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Market Analysis 24 Aug 2021

aug24

EUR/USD

  • EUR/USD’s upside faltered around the 1.1750 region.
  • The resumption of the selling pressure targets 1.1660.

EUR/USD struggles to advance further north of the 1.1750 region so far on Tuesday.

The pair needs to surpass the 1.1750 zone to allow for another visit to last week’s tops in the 1.1800 neighbourhood. Further up comes in the July/August peaks around 1.1900, although a move to this area is not favoured in the very near term at least.

In the meantime, the near-term outlook for EUR/USD is seen on the negative side while below the key 200-day SMA, today at 1.2003.

USD/JPY

The USD/JPY pair trades around 109.70, neutral-to-bearish in the near term. The 4-hour chart shows that the pair is trading below all of its moving averages, which head lower with uneven strength. The Momentum indicator is stuck around its 100 level, while the RSI indicator turned marginally lower, currently at 47, skewing the risk to the downside without confirming another leg lower. The pair needs to break below the 109.50 support level to be able to extend its decline.

Support levels: 109.50 109.05 108.60

Resistance levels: 109.95 110.35 110.80

USD/CAD

From a technical perspective, the pair now seems to have entered a bearish consolidation phase and was seen oscillating in a range near 200-hour SMA. This is closely followed by the 61.8% Fibonacci level of the recent strong move up from the 1.2425-20 area. The mentioned support, around the 1.2625-20 region might act as immediate strong support amid extremely oversold conditions on hourly charts.

Meanwhile, the technical setup makes it prudent to wait for some near-term consolidation or a modest bounce before positioning for any further decline. Hence, a move back above the 1.2660 area, en-route the 50% Fibo. level near the 1.2685 region, looks a distinct possibility. Some follow-through buying beyond the 1.2700 mark might prompt some short-covering move and lift the pair back towards the 38.2% Fibo. level, around mid-1.2700s.

On the flip side, sustained weakness below the 1.2625-20 support zone (61.8% Fibo. level), leading to a subsequent break through the 1.2600 mark will be seen as a fresh trigger for bearish traders. The pair might then turn vulnerable to slide back towards challenging the key 1.2500 psychological mark, with some intermediate support near the 1.2545 region.

General Market

Chinese stock markets bounce as confidence returns and the regulatory onslaught appears to ebb. Oil and industrial commodities follow suit. The Democratic Party still can’t decide which spending bill to pass first. Stocks are set to extend gains when they open later. Medtronic (NYSE:MDT), Best Buy and, later, Intuit (NASDAQ:INTU) are all due to report earnings, while Samsung (KS:005930) outlines a big increase in investment in – among other things – new chipmaking capacity. Here’s what you need to know in financial markets on Tuesday, 24th August.

1. China bounces

Chinese stocks had their best day this year as bargain-hunters, both local and foreign, snapped up names that have sold off heavily in recent weeks on perceptions that the impact of new regulation may be less drastic than feared.

Sentiment has switched sharply in the Chinese market since the country said it had stopped the community spread of Covid-19 with a month of draconian social distancing measures. The prospect of these being relaxed should restore some confidence in China’s growth dynamic for the rest of the year.

Alibaba (NYSE:BABA) rose 5.0% in premarket, while JD.com (NASDAQ:JD), whose strong results on Monday prompted U.S. tech investment guru Cathie Wood to make her first sizeable investment in China in months, was up 9.5%. JD said on Monday that the impact of new regulation may not be too onerous.

For the rest, sentiment in China was improved by another complete session without a new regulatory scare.

2. Dems stuck on spending bills

Democratic Party lawmakers hit an impasse in talks over two signature spending bills at the center of President Joe Biden’s economic agenda.

In talks that dragged on until late in the night on Monday, House Speaker Nancy Pelosi was unable to convince moderate Democrats who have backed a bipartisan $550 billion infrastructure spending bill to drop their insistence on passing that bill before the House takes up a more ambitious $3.5 trillion spending package aimed at bolstering the U.S.’s welfare state.

Of more short-term interest to the economy, new home sales are expected to have stopped a year-long decline in July. Data are due for release at 10 AM ET along with the Richmond Federal Reserve’s local manufacturing survey, on an otherwise light day for data.

3. Stocks set to open higher; Best Buy, Medtronic earnings due

U.S. stock markets are due to open higher later, extending Monday’s gains on the return of confidence to the Chinese economy and financial market.

Dow Jones futures were up 45 points, or 0.1%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.3%, a performance pattern that suggests investors are still more comfortable with ‘longer-duration’ technology stocks than with cyclical stocks more exposed to the reopening story and the progress of the pandemic.

The U.S. registered its highest number of new Covid-19 cases since January on Monday, while the seven-day daily average death count crept back above 1,000 for the first time since April.

A modest earnings roster is headed by Medtronic and Best Buy, with Intuit reporting after the closing bell.

4. Samsung responds to chipmakers arms race

Korean technology giant Samsung marked the recent release from prison of top executive Lee Jae-yon with the announcement of a plan to invest $206 billion over the next three years, an increase of one-third from the current three-year period.

The move reflects, in part, heightened competition among chipmakers to bring more capacity online to satisfy exploding demand for semiconductors. The lack of spare capacity has played a key role in the global shortage of chips for many industrial sectors this year, which now threatens to extend beyond the middle of next year, according to the president of Apple (NASDAQ:AAPL) contractor Hon Hai Precision.

Samsung’s plans are likely to include an expansion of its BioLogics division, as well as a decision on a $17 billion foundry slated to be built in the U.S., according to The Wall Street Journal. This will allow it to be more competitive in the segment of making chips designed by third parties.

Written by Editor

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