressure once again, and it might just surrender itself amid recent strong selling bias. Further on the downside, space will be wide open between 1.2024 and 1.1925, followed support at 1.1812.

Economic Data

Daily Market Analysis

Market Focus

Another quiet day in US equities market, with the big three indices edged marginally higher amid thin liquidity on Wednesday. Within the S&P 500 index, we saw better performance in Consumer Discretionary sector, while Health Care shares trailed behind.

A report from Fitch Ratings suggests the US labor market will take about a year and a half to recover from pandemic’s impact. Unemployment rate will not return to their ‘natural’ rate of 4.3% until the last quarter of 2020.

Iran bans bitcoin mining as the nation face power shortages. Major cities are having difficulty supplying electricity, and government officials are putting the blame on illegal cryptocurrency mining. Statistics showed that around 4.5% of bitcoin mining between January and April took place in Iran, according to blockchain analytics firm Elliptic. The negative headline did little impact to Bitcoin’s price, which rallied roughly 1% to $38,674.

Reserve Bank of New Zealand left its cash rate unchanged at 0.25%, and here are Bloomberg’s key takeaways from RBNZ’s meeting:

Main Pairs Movement:

The US dollar is rebounding across the board today with dollar index up 0.45%, regaining its 90 handle. Euro dollar plunged 0.5%, and essentially gave back all of its gains in the last two days, closed the day just south of 1.22. The 10-year US treasury yield was up 1%, trading at 1.577%.

Cable is also facing some headwinds, slipped 0.2% near closing time. With strong fundamentals such as leading progress in vaccine distribution and optimistic business mood acting as a backdrop, the Sterling was able to withhold dollar’s rebound better than its European peer. Economic docket will be dollar dominated for the rest of this week, key data like US GDP and Pending Home Sales will be out on Thursday.

Kiwi was the best performer against the dollar greenback as RBNZ lift their projection in the second half of 2022. It is the second central bank to send out hawkish signal, the first being BoC. Kiwi promptly surge 1.1% after the announcement, went as far as 0.7316. On the other hand, its antipodean peer Aussie initially ride with RBNZ’s positive shock, but all gains were pared by recovering dollar, closed the day down 0.1%.

USDCAD continues to rebound after failed to break the 1.2022 support, climbed 0.4% on Wednesday. However, the bounce may be temporary as oil prices are advancing further, the WTI crude oil futures reclaimed $66 and Brent futures are getting closer to $69. Oil price will be closely monitored since it can used as a proxy for future inflation, persistent biddings may indicate rapid economic activities, hence leading to high inflation figures.

Technical Analysis:

AUDNZD (Daily Chart)

The knee-jerking reaction in AUDNZD was triggered by RBNZ’s hawkish tone, though the interest rate was left unchanged. The pair plunged nearly 1% on Wednesday, refreshed the largest one-day loss since last March. Price pierced through 61.8% Fibonacci support of 1.064 and look to contest a low point at 1.053. Some traders were probably expecting a positive shift in RBNZ’s narrative at the beginning of this week, thus the dynamic upward support line was already under attack earlier. Given the magnitude of this decisive breakout, it really sets the bearish trading sentiment in the coming month, unless RBA can pull off something similar. There is a chance for price to revisit 1.064, which would be healthy for the longer-term trend.

Resistance: 1.0643, 1.0725, 1.082

Support: 1.057, 1.052, 1.0433

USDCHF (Daily Chart)

USDCHF has been on a rather steep decline since April, retreated 5.7% from a yearly high of 0.947. The south travel was mostly dominated by sellers, no sight of any significant rebounds in the last two months. Price already breached the 23.6% Fibonacci support of 0.9, and now eyes for another crucial level at 0.884 on the downside. It would take huge dedications from the bulls to push price back above 0.91 handle in order to reverse this strong selling bias. Otherwise, the pair will remain subdued, which resonates with MACD bearish signal.

Resistance: 0.9, 0.908, 0.9154

Support: 0.889, 0.884, 0.878

XAUUSD (Daily Chart)

Gold ramped up to $1900 mark earlier than we’ve expected, even advanced to $1913 during mid-day. The constantly leg up in the precious metal is probably associated with institutional inflows like hedge funds and ETFs. We still expect some form of correction coming, likely receding toward the 38.2% Fibonacci level at $1847. With big players bulking their Gold positions against flying inflation, the pullback in Gold will be bumpy ahead. On the upside, there are quite some open spaces to capitalize on, the nearest resistance lays around $1955, next to a big round $2000. RSI indicated Gold is overheated, which also echo with our short-term correction theory.

Resistance: 1955, 2000

Support: 1847, 1815, 1782

Economic Data

Daily Market Analysis

Market Focus

US equities market kicked off the week with some handsome gains. The Nasdaq 100 and S&P 500 rose 1.82% and 1.14% respectively, while the Dow Jones Industrial Index lagged slightly behind. Technology shares led gains across the board as inflation concerns are being addressed by Fed officials today.

The US said Americans should avoid traveling to Japan, with the country under a state of emergency over a widening COVID-19 outbreak that raised doubts about Tokyo’s plans to host the Olympics on July 23rd. The US State Department escalate its travel advisory to level four on Japan as the country has been struggling with vaccine rollout, and thus the rising number of infections.

Tesla’s CEO Elon Musk continues to roil the crypto world, sending tweets to indicate support greener operation of crypto mining. Bitcoin advanced as much as 19% to around $40,000 following the tweets. It has plunged as low as $31,132 on Sunday.

Main Pairs Movement:

Euro gained 0.3% against its US counterpart to start the week. Federal Reserve officials pushed back against the threat that high inflation will stay, saying they would not be surprised to see bottlenecks and supply shortages will bump up prices in the short term. St. Louis’s James Bullard said “A very important part of inflation dynamics is longer-term inflation expectations and those have been extremely well anchored, implying that if we saw some development pushing inflation up I wouldn’t expect that to get embedded in the ongoing inflation rate.

Cable rose as little as 0.06% on Monday. The pair mainly followed today’s trend of dollar weakness, but vaccine optimism continues to act as a backdrop for the Sterling. Boris Johnson’s plan to reopen UK is on track as data shows over 60 million shots were given out, 72% of adults have received a first dose of vaccine, and 43% have received both shots. Government’s goal is to fully remove social restrictions by June 21, though some worried the emergence of the new variant, but a report from Public Health England suggests vaccines from Pfizer Inc. and AstraZeneca Plc are highly effective against the strain. It is a big deal if UK can beat EU and US to be the first economy immunized to COVID-19, thus setting the Pound for an upward trajectory.

Aussie fell around 0.4% during Asian session, but reversed upward in US session, closed the day up 0.22%. China officials are trying to temper overheating commodities prices, and pledge severe punishment for violations in commodities markets. Iron Ore price, one of the most exported commodities from Australia, is suffering from the sudden announcement, and looks to extend declines this week.

Technical Analysis:

EURUSD (Daily Chart)

Euro dollar swing traders could be baffled by the pairs undecisive moves in the past couple days, rose and fell around 50 pips each day. Horizontal support of 1.217 was under fire, and it survived, showing the resilient support level is worthy to defend. Now that we have established a rather strong foundation, the shared currency is set to edge higher against the dollar greenback, likely toward yearly high of 1.235. Recent German bund yields keep rising, with the 10-year yield recovered to -0.142% from January’s -0.6%, and exerts pressure on its US counterpart.

Resistance: 1,235

Support: 1.2175, 1.21, 1.195

XAUUSD (Daily Chart)

Gold has been on a decent rally after shrugged off the $1800 hurdle. However, we have witnessed some exhaustion from the bulls as price spent the past three trading days within a tight range ahead of $1888, which marks the 23.6% Fibonacci Retracement level. Judging the Relative Strength Index of 73, we should be expecting some pullback sooner or later. The odds of a larger retracement would significantly increase if it falls below $1874 with a solid decisive candle. That being said, an interception between previous descending trendline and 38.2 Fibonacci line at $1847 looks like a good place to rest on before climbing back towards $1900.

Resistance: 1900, 1955

Support: 1848, 1815, 1780

USDCAD (Weekly Chart)

Bidders on USDCAD must be scratching their head as the pair pierced through multiple big support lines in a weekly timeframe, and the slide just seem non-stoppable. It is currently sitting north 2015’s low of 1.2065, price did rebound from the support line just like other times in the past several months, in which bidders failed to defend after all. The bears could definitely enjoy some extra gains if the current support line collapses. The nearest key level below would be 1.1671, dated back in December 2014. It is truly amazing for Canadian dollar to pull off such incredible bullish run, RSI of 23 indicated extreme oversold condition, a number that was last seen during the Financial Crisis, and yet we are about to see further plunges.

Resistance: 1.2, 1.245

Support: 1.1671

Economic Data