June 25, 2021

Daily Market Analysis

Market Focus

Stocks climbed to an all-time high as President Joe Biden’s bipartisan $579 billion infrastructure deal added to optimism the economic recovery is taking hold. Nasdaq 100 rose 0.6%. Dow Jones rose 1%. Companies that stand to benefit the most from a rebound in activity outperformed — with financial and energy shares leading gains in the S&P 500. Caterpillar Inc. (+2.6%), the world’s biggest maker of mining and construction equipment, jumped alongside raw-material producers such as U.S. Steel Corp. (+3.36%) and Nucor Corp. (+1.99%).

Wall Street banks are poised to announce a deluge of dividend increases and stock buybacks after Fed’s stress tests showed the industry built up a stockpile of cash during the pandemic.

Lenders can announce their plans for distributing capital after the market closes on June 28, and the industry’s strong results mean payouts may be the largest ever following the Fed’s annual exams. Early estimates indicate the six biggest U.S. banks, including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., could return more than $140 billion to shareholders.

The passing marks, announced Thursday by the Fed, indicate that firms are officially free from restrictions that the regulators put on dividend payments and share repurchases last year when Covid-19 was ravaging the economy. The banks’ solid performance also signals that the industry has grown much more comfortable with the exercises, which used to trigger anxiety and frustration across Wall Street.

However, as the news suggests the Fed’s indirect recalling of the pandemic-led relief measures, investors do worry for the monetary policy adjustments and the same weigh on the risk appetite.

Main Pairs Movement:

Similar to the previous day, the greenback lost some ground throughout the first half of the day, to recover most of it during the American session. Trading was dull as released economic data were mixed. The euro pair hovered around familiar levels above the 1.1900 level, while antipodean currencies consolidated against their American rival. Loonie closed at 1.2320, slightly higher than yesterday.

US data was somewhat encouraging, although most of the figures missed the market’s expectations. Weekly Initial Jobless Claims printed at 411K, while the previous weekly figure was revised to 418K. Durable Goods Orders were up 2.3% in May, while the Q1 GDP was confirmed at 6.4%. The numbers indicate that the US economic recovery may have reached a plateau. It is not bad news but may prevent the greenback from strengthening further.

Sterling was the worst among the major currencies, falling after the BoE’s monetary policy announcement. As widely anticipated, policymakers remained rates and easing programs unchanged. However, the following statement offered a dovish tone. “The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is made in eliminating spare capacity and achieving the 2% inflation target sustainably.” Apparently, clichés were not satisfying. Speculators were looking for a more hawkish tilt. Cable trades around 1.3910.

Gold faced headwinds during the US afternoon, as stocks reached record high. The rally in equities was backed by US President Joe Biden’s announcement, as he said that they reached a bipartisan deal on the infrastructure spending plan. The yellow metal settled at around $1,775.00 per ounce.

Crude oil prices bounced from intraday lows, posting modest daily gains. WTI settled at $73.30 a barrel, while Brent stands firmly above $75.00, trading at $75.54 as of writing.

Cryptos are on the way to recover its huge loss on Monday. Bitcoins traded higher in a third consecutive day, attacking the $35,000 resistance; Ethereum alike tried to break though the $2,000 level, trading at $1,990 at the moment.

Technical Analysis:

USDJPY (4- Hour Chart)

USDJPY erodes overnight gains from the highest level during the American session as the mixed signals on the US inflation concerns keep the greenback bulls on the defensive. From the technical perspective, after contesting the resistance level of 111.12, USDJPY struggles to find acceptance above the level, resulting in a pullback afterward. However, the pair remains its offered tone since it continues to trade within the ascending channel, signaling that the bullish momentum has not ended yet; the pullback might be a signal to adjust its overbought readings as the RSI was around 70 when the pair hit 111.12 on the 4- hour chart. At the same time, sustainly advancing above its simple moving averages also supports USDJPY’s bullish traction.

Resistance: 111.12

Support: 110.51, 109.14, 109.84

EURUSD (4- Hour Chart)

EURUSD enters consolidative phase as both currencies are without clear directional strength. On the 4- hour chart, the pair shows that it keeps finding the support level of 1.1919 while trading in between the upper bounce and the midline of the bollinger band, showing that the pair is poised to extend its bullish momentum in the near- term. The short- term bulls are supported by the MACD, as the MACD line is above the signal line. To the upside, if the pair successfully breaches this consolidative phase around 1.1919 region, then it will head toward the next resistance of 1.1985 to 1.2000, where the psychological level is. Technical indicators aim higher after consolidating around their midlines, which reflect the greenback’s limitation.

Resistance: 1.1985, 1.2052

Support: 1.1919, 1.1837

GBPUSD (4- Hour Chart)

The British pound weakens against the greenback on diappointing BOE as BOE decides to maintain the monetary policy on hold, not intending to tighten the monetary policy. From the technical perspective, after the strong move this week, GBPUSD slides as the double top formation was previously formed in the near- term. The consoliadation might take places as the RSI is in the neutral condition and the pair is at the moment trading on the midline of the bollinger band, which signal that the clear move of the pair is indecisive as of now. And the price range for the consolidation is expected to see in between 1.3963 and 1.3896. To the downside, a convincing breach below 1.3896 will be seen as a fresh trigger for the bears; on the other hand, a break above 1.3963 will be seen as a short- term bullish momentum.

Resistance: 1.3963, 1.4017, 1.4072

Support: 1.3896, 1.3787

Economic Data