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A potential rate hike projected to start as early as 2022 –…

A potential rate hike projected to start as early as 2022 – so long as the Fed’s employment and inflation goals continue to be met

Market Focus US stocks advanced on Wednesday even though Federal Reserve officials signaled that bond tapering would probably start in November at the earliest. During a press conference, …

20210923
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Market Focus

US stocks advanced on Wednesday even though Federal Reserve officials signaled that bond tapering would probably start in November at the earliest. During a press conference, Fed chairman Jerome Powell also said that mid-2022 could be the end of tapering. This means that if Fed announces tapering in November, it will create an eight-month tapering process. However, the stock markets ignored Fed’s tapering hints amid mixed details. On top of that, gold and oil both rose as the decline in crude oil inventories was more than expected.

The benchmarks, S&P 500, Dow Jones and Nasdaq, all rose on Wednesday. S&P 500 was up 1% on a daily basis as the index rebounded from a two-month low and recorded the biggest climb since July. Wednesday was also the first time S&P 500 finished in positive territory in five trading sessions. Nine out of eleven sectors posted a gain, with the energy and financial sectors the best performing among all groups having rose 3.16% and 1.58% respectively. Meanwhile, Nasdaq gained the most at 1.02%.

The Federal Reserve kept interest rate was unchanged at 0.25%, same as the market’s expectations. But the policymakers are divided over the rate hike, and are now expecting a start from either 2022 or 2023 versus the previous support for 2023. For investors now, the timeline of bond tapering and any shifts in expectations for rate hikes are crucial information.

In Asia, stock markets declined on Wednesday amid concerns about Evergrande group’s debt crisis. But China avoided a major selloff after the country’s central bank boosted its injection of short-term cash into the financial system. In Japan, the BOJ left its interest rate policy unchanged while the Japanese yen dropped.

Main Pairs Movement

Despite the lingering effects from China’s Evergrande credit issue, markets advanced during Wednesday’s trading as investors turned their attention to the Fed’s bond tapering timetable and interest rate projections. As of writing, all major U.S. indices have gained from yesterday’s slump. The two-day meeting of the FOMC yielded a marginally more hawkish tone from the Fed, and a potential start date for scaling back pandemic-era monetary measures. The minutes of the meeting also indicated a potential rate hike projected to start as early as 2022 – so long as the Fed’s employment and inflation goals continue to be met.

The U.S. dollar index slipped at the release of the FOMC minutes, thus benefiting most currency pairs against the dollar. However, when Fed chair Jerome Powell gave his speech, market sentiment changed quickly, causing the dollar to soar, hurting currencies against the dollar.

Technical Analysis

GBPUSD (4-hour Chart)

Cable began trading lower at the start of the European session, but the pair will find support at around the 1.362 price level. Cable quickly rebounded from the session’s low once the American trading session began, and the pair saw a quick boost once the FOMC minutes were released. The dollar weakened against the backdrop of the Fed’s newly-found hawkish tone despite its commitment to keep near term bond purchsing measures unchanged.

From a technical standpoint, Cable traded below our estimated support level of 1.3641 for the first half of the trading day, but the American trading session brought the pair back to positive territory. The near-term resistance level of 1.3687 remains unbroken. However, Fed chair Jerome Powell’s speech, scheduled for later today, might compromise that resistance level if the Greenback continues to weaken against the pound. RSI for the pair indicated a neutral 42, as of writing. Cable is currently trading above the 50, 100, and 200 day SMA.

Resistance: 1.3687, 1.381, 1.3851

Support: 1.3627, 1.3603

USDCAD (4- Hour Chart)

An upbeat market sentiment has strengthened the Loonie against the dollar. Ahead of the FOMC minutes release, USD/CAD was, once again, rejected from the resistance level of 1.2834. However, once the minutes were released, the dollar weakened and brought the pair below our previously estimated support level of 1.2752.

From a technical viewpoint, USD/CAD continues to see downward pressure near the 1.28 price level. The 1.2752 support level did not hold for the pair as the dollar continues to weaken on the back of the FOMC’s announcements. As of writing, RSI for the pair sits at 52, indicating neutral buying. Furthermore, the pair is trading above the 50, 100, and 200 day SMA.

Resistance: 1.2834, 1.2912

Support: 1.2752, 1.2635, 1.2586

AUDUSD (4- Hour Chart)

AUD/USD continues to be range-bound between 0.722 and 0.728. The FOMC minutes release brough a short spike to AUD/USD, but the spike was not sustainable and the pair is again trading lower as of writing. The Aussie dollar continues to be depressed due to poor employment figures and the strong economic ties between China and Australia. The increasingly hawkish tone of the Fed also provides a negative outlook for the pair.

From a technical viewpoint, AUD/USD successfully defended the 0.7222 support level in the early part of the trading session. However, this support level will be tested again as the dollar begins to gain strength after Fed chair Jerome Powell’s speech. As of writing, RSI for AUD/USD sits at 42, and the pair is trading below the 50, 100, and 200 day SMA.

Resistance: 0.728, 0.7332, 0.7375

Support: 0.7222, 0.7117

20210923
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Markets await Wednesday’s update from the Fed as well as details about…

Markets await Wednesday’s update from the Fed as well as details about how China’s government will respond to the Evergrande crisis

20210922
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Market Focus

US stocks declined near the end of trading on Tuesday, edging lower for the day. Investors are now evaluating the risks from this week’s Federal Reserve meeting, and China’s strict regulations on the real-estate sector. Markets await Wednesday’s update from the Fed as well as details about how China’s government will respond to 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 opened higher, but experienced high volatility throughout the day. The industrial, communication services, and utilities sectors are the worst performing among all groups, dropping 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 as the potential timeline for bond tapering and any shifts in expectations for raising interest rates will both be pivotal for the global stock market.

In Asia, Evergrande tumbles further after S&P Global Ratings say default is likely. Despite concerns about broader contagion remaining, things are looking up as Wall Street believes that China has it under control. Investors expect that China will save its biggest real-estate firm, either directly or indirectly, from being like the Lehman saga. International Monetary Fund’s (IMF) Chief Economist Gita Gopinath also sounded optimistic in her latest speech, citing that China has “the tools and the policy space to prevent this turning into a systemic crisis.”

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, as well as 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 as the FOMC keeps 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 lost 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 a technical perspective, Cable met resistance at the 1.3687 price level, and was unsuccesful at breaking through 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 overselling 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 gains. 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 a technical position, USD/CAD continues to be rejected from the 1.2834 resistance level, but the pair has found higher levles of support at the 1.2752 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 overbuying 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 (4- Hour Chart)

AUD/USD gained during the European session as the pair climbed to a session high of 0.7283 before the American trading session began. As the Greenback gained strength, 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 a technical viewpoint, 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 underbuying 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

20210922
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At its meeting next week, the Fed will probably hint at the…

At its meeting next week, the Fed will probably hint at the timeline of bond tapering before making a formal announcement in November

20210920
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Market Focus

US stocks declined on Friday, touching the lowest levels in four weeks. Investors are now evaluating the resilience of the global recovery amid concerns about the delta virus and risks from China. On top of that, Friday is the day of quarterly expiration of options and futures, which can create volatility. Oil slipped, while gold advanced.

The benchmarks, S&P 500, Dow Jones and NASDAQ both dropped on Friday. The S&P 500 was down 0.9% on a daily basis, while the index edged lower for a second day and erased its gains from earlier in the week. The material, utilities and technology sectors were the worst performing among all groups, dropping 2.06%, 1.59% and 1.52%, respectively. The NASDAQ, in the same way, finished in positive territory for a third day. The global stock market struggled to maintain optimism in the face of slower economic growth, high inflation, and likely pending changes in the Fed’s tapering plan.

From the angle of economic data, the University of Michigan’s preliminary sentiment index was released on Friday, showing that US consumer sentiment rose slightly but remained close to a decade low. High prices also resulted in deteriorated buying conditions. At its meeting next week, the Fed will probably hint at the timeline of bond tapering before making a formal announcement in November.

In Asia, stock markets were mixed as the debt crisis at China Evergrande Group continues. Casino stocks extended their losses amid tightening regulations in Macau.

Main Pairs Movement

The US dollar advanced on Friday, touching its highest level since August 27. The Dollar Index started to gain bullish momentum in the beginning of the American session and pushed higher after the U.S. Michigan Consumer Sentiment index was released. Consumer confidence in the US improved modestly in September with the Index rising to 71 from 70.3 in August. This reading came in slightly weaker than the market expectation of 72.2. The DXY index rose 0.4% on a daily basis. Market focus now shifts to next week’s FOMC meeting, as investors expect Fed to give more hints about the timeline of bond tapering.

EUR/USD and GBP/USD both declined on Friday amid stronger the US dollar across the board, losing 0.33% and 0.38% for the day respectively. The EUR/USD pair continued its slide, dropping to a fresh monthly low during American trading hours. The Eurozone Core Consumer Price Index (YoY) rose by 1.6%, in line with expectations. Meanwhile, the Core CPI for August (MoM) also edged higher by 0.3%. As for the Cable, Bank of England will announce their interest rate decision on September 23.

Gold advanced slightly on Friday. After climbing to a daily high during the European session. However, gold lost its traction and dropped below $1,750 amid renewed USD strength. The precious metal posted a 0.05% gain on a daily basis. WTI Crude Oil, on the contrary, dropped more than 0.9% on Friday.

Technical Analysis

GBPUSD (4-hour Chart)

GBP/USD is trading under the 1.3800 level, on the back foot after UK’s disappointing Retail Sales data, -0.9% in August. From a technical point of view, the intraday bias looks bearish as GBP/USD falls below the ascending trend line, indicating that the upside momentum has been overturned on the four- hour chart. The bearish move is expected to continue as the RSI has not reached the oversold territory, giving more rooms for the pair to extend further south. Bears might continue to head toward the next immediate support level at 1.3727.

Resistance: 1.3771, 1.3798, 1.3820

Support: 1.3727

EURUSD (4- Hour Chart)

EUR/USD is trading below the 1.1800 level, remaining pressured after the US Consumer Sentiment missed estimates in September. From a technical perspective, EUR/USD continues to trade negatively as the pair is still trading within the descending channel. At the same time, technicals are pointing lower since the pair failed to climb above the 20 and the 50 SMAs. The RSI on the four-hour chart is above 30, and is thus outside oversold territory, whilst the MACD is negative, lending supports to bears. That being indicated, EUR/USD is still on the downside. Nonetheless, the downside might face some obstacles as the pair has reached the lower bound of the Bollinger Bands, and is due for a pullback.

Resistance: 1.1806, 1.1894, 1.1965

Support: 1.1664

XAUUSD (Daily Chart)

From the technical aspect, the price of gold is currently in a descending triangle on the daily chart, with the bottom support line at 1756.90 and the resistance at around $1800. As mentioned earlier, the price of gold formed support near $1753 after a sharp drop on Thursday, and the RSI indicator was in the oversold area. Therefore, the next trend of gold should be able to take a breather with its small rebound. On the other hand, on the 1-hour chart, based on Fibonacci indicators, the short-term resistance is at the level of $1,765.58, while the next resistance is at the level of 1,778.62. All in all, the long term movement for the gold is on the downside.

Resistance: 1763.51, 1837.13, 1928.22

Support: 1689.89, 1598.80

20210920
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