Daily market analysis

July 13, 2021

Daily Market Analysis

Market Focus

US equities market broke record high as investors are optimistic about earnings season. The three big indices climbed around 0.35% on Monday. Financials shares led the gains within S&P 500 index, while Consumer Staples stocks lagged slightly behind. Large banks such as Bank of America, Goldman Sachs, and JPMorgan will kick off earnings season this week.

White House officials are proposing a digital trade agreement with Indo-Pacific economies including Canada, Japan, Malaysia, Australia, New Zealand and Singapore. Such agreement aims to curb China’s influence in the region, and get the United States back in the trade game in Asia. According to Bloomberg, the deal could set out rules on the use of data, trade facilitation and electronic customs arrangements.

ECB President Christine Lagarde told investors to buckle-up for new guidance on monetary stimulus in 10 days. She said that “given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certainly be revisited.” Lagarde also mentioned the current 1.85 trillion-euro bond-buying plan to run at least until March 2022, and hinted ECB might adopt fresh measures after the emergency bond program ends.

Main Pairs Movement:

US dollar was best performer among its G-7 peers as high inflation pressure continues to favor the greenback. The New York Fed’s Survey of Consumer Expectations for June indicates expected inflation over the next 12 months rose to 4.8%. Despite Fed’s effort to ease hyperinflation fears, but inflationary data are popping out from every corner in the economy, constantly rising skepticism on Federal Reserve’s transitory talks. Such anxiety will persist until investors see a deceleration in inflation tracked index such as CPI and PPI.

Gold price is sitting comfortably above $1800 amid worries of spreading delta variant. However, the mutated virus should not be a strong supporter to move the precious metal since health authorities around the World are much more capable to contain COVID-19 with the help of lockdowns and vaccines.

Oil prices retreated on Monday with the Brent and WTI futures dipped 0.52% and 0.62% respectively. Demand for crude oil was on a downhill in South Asian countries during nationwide lockdown. According to Bloomberg, Indonesian motor fuel demand will drop by 8% in the third quarter compared with May, while Malaysia will witness a plunge of 17% over the same period.

Technical Analysis:

XAUUSD (Daily Chart)

Gold remains depressed amid the US dollar’s strength; however, the downside seems limited. On the daily chart, gold hovers above the midline of the bollinger band during the American session. It seems that gold needs to condolidate before heading toward the resistance 1829; the near- term outlook remains bullish as the MACD is leaning up and the RSI reading is around 48, outside of the overbought region, giving gold spacious rooms to head upward. If gold successfully breaks its current consolidation, it is expected to see another pause around 1829 because 1829 is not only the resistance but also the upper bounce of the bollinger band, due to a bounce back.

Resistance: 1829, 1876

Support: 1770, 1676

EURUSD (4- Hour Chart)

EURUSD trades around 1.1850 level as the US dollar recovers strength. A new rise in Covid-19 cases and US inflation figures are awaited. From the technical perspective, the 20 simple moving average contains advances while EURUSD has bounced from the bullish 10 SMA on the 4- hour chart. In the meantime, the pair has breached the descending trend line, which indicates that the bullish momentum has been formed in the near- term. As the RSI reading falls outside of the overbought territory, the pair still has some potential to move further north toward its resistance at 1.1919.

Resistance: 1.1919, 1.1985

Support: 1.1837, 1.1704

GBPUSD (4- Hour Chart)

The British Pound slides toward 1.3870 against the US dollar as the UK might raise the restriction due to the rising cases of Covid-19. On the 4- hour chart, short- term outlook remains positive as GBPUSD still stays above the previous descending trend line, meaning that the bullish momentum still exists. The bullish mode is supported by a positive MACD as well as a RSI of 58, suggesting that the upside still has some potentials. It is expected to see the price action toward its resistance at 1.3926, then it will either consolidate or pullback as the RSI will likely to surpass 70 during that time. After, if a break of 1.3926 is successful, then it will head to 1.4000, a psychological resistance.

Resistance: 1.3926, 1.4000

Support: 1.38, 1.3675

Economic Data