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Bitcoin has fallen back below 42,000, more than a 35% drop from…

Bitcoin has fallen back below 42,000, more than a 35% drop from its November 2021 high

Market Focus The broad U.S. equity markets continued to fall on Wednesday’s trading. The Dow Jones industrial average lost 0.96% to close at 35,028.65, the S&P 500 lost …

20220120
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Market Focus

The broad U.S. equity markets continued to fall on Wednesday’s trading. The Dow Jones industrial average lost 0.96% to close at 35,028.65, the S&P 500 lost 0.97% to close at 4532.76, and the Nasdaq composite lost 1.15% to close at 14,340.25. The benchmark U.S. 10-year Treasury yield continues to edge higher and is currently sitting at 1.865%. Meanwhile, the 30-year Treasury yield inched higher as well and is currently at 2.169%.

With earnings seasons well underway, Bank of America and Morgan Stanley have both reported better-than-expected earnings results. However, the broad equity market is already bracing for the Fed’s imminent rate hike. Among the 11 sectors that make up the S&P 500, only consumer staples and utilities were able to post moderate gains.

Meanwhile, the cryptocurrency market suffered as well. Bitcoin has fallen back below 42,000, more than a 35% drop from its November 2021 high. Ethereum lost 2.53% against the dollar and is currently trading at 3114.36.

Main Pairs Movement

The Dollar Index, which measures the Greenback against a basket of major foreign currencies, dropped 0.11% over the course of yesterday’s trading.

Cable gained 0.13% over the course of yesterday’s trading. Britain’s CPI data indicated the largest inflationary pressure in nearly 30 years. Market participants interpreted this information as a possible trigger for the BOE increase interest rates once again.

The Euro gained against the Dollar amid broad-based Dollar weakness. With interest rate divergence on the horizon, upward momentum for the Euro remains weak.

Gold enjoyed a 1.48% gain against the dollar over the course of yesterday’s trading. With inflation rising globally, market participants have once again turned to the precious metal as a hedge against inflation.

Technical Analysis

GBPUSD (Daily Chart)

Cable regained traction and rebounded on Wednesday, signalling an end of a three-day retreat, triggered by a double rejection at 200 DMA (1.3736) last week. Sterling was boosted by UK CPI data, which showed that inflation in Britain continues to rise and has hit the highest level in nearly 30 years in December, hammering policymakers’ general view of the transitory process and boosting hopes for another BoE’s rate hike on its February 3rd meeting.

On the technical front, owing to the fundamental supports, the RSI indicator bounced back to 60, suggesting a recovery in the bulls’ strength. Cable has jumped above the 1.3600 resistance and is heading to the critical 200 DMA pressure level at the moment. A breakthrough of that level indicates that there’s more room for Pound to appreciate, eyeing on 1.3830.

Resistance: 1.3736 (200 DMA), 1.3830, 1.3900

Support: 1.3500, 1.3400, 1.3200

EURUSD (Daily Chart)

The EUR/USD pair is following its British peer’s rally with a modest 0.2% gain, which has barely regained about a quarter of its Tuesday’s decline. However, considering the weak outlook of the monetary policy divergences between the two central banks, and the risk of losses on Russia and Ukraine tensions, it is expected that the pair will eventually break under 1.1300 in the near term, and potentially post a fresh 2-year low as the Fed’s tightening cycle kicks off.

From a technical perspective, if the Euro pair doesn’t recover to the 38.2% Fibonacci during today’s trading, it shows that its intraday gains are nothing but a mild correction. The RSI for the pair marks 49.47, indicating the shared currency remains under selling pressure. On the downside, the pair could fall over the 1.1300 support and then season lows around the 1.1200 support. The pair is still capped by its 20 and 200 DMA, slightly above the 50 DMA.

Resistance: 1.1380, 1.1440,1.1500

Support: 1.1300, 1.1200

XAUUSD (Daily Chart)

Gold’s upside momentum has waned in recent trading, with prices trading in more of a subdued manner near $1842 after bursting above resistance in the $1830s for the first time in over two months. The speed of the pair’s latest advances, especially between the $1830 to $1840 area, is suggestive of a stop run, as many short traders may have had their stop loss sat somewhere in the $1830s. However, it is unlikely that spot gold can resist the advances of the US dollar and US real yields forever, and expectations for a very hawkish Fed in 2022 suggest continued upside risks for both.

From the technical perspective, though gold’s intraday hike, the pair’s mid-term bearish tractions are still above the price action. Gold is now trading above all its moving averages, and the RSI indicator reads 62.12, suggesting a bullish outlook. We expect the short-term uptrend to reach the critical $1,860 resistance, though the downside risk will get bigger and bigger during its climb.

Resistance: 1860, 1900

Support: 1830, 1800, 1765

20220120
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Treasury yields surged to the milestones, with the 10-year yield at 1.856%…

Treasury yields surged to the milestones, with the 10-year yield at 1.856% and the 2-year yield over 1%

20220119
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Market Focus

Wall Street’s main indexes fell sharply on Tuesday as soaring U.S. Treasury yields hit tech stocks in the U.S. and Europe, while losses at Goldman Sachs led to losses in U.S. financial stocks. U.S. 10-year yields have risen to a two-year high of 1.875%, while two-year yields also rose above 1%, as traders brace for the Federal Reserve to be more aggressive in tackling unabated inflation. At closing, the Dow Jones Industrial Average slid 1.51% to 35,368.47 points, the S&P 500 index lost 1.84% to 4,577.11 and the Nasdaq Composite Index slipped 2.6% to 14,506.9 points. European tech stocks were also under pressure, falling 2.2% and causing the pan-European STOXX 600 index to drop as much as 1.44% during the session before closing lower by 0.97%.

Of the 11 sectors in the S&P 500, 10 ended lower, with information technology being the biggest loser, down 2.48%, followed by interest-rate-sensitive financials, down 2.27%. Energy, the biggest gainer so far in 2022, was the only sector in positive territory, up 0.4%. Large-cap stocks such as Microsoft, Apple and Meta fell 2.43%, 1.89% and 4.14% respectively, weighing on the information technology sector. In addition, the worst-performing of the Dow Jones index was the Goldman Sachs Group, which fell 6.97%, JPMorgan Chase fell 4.19%, and Cisco Systems fell 2.66%. The worst performers on the S&P 500 were Moderna Inc, down 8.85%, Applied Materials, down 8.77%, and KLA-Tencor Corporation, down 7.20%.

Main Pairs Movement

The U.S. dollar was the overall winner compared to all its major competitors. U.S. Treasury yields surged to the milestones, with the 10-year yield at 1.856% and the 2-year yield over 1%. Stocks edged lower and global indices closed lower.

As Treasury yields continued to rise, the dollar was fueled. The Dollar Index moved on its winning streak, gaining 0.5% to end at 95.7.

Cable started to fall and dipped below 1.3600. The unemployment rate fell to 4.1% in the three months since November, while the number of unemployed fell by 43.3K in December. Meanwhile, a scandal over Downing Street parties has put Prime Minister Boris Johnson’s leadership at risk during Britain’s worst lockdown.

The same pattern scenario was seer for EUR/USD. After reaching the 1.14500 level, the pair declined and is currently back in the consolidation zone. Despite Germany’s ZEW survey showing a sharp rebound in economic sentiment, it offered little help for the euro.

Technical Analysis

GBPUSD (Daily Chart)

Cable headed south for the third consecutive day as the hawkish Fed rate hike timetable has finally taken effect. The GBP/USD pair traded sideways during the Asia-Pacific session, but then plummeted at the beginning of European trading hours, and dropped further after the Wall Street opening as US equities opened low. That said, the tightened US policies and the risk-off market mood boosted the greenback.

On the technical front, the RSI indicator reads 56.23 as of writing, having retreated from yesterday’s 60s, suggesting a depletion in the bulls’ strength. Moreover, Cable has made several attempts to regain 1.3600 intraday but failed, indicating that a strong selling power is hovering around that critical resistance level, and making the pair’s comeback more difficult.

Resistance: 1.3600, 1.3736 (200 DMA), 1.3830

Support: 1.3500, 1.3400, 1.3200

EURUSD (Daily Chart)

The euro pair’s price actions are similar to Cable ones, but as the ECB is more conservative in monetary policies, the shared currency is more vulnerable to unfavourable circumstances such as the recent US dollar rally and equity crashes. The pair is now hovering around 1.1330, seventy pips down during today’s trading with the negative tone intact.

On the technical side, if the EUR/USD pair fails to recover over 38.2% Fibonacci, then it could remain under pressure, looking at the 1.1300 zone and then season lows around the 1.1200 support. The slide pushed the pair back below all its major moving averages and into the previous consolidation phase in December 2021.

Resistance: 1.1380, 1.1440,1.1500

Support: 1.1300, 1.1200

USDCAD (Daily Chart)

Loonie has had a subdued session on Tuesday, with the pair having dropped back to trading just above its 200-day moving average at the 1.2500 level after briefly surpassing the 1.2550 mark midway through US trading. Surging crude oil prices failed to push USD/CAD below support in the 1.2500 area, with the pair supported by a broad recovery in the US dollar as US government bond yields advanced to reflect new hawkish Fed tightening bets ahead of next week’s meeting.

From the technical perspective, the pair’s mid-term bearish traction seems to have weakened a lot during January’s trading, indicating that the recent sharp pullback from the December high might soon be over. That said, repeated failures to find acceptance below the 1.2500 mark shows the unlikelihood to set off any further near-term depreciating moves.

Resistance: 1.2550, 1.2630, 1.2700

Support: 1.2450, 1.2290

20220119
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The price of cotton has surged amid global demand and supply issues

The price of cotton has surged amid global demand and supply issues

20220118
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Market Focus

U.S. markets were closed on the 17th in observance of Dr Martin Luther King day and markets will resume trading on the 18th. The benchmark U.S. 10-year Treasury yield edged higher to 1.811% and the 30-year Treasury yield also edged higher to 2.14%. China released its fourth-quarter GDP for 2021 yesterday and the nation saw an 8.1% growth, year over year. However, retail sales figures missed expectations by about 2%. Furthermore, the central bank of China has decided to lower medium-term loan rates in order to prevent an economic slowdown. The current medium-term loan rate set by the PBOC sits at 2.95%, which the central bank is lowering by 10 basis points to 2.85%.

The cryptocurrency market once again retreated slightly after yesterday’s trading. Bitcoin lost close to 2% and is currently trading below 42,200. On the other hand, Ethereum experienced a deeper drop by 4.15% and is currently trading at 3210.

Main Pairs Movement

The Dollar Index recovered from last Friday’s low and is currently trading above 95.25. Continued rising treasury yields have propelled the Dollar. A parallel shift of the yield curves could further fuel the Dollar’s demand.

Cable continued to drop amidst a stronger Dollar across the board. Strong selling pressure appeared once the European session began.

Cotton has gained steam over the past month, as global demand for the commodity continues to rise amid a supply interruption due to unfavourable weather conditions.

Natural gas has resumed trading around 4.11 as the supply chain issue, which appeared last week, eases. Demand for the commodity remains high, but it remains to be seen if the commodity will recapture the 6.6-dollar mark of late 2021.

Technical Analysis

GBPUSD (Daily Chart)

The GBP/USD pair edged lower on Monday, following last Friday’s sharp retreat from a three-month high above the 1.373 level. The pair was surrounded by bearish momentum and dropped to a daily low during the Asian and European sessions, staying relatively quiet below 1.3700 as it headed into the New York session. At the time of writing, the GBP/USD pair started to see fresh selling and targeted the 1.3600 area. Cable was last seen trading at 1.3645.

On the technical side, the RSI indicator reads 63.35 as of writing, suggesting bulls are still robust at the moment. In conclusion, we think the market will be bearish as the pair failed to gain sustained strength beyond the 200 DMA and the pair could extend its downward correction toward 1.360.

Resistance: 1.3736 (200 DMA), 1.3830, 1.3900

Support: 1.3600, 1.3500, 1.3400

COTTON (Monthly Chart)

Cotton continues trading with a positive bias, and it is for the first time in a decade when cotton prices have fetched farmers above $100, not to mention the current price near $120. The multi-month price rally was mainly because of the surging demand post-COVID recovery, followed by a drastic fall in production due to unfavourable weather conditions. However, due to expensive offers, there are chances of an increase in selling interest as the market prices are quite lucrative. Therefore, a correction is expected in the next few weeks.

On the technical front, cotton prices have breached the 150% Fibonacci and are approaching the 161.8% resistance. The RSI reads 74.73, suggesting that cotton is highly overbought and that cotton prices are highly likely to experience a correction in the near term. We expect the price of the cotton to drop to around $95 if it is blocked by the 161.8% or 176.4% Fibonacci, and the price will further decline to normal (around $66) around Autumn 2022, when the season for cotton harvest begins.

Resistance: 123 (161.8% Fib), 130 (176.4% Fib)

Support: 105 (123.6% Fib), 95 (100% Fib)

Natural Gas (Daily Chart)

In last week’s trading, the price of natural gas surged to monthly highs around $4.80, though it dropped sharply in the coming days, the price actions remain above $4.00 per MMBtu. Recent volatility in the natural gas price derived from the winter weather expectations, the potential for extreme weather events such as the latest cold snap in northeast America, and a rise in demand for natural gas imports in Europe and Asia. As the supply chain bottleneck is expected to ease in the second half of 2022, the natural gas demand is likely to remain resilient in the short term, but will slightly fall once the supply catches up with the demand.

On the technical side, the natural gas price has broken through its past resistance of $4.00, once bounced off the next resistance at $4.80, and is lingering around $4.20 per MMBtu as of writing. The price action is now above its 20 and 200 DMA, and just slightly below the 50 one. The RSI reads 53.13, suggesting a neutral-to-bullish sentiment. The uptrend of the pair seems convincing, eyeing the $4.80 price level.

Resistance: 4.80

Support: 4.20, 4.00, 3.55

20220118
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