The relentless climb in stocks pushed major U.S. benchmarks to historical highs just a day ahead of the Fed’s policy meetings

3 November 2021, 03:15

Market Focus

The relentless climb in stocks pushed major U.S. benchmarks to historical highs just a day ahead of the Fed’s policy meetings. The rally of stocks was underpinned by better-than-expected corporate earnings results. The S&P 500 rallied 0.37% to 4630.65, Dow Jones went up 0.39% to 36052.63, while Nasdaq rose more modestly with only 0.34%, weighed by a drop in Tesla (TSLA) after CEO Elon Musk downplayed the expected impact of a deal with car rental giant Hertz. Investors watched with optimism as more corporate earnings results exceeded expectations and defied concerns over ongoing supply chain constraints, shortages and cost pressures.

The Centers for Disease Control and Prevention (CDC) has approved Pfizer Inc.’s Covid-19 vaccine for children aged 5 to 11, following a recommendation from a panel of experts.

The decision ushers in a new phase in the U.S. pandemic response, widening access to vaccines to some 28 million more people at the same time that Americans who received shots earlier in the pandemic are lining up for booster doses.

Boosted by the good news, Pfizer Inc. (PFE) surged 4.15% during Wall Street trading hours, closing the day at 45.45.

Main Pairs Movement

The Greenback strengthened against most of its major rivals, and was only stable against the Japanese yen, which has depreciated too much in the past several weeks. The AUD and the GBP were the worst performers, with the former hit by a dovish RBA statement, while the latter has been hit by Brexit jitters and uncertainty related to the Bank of England, which is scheduled to meet this week. AUD/USD is trading around 0.7420 while GBP/USD hovers near 1.3600.

The EUR/USD pair is trading around 1.1580, with demand for the shared currency undermined by Markit’s final readings of its October Manufacturing PMIs. The German version of the index was downwardly revised to 57.8 from 58.2, while that for the European Union was confirmed at 58.3, below the preliminary estimate of 58.5.

Commodities shed some ground but held within familiar levels. Spot gold settled at $1,788 a troy ounce while WTI and Brent trade around $83.00 and $83.60 a barrel respectively.

Technical Analysis

GBPUSD (4- Hour Chart)

The GBP/USD pair declined on Tuesday, preserving its bearish momentum and falling for the third straight day. The pair was trading lower early in the Asian session and started to see heavy selling after the American session began. GBP/USD has stayed in negative territory amid the stronger US dollar across the board, as the risk-off market sentiment has underpinned the safe-haven US dollar. Investors now await the critical monetary policy decisions from the Fed and the BOE meeting. On top of that, concerns about UK and France’s spar over the fishing rights in the post-Brexit transition rules continue weighing on the cable.

For the technical aspect, the RSI indicator is at 35 figures as of writing, suggesting bearish movement ahead. For the MACD indicator, the negative histogram also indicates a possible downward trend for the pair. If we take a look at the Bollinger Bands, the price is sitting between the moving average and the lower band, which means that the bearish momentum is likely to persist. In conclusion, we think the market will be bearish as the pair is heading to test the 1.3570 support.

Resistance: 1.3751, 1.3835, 1.3913

Support: 1.3570, 1.3412

AUDUSD (4- Hour Chart)

AUD/USD tumbled on Tuesday, surrounded by strong selling pressure all day amid a dovish RBA. After RBA governor Phillip Lowe said that it was still “likely to take some time” for inflation to sustainably return to its target, the falling short-term Australian government bond yields dragged the pair down to a weekly low. On top of that, the stronger US dollar is also hurting the pair, as the downbeat market mood weighed on global stocks and the riskier Aussie. AUD/USD was last seen trading at 0.7533, posting a 0.21% gain for the day.

From a technical standpoint, the RSI is at 29 as of writing, suggesting that the pair is in the oversold zone now, investors should be aware of a trend reversal. Looking at the Bollinger Bands, the price is moving out of the bands so a strong trend continuation can be expected. In conclusion, we think the market will be bearish as the pair just dropped below the previous support, and is now heading to test the 0.7379 support.

Resistance: 0.7478, 0.7556

Support: 0.7379, 0.7324, 0.7226

USDCAD (4- Hour Chart)

After ending in the negative territory yesterday, USD/CAD rebounded on Tuesday and moved towards the 1.240 area. The pair is currently flirting with the 1.2400 level, up about 0.28% on the day. USD/CAD was supported by a stronger US dollar across the board and falling oil prices. The market’s focus has now shifted to the OPEC+ and Fed meetings, as most analysts remain bullish on oil prices amid the rebound in global oil demand. On top of that, Canadian job data is scheduled to be released this Friday, which is critical for early BoC rate hikes expectations.

From a technical viewpoint, the RSI indicator reads 55 as of writing, suggesting tepid bull movement ahead. As for the Bollinger Bands, the price has crossed above the moving average and continues climbing upwards, therefore, the upper band becomes the profit target. In conclusion, we think that the market will be bullish as the pair is trying to re-test the 1.2431 resistance, a break above that level will open the door for additional near-term profits.

Resistance: 1.2431, 1.2499, 1.2648, 1.2775

Support: 1.2288, 1.2157