Gold was limited as markets were awaiting the report of the FOMC’s consumer spending and inflation for the days ahead

12 October 2021, 03:13

Market Focus

US markets started the week in a gloomy mood as the Dow Jones shed 0.7%, and the S&P 500 dropped 0.7%, while the Nasdaq Composite dipped 0.6%. Stocks were mostly positive for most of the day, but selling pressure increased in the final hour, with the major indices closing the session at their lows.

US 10- year Treasury yield has risen above 1.6% as markets tried to digest disappointing job data from last Friday. The majority of the markets believed that the latest job report did not change the Federal Reserve’s outlook for tapering its bond purchases later this year.

Singapore has announced to open its border to more countries for quarantine-free travel. The move has shown that the country is preparing to reach a new normal of living with the coronavirus. It is significant as Singapore is one of the world’s biggest travel and financial hubs.

Main Pairs Movement

USDJPY has printed a fresh high since 2018, trading at 113.482, up 0.97% on Monday. With Japanese bond rates well-anchored as the Bank of Japan continues to keep policy rates on ice, the potential tapering by the US Fed should bring the US dollar stronger, favouring a higher Dollar-Yen rate.

EURUSD seesawed between gains and losses on Monday, trading at 1.15494. The currency pair would be mostly driven by the dollar this week as the European calendar has been scarce with only a couple of ECB’s speakers.

AUDUSD traded 0.52 higher, closing at 0.73427. The Australian dollar was stronger against the Dollar on Monday on the back of iron ore prices.

Gold price was consolidating on Monday, trading at $1,754. Bullion was limited as markets were awaiting the report of the FOMC’s consumer spending and inflation for the days ahead.

Technical Analysis

USDJPY (4 Hour Chart)

The Japan Yen soared during the New York session, trading at 113.38 as of writing, up over 1% in the day market. The risk-on environment, as witnessed by U.S. stock indices trading in the green, post gains between 0.43% and 0.86%. Also, the U.S. T-bond yields, with the 10-year benchmark note rate rising above the 1.6% threshold, exerted upward pressure on the yen.

On the technical side, the RSI is at 79, indicating overbuying in the short term. On the moving average side, 15-and 60-long moving averages are remaining the ascending traction.

All in all, the Yen had broken through a critical resistance at 112 recently, so we believe that the market will probably tick up to a higher level while maintaining smooth momentum. One concern is that the market might experience an exaggerated bounce up in the short term, and we should not rule out the fact that the market will have a correction.

Resistance: 114.55 (Oct. 2018 high), 118.60 (Jan. 2017 high)

Support: 112.00, 110.65, 109.15

EURUSD (4 Hour Chart)

The Euro-Dollar pair is trading below 1.16, yet has gotten off the lows as U.S. share indices advance, with the closed bond markets providing some calm, Concerns about energy costs, disappointing U.S. jobs figures, and uncertainty about fiscal policy weighed on sentiment earlier. ECB executive board member Philip Lane seemed reluctant to act to battle inflation.

From a technical perspective, the RSI continues to trim weakness, closing at around 39, suggesting bearish movement ahead. For averages, the 15-long indicator has been flattening while 60-long remains on the descent.

On the slip side, we expect that the last time low of 1.153 will give the pair short-term support guidance. If breaks below the threshold, we foresee the downside support will eye the psychological level at 1.15.

Resistance: 1.161, 1.1675

Support: 1.153, 1.15

USDCAD (4 Hour Chart)

The U.S. dollar attempted to pick up on Monday after a sharp decline observed in the previous three days. The pair has pulled back from a two-month low at 1.2445, although, so far, it has remained unable to pose a relevant recovery due to high oil prices. Meantime, U.S. WTI has appreciated for the eighth consecutive day, hitting 7-years highs.

From a technical perspective, the RSI indicator rebounded from oversold territory at 38 as of writing, suggesting bearish momentum in the short term. For the moving average indicator, the 15- and 60-long indicators still retain downside movement.

Since the Loonie rapidly broke through a critical support at 1.25, we expect that the next downward support will be last July’s low at 1.2425. On upside, a psychological level at 1.25 will turn into a pivotal resistance for the short-term, 1.256 behind.

Resistance: 1.25, 1.256

Support: 1.2425, 1.23