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Market Analysis 16 Aug 2021

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Today’s Analysis

EURUSD is flirting with the 20-day simple moving average (SMA) near 1.1800 after the rebound off the 1.1700 critical level, which is also the lower boundary of the seven-month consolidation area.

According to the technical indicators, the RSI is rising towards the neutral threshold of 50 and the MACD oscillator is ready to cross to the upside of its trigger line in the negative region. In terms of trend indicators, the Ichimoku cloud is moving lower. However, the 20- and 40-day SMAs are turning up as well as the Ichimoku lines.

If the pair overcomes the short-term SMAs, the next target would be the 1.1910 and 1.1975 resistance levels. Marginally above these lines, the flat 200-day SMA at 1.2005 could come into the spotlight ahead of the almost-five-month high of 1.2265 and the 32-month peak of 1.2348.

On the other side, a successful drop below 1.1700 could drive the bears lower to 1.1610 and 1.1420, shifting the neutral bias to bearish. Even lower, the next support would be the 1.1170 barrier, registered in June 2020.

In brief, EURUSD has been in a trading range since January and any closing candles above 1.2267 or below 1.1700 could identify the broader outlook.

EURUSD

USD/JPY

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside with the confirmation of Wednesday’s closing price reversal top.

A trade through 110.800 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 108.722 will change the main trend to down.

The short-term range is 111.659 to 108.722. Its retracement zone at 110.191 to 110.537 is resistance.

The minor range is 108.722 to 110.800. The USD/JPY is currently trading on the weak side of its 50% level at 109.761.

The main range is 107.479 to 111.659. The USD/JPY is currently testing its retracement zone at 109.569 to 109.076. Trader reaction to this zone will determine the near-term direction of the Forex pair..

USD/CAD topped exactly at first resistance at 1.2525/35 and bottomed exactly at the first target of 1.2500/1.2490.

USD/CAD holding first resistance at 1.2525/35 targets 1.2500/1.2490. A break below here is a sell signal targeting 1.2450/40 and 1.2420/10. First resistance at 1.2525/35. Bulls need a break above 1.2560 for a buy signal targeting 1.2600, perhaps as far as 1.2650/60.

General Market

U.S. stocks are seen opening lower Monday, falling back from the previous session’s record levels as rising Covid cases stunt the global economic recovery, particularly in China.

The Dow Futures contract was down 100 points, or 0.3%, S&P 500 Futures traded 10 points, or 0.2%, lower, while Nasdaq 100 Futures dropped 35 points, or 0.2%.

The blue-chip Dow Jones Industrial Average posted gains of 0.8% last week, closing at a record, while the S&P 500 finished Friday up 0.7% for the week, also notching its best-ever finish. The tech-heavy Nasdaq Composite underperformed during the week, down just under 0.1%.

The main indices have been supported by a strong quarterly earnings season, with FactSet calculating that 87% of S&P 500 companies have reported positive earnings surprises, the highest percentage since the data company began tracking this metric in 2008.

That said, sentiment has turned more cautious Monday as investors digested signs China’s economic recovery was losing momentum, with both industrial production and retail sales rising more slowly than expected in July, as new Covid-19 outbreaks disrupted business.

The number of coronavirus cases is also growing in the U.S., with the delta variant, which is rapidly spreading among mostly the unvaccinated portion of the U.S. population, causing hospitalizations to spike in recent weeks.

Also causing wariness Monday is the turmoil in Afghanistan with the Taliban overrunning the capital Kabul over the weekend, prompting President Ashraf Ghani to flee the country.

There’s little in the way of significant economic data due Monday, but Tuesday’s U.S. retail sales data will be studied to see if the Covid outbreak has impacted consumer spending patterns.

Additionally, the Fed Reserve’s minutes of its July meeting are released on Wednesday, and will be carefully scrutinized, particularly after a Wall Street Journal report claiming that the central bank is looking at ending its asset purchases by the middle of next year.

In corporate news, Hyatt Hotels (NYSE:H) will be in the spotlight after the hotel operator announced a  deal to buy resort company Apple (NASDAQ:AAPL) Leisure Group from private-equity firms KKR and KSL Capital Partners for $2.7 billion in cash.

Elsewhere, oil prices fell by over 1% Monday on concerns mobility restrictions in China, the second largest importer of crude in the world, will hit fuel demand.

China’s daily crude throughput last month fell to the lowest since May 2020 as independent refiners slashed production, according to data from the National Bureau of Statistics on Monday. That was the first year-on-year decline since March last year when the coronavirus hit hard.

U.S. crude futures traded 1.6% lower at $67.14 a barrel, while the Brent contract fell 1.5% to $69.56.

Additionally, gold futures fell 0.1% to $1,776.05/oz, while EUR/USD traded 0.1% lower at 1.1780.

Written by Editor

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