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Market Analysis 13 Aug 2021

aug13

EUR/USD is holding best support at 1.1735/15 as we look for the target of 1.1790/1.1800 for longs.

USD/CAD shorts at first resistance at 1.2570/80 worked this week to test minor support at 1.2520/10.

GBP/CAD remains quite erratic and random. No trend to follow.

Today’s Analysis

EUR/USD is back in the green zone, reversing Thursday’s bearish momentum, as the US dollar remains on the back foot amid risk aversion-led weakness in the Treasury yields.

Despite the latest bounce, the spot remains below the key 1.1750 barrier, now trading at 1.1736, up 0.08% on the day.

From a near-term technical perspective, EUR/USD’s daily chart has taken the shape of a bear pennant formation, in the wake of the recent sell-off that followed a brief consolidative phase.

A daily closing below the rising trendline support at 1.1712 is needed to validate the bearish formation, which will confirm deeper losses in the coming days.

The 14-day Relative Strength Index (RSI) trades flat but remains below the midline, keeps floors open for further downside.

Confirmation of the bearish continuation pattern could expose the September lows at 1.1612.

USD/CAD refreshes intraday low to 1.2519, down 0.05% on a day, amid Friday’s Asian session. Even so, the Loonie pair seesaws around 200-SMA while raising doubts on the rising wedge confirmation, portrayed on Thursday.

In addition to lacking a clear downside below the 200-SMA level of 1.2515, an ascending support line from June 23, close to 1.2480, also challenges the pair sellers.

It should be noted that sustained trading below 1.2480 will not hesitate to challenge five-week-long horizontal support surrounding 1.2420.

Meanwhile, USD/CAD sellers remain hopeful unless the quote bounces back beyond 1.2545, defying the bearish pattern.

Even so, the formation’s upper line and a short-term horizontal resistance, respectively near 1.2600 and 1.2610, will be a strong hurdle for the bulls to retake controls.

Should the quote remains firmer past 1.2610, 1.2670 and 1.2730 will be important to watch ahead of the previous month’s top around 1.2810.

GBP/CAD shorts at first resistance at 1.7400/20 worked perfectly as we hit targets of 1.7360/40 and 1.7320/10 for a potential 90 pip profit. Longs at best support at 1.7310/1.7290 starting to work, but need stops below 1.7275. A break lower is a sell signal targeting 1.7250 and 1.7225/15 for profit taking on shorts. Longs at best support at 1.7310/1.7290 target first resistance at 1.7370/90. A break above 1.7410 meets minor resistance at last week’s high of 1.7490/99. A break above 1.7510 targets the July high at 1.7557/67.

General Market

U.S. stocks are seen edging higher Friday, with a generally positive week coming to an end, boosted by a rebounding labor market and strong corporate earnings.

At 7:05 AM ET (1105 GMT), the Dow Futures contract was up 35 points, or 0.1%, S&P 500 Futures traded 2 points, less than 0.1%, higher, while Nasdaq 100 Futures was largely flat.

The blue-chip Dow Jones Industrial Average and the broad-based S&P 500 are on track to finish the week with gains of 0.8% and 0.6%, respectively, both new record highs. The tech-heavy Nasdaq Composite has underperformed this week, down 0.1%.

Helping the tone has been a generally strong earnings season, with over 90% of the S&P 500 companies having already reported, and about 88% of them beating expectations, according to data from Refinitiv.

Entertainment giant Walt Disney (NYSE:DIS) provided further evidence of this after the close Thursday, beating expectations for the most recent quarter as its streaming services picked up more customers than expected and pandemic-hit U.S. theme parks returned to profitability.

Economic data this week has shown that the U.S. economy is growing robustly, with the labor market rebounding as weekly jobless claims fell for the third week running. However, Covid-19 remains a headwind, and this is likely to limit consumer confidence going forward.

The main data release Friday comes in the form of the preliminary reading of the University of Michigan’s Consumer Sentiment Index, at 10 AM ET (1400 GMT), and is seen unchanged from last month at 81.2.

Oil prices slipped lower Friday, amid growing concerns that the spread of the Covid-19 delta variant will curtail oil demand growth as the year progresses.

By 7:05 AM ET, U.S. crude futures were down 0.%3 at $68.82 a barrel, while Brent futures dropped 0.2% at $71.16 a barrel.

The flare-up of Covid cases in China, the second largest consumer of oil in the world, is causing the most concern. Authorities there have taken an aggressive approach to containing the outbreak, including shutting down one of the world’s busiest container ports after one case was reported.

The IEA predicted, in a report released Thursday, that demand growth would be half a million barrels per day lower in the second half of the year compared with its estimate last month, citing new Covid-19 restrictions.

The weekly update from Baker Hughes of the number of oil rigs will be of interest later Friday, while the CFTC will release its weekly commitments of traders report.

 

Written by Editor

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