Daily market analysis

August 31, 2021

Daily Market Analysis

Market Focus

Stocks climbed, led by some of the world’s largest technology companies. Traders also assessed the impacts from Tropical Storm Ida, which sank insurers and energy firms, while pushing gasoline higher.

The S&P 500 notched its 12th all-time high in August, and the Nasdaq 100 rallied as Apple Inc.’s market value topped $2.5 trillion. Robinhood Markets Inc. and Charles Schwab Corp. slid as Securities and Exchange Commission’s Chairman Gary Gensler told Barron’s that a full ban of payment for order flow is “on the table.” Zoom Video Communications Inc. sank in late trading after giving a sales forecast that fell short of some analysts’ estimates.

As the earnings season draws to a close, the S&P 500 is on track for its seventh straight monthly advance — the longest winning streak since January 2018. Federal Reserve Chair Jerome Powell did just enough last week to preserve the view that his goals align with investors’: growth that is fast enough to boost hiring and corporate profits, but not inflation. U.S. pending home sales fell in July, while traders looked to Friday’s payrolls data for a guide as to whether there’s any slowdown.

A few days after Prime Minister Scott Morrison called for an independent international probe into the origins of the coronavirus, Chinese bots swarmed on to Australian government networks. It was April 2020.

    

Main Pairs Movement:

The dollar index traded in tight range on Monday amid UK’s Bank Holiday and a scarce economic calendar, gained as little as 0.03%. Momentum from Jackson Hole failed to carry over to Monday’s session, and raise question whether speculators are fully buying into the divorce between tapering and rate hikes. Powell explicitly stated the timing of rolling back Fed’s current asset purchases does not necessarily imply anything about lifting interest rates. Powell tried his best to cushion the downside risk in equity market with some dovish speech, but also mentioned the labor market is well on course of a recovery, therefore fueling a persistent bullish run in stocks market. For now, market’s primary focus remains to be the timing and amount of the long-eyed taper program.

The Swiss Franc was the weakest performer within the G-7 space, lost 0.63% and 0.56% against the US dollar and the Euro respectively. The independent move in the Franc series might suggest institutional investors might be positioning for SNB’s potential intervention to curb CHF’s strength. “We still think the fundamental outlook points to a weaker Franc ahead, but it will take some stabilization in the global growth outlook for this trend to resume”, commented by analysts at Goldman Sachs.

    

Technical Analysis:

GBPNZD (Daily Chart)

GBPNZD has been sitting conformtably inside the Bollinger Band for several months, indicating this currency pair was little affected by recent dollar driven headlines such as last week’s Jackson Hole Symposium. That does not mean there is little trading opportunity in this pair, in fact GBPNZD is reaching a pivotal point where a breakout from below could provide strong sell incentives. Price has gradually receded toward a support zone between 1.96 and 1.966, which sellers failed to penectrate since June. This support band also coincides with a decent ascending trendline, adding strengths to bulls’ defense. If bears could pull off a mirrical breakthrough from current levels, then they could look to capitalize further downside spaces. But we believe the heavy defense line will hold-off, and price looks to rebound from here.

Resistance: 1.981, 2.0,

Support: 1.96, 1.939, 1.92

   

AUDUSD (Daily Chart)

Aussie continues its descending trend as price was capped under DMA20 since June. It is also meeting horizontal resistance at 23.6% Fibonaaci of 0.732, measured from 0.738 to August’s low of 0.7107. The recent V-shaped recovery acts more like correction rather than a bullish reversal after RSI stepped into oversold region. Selling bias should still be robust given the uncertainties surrounding the Delta-variant, risk appetite could stage a significant pullback if infections persist to be higher.

The fact that Aussie is not carrying over its gains from last Friday’s dollar unfriendly speech suggests the surge was a one-time off move. We believe AUDUSD will edge lower in the near term, at least prior to Friday’s Non-Farm Payroll release.

Resistance: 0.732, 0.743, 0.76

Support: 0.723, 0.711, 0.7

   

XAUUSD (Daily Chart)

Gold pared some of its gains from last Friday’s surge, which was powered by Powell’s somewhat dovish tone. Price has overcame DMA20, and retraced to validate the breakout was solid, then followed by some bullish moves.

Looking at a broader picture, the precious metal previously underwent a double-top pattern. Price took a dive straight to $1690 after the neckline of the double-top was defeated. Normally, if price comes back to retest the neckline, it will meet abundant pressure around this level. The fact that current trade pattern failed to fulfill this thesis suggests short positions have been overwhelmed by longs. Therefore, we do not expect to see a significant pullback in the near term. That being said, price looks to advance further into 61.8% Fibonacci resistance around $1830.

Resistance: 1830, 1863, 1917

Support: 1804, 1777, 1744

    

Economic Data

Currency

Data

Time (GMT + 8)

Forecast

CNY

Manufacturing PMI (Aug)

09:00

50.2

EUR

German Unemployment Change (Aug)

15:55

-40K

EUR

CPI (YoY) (Aug)

17:00

2.7%

CAD

GDP (MoM) (Jun)

20:30

0.7%

USD

CB Consumer Confidence (Aug)

22:00

124.0