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Market Analysis 26 Aug 2021

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EUR/USD

EUR/USD eventually escaped the trading range of 1.1725/1.1765 where it has been trapped for a couple of days. Traders managed to extend a correctional move from the major support of 2021. The buyers could face resistance at 50.0% and 61.8% Fibonacci levels.

The RSI technical indicator is hovering around the average level of 50. There is no signal that the euro is overbought.

EUR/USD is likely to complete its correctional move at near 1.1785/1.1810. If the prediction comes true, next week the currency pair is expected to resume its downward move.

Both complex and indicator analysis are generating buy signals for an intraday and short-term strategy during the correctional move. However, a medium-term strategy suggests selling amid the bearish trend which has been going on since early June.

USD/JPY

  • USD/JPY witnessed a subdued/range-bound trading action through the Asian session.
  • The underlying bullish tone weighed on the safe-haven JPY and extended some support.
  • A modest USD strength remained supportive, though softer US bond yields capped gains.

The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the early part of the trading action on Thursday.

The pair struggled to capitalize on the previous day’s positive move or find acceptance above the key 110.00 psychological mark and witnessed a subdued/range-bound price action on Thursday. The underlying bullish tone continued undermining the safe-haven Japanese yen. This, along with a modest pickup in demand for the US dollar, acted as a tailwind for the USD/JPY pair.

USD/CAD

The recent USD/CAD decline from a 1.2949 peak aligns well with the recent oil price recovery from a 61.74 low. USD/CAD slump eyes the 200-day moving average (DMA) at 1.2549, where a break opens up support panes resting in the 1.2478-1.2367 region, Benjamin Wong, Strategist at DBS Bank, reports.

Canadian general election should not impact the loonie

“The weekly charts still portend a bullish moving average convergence divergence (MACD) outlook, and USD still has scope to test the pivotal convergence zone stacked higher at 1.3065, unless key support zones crater. The decline from 1.2949 is ostensibly triggered by a recovery in crude oil prices from a recent 61.74 low.”

The USD/CAD pair held on to its modest intraday gains through the early European session, albeit lacked any follow-through buying. The pair was last seen trading around the 1.2615 region, up nearly 0.20% for the day.

General Market

U.S. stocks are seen opening mixed Thursday, struggling to climb from record levels ahead of the release of important economic data and ahead of a key speech by Federal Reserve Chairman Jerome Powell.

At 7:05 AM ET (1105 GMT), the Dow Futures contract was up 25 points, or 0.1%, while S&P 500 Futures traded 3 points, or 0.1%, lower, while Nasdaq 100 Futures dropped 27 points, or 0.2%.

The broad-based S&P 500 gained 0.2% Wednesday, closing at a new record level after crossing the 4,500 threshold for the first time ever. The tech-heavy Nasdaq Composite rose 0.2%, also a record close, while the blue chip Dow Jones Industrial Average gained 0.1%.

The economic data slate includes the weekly initial jobless claims release, at 8:30 AM ET (1230 GMT), which is expected to be largely unchanged from the previous week’s 348,000 figure. The first revision of the second-quarter GDP figure is due at the same time, and is likely to show a slight improvement from the annualised 6.5% growth first recorded.

These numbers create an interesting backdrop for Powell’s highly anticipated speech on Friday at the Federal Reserve’s Jackson Hole symposium. The market is looking for any hints for when the central bank will start tapering its massive bond-buying program.

There are several companies scheduled to report earnings Thursday, including retailers Dollar Tree (NASDAQ:DLTR), Gap (NYSE:GPS) and Abercrombie & Fitch (NYSE:ANF), tech companies Dell Technologies (NYSE:DELL) and HP (NYSE:HPQ), and exercise equipment company Peloton (NASDAQ:PTON).

Software giant Salesforce (NYSE:CRM) will also be in the spotlight after beating market expectations for earnings in the May-July period, while Ulta Beauty (NASDAQ:ULTA) also released strong quarterly results after the close Wednesday.

JD.com (NASDAQ:JD) will also be in focus after Bloomberg News reported that the Chinese e-commerce company is nearing a deal to buy a controlling stake in storage facilities manager China Logistics.

Elsewhere, oil prices fell Thursday, correcting after the biggest three-day gain since March, with mounting Covid-19 cases, fuelled by the highly transmissible delta variant, continuing to threaten the global demand recovery in the second half of the year.

That said, the picture in the U.S. looks more promising. Crude inventories in the largest consumer in the world fell last week for a third consecutive week while overall fuel demand increased to the most since March 2020, the Energy Information Administration said Wednesday.

By 7:05 AM ET, U.S. crude futures traded 1% lower at $67.69 a barrel, while the Brent contract fell 0.9% to $70.65. Both contracts have risen by around 10% over the last three days.

Additionally, gold futures fell 0.1% to $1,790.45/oz, while EUR/USD traded 0.1% higher at 1.1776.

Written by Editor

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