June 3, 2021

Daily Market Analysis

Market Focus

US equities rose on Wednesday amid mixed investment sentiment. The three big indices closed in the positve territory. The S&P 500 edged 0.14% higher with Energy stocks continue to outperform, and Materials shares lagged. Meme stocks are making a comeback. AMC Entertainment Holding Inc. soared as much as 125% to 40.23 and marked a disturbing 3520% price appreciation since January.

President Joe Biden plans to amend Trump’s China blacklist this week. Under the amended order, Treasury department will add a number of companies to the existing list that could face financial penalties for their connection to China’s defense and surveillance technology sectors, people familiar with the matter said.

BlackRock CEO Fink said investors may be underestimating the potential for a spike in inflation. He further commented that “most people haven’t had a forty-plus year career, and they’ve only seen declining inflation over the last 30-over years.” Fink along with other well-known economists criticized President Joe Biden’s infrastructure plan could risk the US economy running into hyperinflation.

Main Pairs Movement:

USDJPY climbed little 0.08% on Wednesday. Seiji Adachi, a board member from Bank of Japan, signaled the bank’s readiness to act if Fed’s tapering could trigger unexpected spikes in Yen. In normal circumstances, US greenback should strengthen when the Fed winds down asset purchases. It is somewhat odd to see BoJ officials prepared to defend the Yen this early when the Fed is still talking about talking about tapering, or perhaps Japenese policy makers already spotted something peculiar in the market.

GBPUSD was playing tug-of-war as virus narrative diverged between Indian variant spreading concern and record low death numbers. Britain recorded a day without deaths, for the first time since the pandemic. It is interesting to see how scientists are assigning Greek alphabet to various virus variant. The B.1.617.2 COVID-19 strain, aka Indian variant, was given a new name of Delta variant. The UK variant is labelled as Alpha, whereas South African variant is named Beta.

Gold rallied 0.42% to the highest close in almost five months. Investors are waiting for the big non-farm payroll report on Friday while assessing the Federal Reserve’s views on growth and inflation. The Fed highlighted in its Beige book report on Wednesday that US recovery picked up somewhat in April and May, though price pressures mounted. The report also cited companies struggled with higher input prices, supply chain disruptions and a shortage of workers.

Technical Analysis:

USDJPY (Daily Chart)

USDJPY lost traction during late EU sessions, giving back all daily gains. Upside was rejected by 109.85 resistance, and is moving toward a five-months ascending trendline. The dynamic upward support line survived multiple breakouts attempts since April, but will be under stress once again if US treasury yields move lower. Friday’s NFP will provide the catalyst that Forex market desperately needs to move forward, if we were to see another downside surprise to US labor market, USDJPY will collapse to 107.9, or possibly to 106.7 in the near term.

Resistance: 109.7, 111, 112.1

Support: 107.9, 106.7

USDCAD (Daily Chart)

USDCAD remains heavily depressed amid rising oil prices. OPEC+ group was quite optimistic on oil price outlook, and they will gradually bring back oil supply. Even Iran’ potential revival of its oil output could hurt oil price, it would just be a hiccup in a longer-term process. Overall, the bearish trend will still be dominant until we see a much lower price, like 1.162, but it must go through 1.1925 and 1.18. Weekly RSI of 23 is flagging an extreme oversold condition.

Resistance: 1.23, 1.24, 1.264

Support: 1.1925, 1.18, 1.162

EURUSD (Daily Chart)

Today’s move in EURUSD very much resembles the one from last Friday, where it plunged and recovered, creating a long tail wick. Demand for the euro remains relatively strong as bidders are showing dedication in defending the horizontal support at 1.217, which coincides with SMA20 on the daily chart. However, this pair is still in a limbo zone between 1.217 and 1.225 given the current uncertainties in Fed’s responses to mixed economic figures. As of current, we still hold a bullish view on EURUSD unless there is a something new coming out from the Federal Reserve.

Resistance: 1.225, 1.235, 1.246

Support: 1.217, 1.195, 1.17

Economic Data