October 25, 2021

Market Focus

All three major U.S. stock indices recorded weekly gains on the back of better than expected 3^rd quarter earnings results from major companies. The Dow notched another record close on Friday to close at 35677.02. The S&P 500 lost 0.1% to close at 4544.9, while the Nasdaq lost 0.8% to close at 15090.2. The U.S. 10 year Treasury yield trended higher to close at 1.638%.

Major companies including Procter & Gamble and Netflix both reported their 3^rd quarter earning results during this week. Procter & Gamble reported Q3 earnings that beat Wall Street’s estimate as consumers continue to demand cleaning supplies and beauty products. Netflix also posted better than expected earnings as the company was able to add 4.4 million subscribers over the quarter. Facebook, AMD, Alphabet Inc, Amazon Inc, and Berkshire Hathaway are among the major companies that will report their Q3 earnings for this week.

Cryptocurrencies enjoyed a healthy rise over the past week as Bitcoin rallied past $60,000 and reached historical heights. Ethereum and other alternative coins also experienced healthy gains. As of writing, Bitcoin is trading at $61,071, Ethereum is trading at $4088, and XRP os tradomg at $1.0803.

This week’s economic docket is highlighted by the Australian CPI, U.S. GDP for Q3, U.S. initial jobless claims and the European Union CPI.

Main Pairs Movement:

The Greenback rose on Friday as Fed Chair Jerome Powell’s speech, once again, affirms the Fed’s previously adopted hawkish stance. In his speech, Fed Chair Jerome Powell, reiterates the urgency to begin tapering, while at the same time stating that it is not time for a rate hike, yet. Chairman Powell also provided a positive outlook on the recent supply chain crunch as he expects constraints to ease as expected and it is “very possible” that the Fed’s full employment goal would be met by next year.

Most currency pairs against the dollar struggled as the Greenback gained steam. USDJPY, however, experienced a 0.44% daily slide as the pair could have already reached some investors profit taking level. GBPUSD saw a 0.3% intraday decline. The Pound struggled due to weaker than expected September retail sales. USDCAD gained 0.03% as the Dollar strengthens to help the pair extend yesterday’s winning session.

Technical Analysis:

USDJPY (Daily Chart)

The USD/JPY pair dived deeper on Friday, extending its southern corrections from muti-year highs at 114.70 to session lows right above 113.40. The pair started its intraday slide since the early European session, rebounded slightly as the Powell’s speech talking about an upcoming taper from the Fed, and then resumed its downside sloping afterward.

On Friday’s speech, Fed Chair Jerome Powell said that he thinks it is the time to start reducing asset purchases, which reaffirmed the investors’ anticipation of November tapering and rose a sudden panic throughout the market. The dollar has surged for a bit, though, it did not stop the selling stream of the USD/JPY. A possibility for that may be profit-taking, as some investors might have closed their long positions after the prolonged USD/JPY uptrend.

On the technical front, both the daily MACD histogram and the RSI indicator are still at the bullish side. The price actions have been away from the top of the Bollinger band, sparing some rooms for further rally.

Resistance: 113.75, 114.70

Support: 112.65, 110.97, 109.17

GBPUSD (Daily Chart)

Cable continue its yesterday’s decline, edging lower to end the week at 1.3755. The pair climbed higher to a daily top in early European session but failed to preserve its bullish momentum afterward, as the Fed’s Chair Powell popped up taper issues in his speech during the American trading hours, which led the pair plummeted over 40 pips in a sudden.

Sterling’s weakness may derive from the dismal retail sales data. The UK retail sales released Friday showed a -0.2% reading in September, a big miss to market’s expectation of 0.5%. The downbeat macros also revived the Covid concerns as UK policymakers rejected restrictions, further weighing on the British Pound.

On the technical aspect, both the MACD histogram and RSI indicator remain in the bullish territory, suggesting the demand for the Quid is still robust. Considering the looming UK rates hike plan, it is reasonable to expect the pair to get back to its upward track.

Resistance: 1.3830, 1.4000, 1.4220

Support: 1.3720, 1.3580, 1.3410

USDCAD (Daily Chart)

Loonie defended its gains on Thursday and successfully closed in the green amid the broader greenback strength. The pair once climbed to daily high at 1.2383, which matched Thursday’s high, and consolidates near the high afterward, with a strong bullish impulse. A break higher would clear the way for a test of 1.2400.

A stronger US dollar across the board has been the critical driver in the Loonie pair. Fed Chair Powell mentioned that high inflation will likely last well into next year. He affirmed that it is the time to taper QE but not to raise rates. Commodities including crude oils reversed sharply after Powell’s speech.

On the technical front, both the daily MACD histogram and the RSI indicator are still deeply under the bearish territory. The price actions lingered around the 61.8% Fibonacci throughout the day, some catalysts may be required to breakthrough this awkward situation.

Resistance: 1.2478, 1.2727, 1.2949

Support: 1.2229, 1.2007

Economic Data