June 4, 2021

Daily Market Analysis

Market Focus

US equities fell amid upbeat economic data, and investors are growing concern that strong data may push the Federal Reserve to withdraw from the easy monetary policy sooner than expected. Tech shares led the decline with the Nasdaq 100 index dipped 1.07% on Thursday. In the S&P 500, Utilities and Consumer Staples stocks both gained around 0.5%, while Consumer Discretionary had even worse performance than Techs.

President Joe Biden proposed a 15% minimum tax on US corporations along with strengthen IRS enforcement efforts as a way to fund a bipartisan infrastructure package. The new proposal sets aside his previous plan to raise corporate income from 21% to 28%. The offer does not mean that Biden is ditching his larger ambitions to raise taxes on corporations, the proposal as simply a bid to find common ground in the Capito talks, according to a person familiar with the discussions.

Russia may move away from dollar dominated oil contracts if President Joe Biden’s administration continues to impose sanctions on the oil rich nation. Meanwhile, Russia is said to reduce its $186 billion National Wealth Fund to 0. Russian Finance Minister Anton Siluanov told reporters on Thursday that instead of investing in dollar assets, the NWF will seek alternatives like Euro, Yuan, and gold assets. These changes are expected to take place next month. Once completed, share of euro assets in the fund is expected to stand at 40%, the yuan at 30% and gold at 20%.

Main Pairs Movement:

Dollar soared 0.65% to 90.49 amid strong US economic data on Thursday. ADP research report showed there were 978,000 new jobs in the US, beating expectation of an increase of 650,000 jobs. The ADP figure finally came above economists’ forecasts, which have been downbeat for three-months in a row, therefore rising the prospect for upcoming official Non-farm Payroll on Friday. Jobless claims in the US were declining in the last week of May, the figure came slightly better than anticipated 390,000, printed 385,000. Lastly, the ISM Services PMI came out at 64, refreshed the highest number in decades, the reopening is bringing the crowd back from lockdowns and social restrictions as CDC announced on May 13th that fully vaccinated people don’t need to wear a face mask in most areas.

Multiple forex pairs are finally stepping outside of their consolidation zone, such as EURUSD, AUDUSD, and USDJPY. However, they are not completely out of the woods yet, we still need to see NFP numbers to get a clear picture on where the Fed might be heading. If US jobs market is improving in line with or exceed Fed’s expectation, then monetary officials will soon kick off their talks in tapering. If not, then we are back in the wait-and-see game, where the US government needs to find a fix for labour shortage caused by decreased incentive to work and lack of child-care resources.

Gold plummeted nearly 2%, the largest one-day loss since late February where the selloffs were brutal. Traders are exiting their positions in early indication of better jobs market in the US. Rumors suggest the Besel III update on June 28th may potentially remove non-allocated gold as tier-1 asset, which could cause a squeeze on bullion banks, and benefits large physical gold holders like central banks. If this event were to materialize, Gold should be in a upward trajectory in the long run.

Technical Analysis:

XAUUSD (Daily Chart)

Much to our surprise, XAUUSD stumbled and fell under its upward trajectory before the NFP release, as the U.S. ADP Employment Change data well beat Wall Street’s consensus. Gold fell around $30 earlier today, traded at $1871.75 as of writing. Despite the massive chaos caused by the previous data, the incoming Fed’s Chair Powell speech and NFP are still the main dishes, providing us about the Fed’s attitude toward tapering and the U.S.’s pace of recovery.

The pair now encounters a fork in the road. On the upside, gold may surge back to $1900, and challenge resistances like $1930 and $1960; on the downside, however, the instant defense will be at $1860, and once breached, gold may experience a severe adjustment, leading it back to mid-May’s level at $1810, even worse at $1756, the price level in late April.

Resistance: 1900, 1930, 1960

Support: 1860, 1809, 1756

USDCHF (Daily Chart)

Swissy broke its two-week silence right after the U.S. upbeat macros and solidly breached the 0.9 fences that the pair failed to take down in past attempts. The rebound may seem unexpected, but there have been several hints from the technicals. RSI suggests a rekindled buying power since May 7th, while MACD histogram just formed a golden cross last week.

Looking to the Fibonacci, the pair has just hit the 23.6% level and is challenging 38.2% as of writing. In cases of accelerating inflations and delayed Fed’s tapering or other serious macro incidents, Swissy may plunge to its 2-week low at 0.893, or worse, yearly low at 0.876.

Resistance: 0.903, 0.92, 0.947

Support: 0.893, 0.876

AUDUSD (Daily Chart)

Aussie just plummeted over its lowest price since mid-April, traded 0.7654 as of writing. Before that, the pair have stocked in a relatively small interval, 0.767 to 0.79, for about one and a half months, with not much exciting news between the two countries. The main reason for this breakthrough still springs from the abovementioned cheering US data and the following speculation of about-to-come tighter monetary policy.

Compared to that, the dull economic performance of Australia seems to provide downside tractions as technical indicators appear bearish. RSI is at its monthly low of 40.84, while MACD is negative. The estimated support line for the pair may be its previous lower bound of 0.767 and the yearly low of 0.756, whilst the resistance awaits the unlikely rebound at the monthly high of 0.79, followed by the yearly high of 0.8005.

Resistance: 0.79, 0.8005

Support: 0.767, 0.756

Economic Data