Biden appointed Jerome Powell as the chairman of the Federal Reserve for his second term, U.S. stocks rose to a record high, the price of gold plummeted

23 November 2021, 03:16

Market Focus

As investors cheered on the appointment of Federal Reserve Chairman Jerome Powell for his second term, U.S. stocks rose to a record high, and the S&P 500 index surged to a high of the day immediately after the opening of the U.S. market. However, the S&P 500 Index closed lower on Monday as Wall Street expects banks to raise interest rates in 2022. In addition, rising U.S. Treasury yields put pressure on major growth stocks such as Amazon and Alphabet, which fell -2.83% and -1.92% respectively. Moreover, following the surge in US Treasury yields, the S&P 500 Bank Index rose as investors priced in tightened policy in the first half of 2022. Wells Fargo Bank (WFC.N) is one of the strongest banks on Wall Street.

At the close of the market, the S&P 500 Index fell 15.38 points or 0.32% to close at 4,682.88 points, the Nasdaq Composite Index fell 202.68 points or 1.26% to 15,854.76, and the Dow Jones Industrial Average rose 17.28 points, or 0.05%, to 35,617.83.

Tesla is also one of the biggest gainers, rising 1.74%. Earlier on Monday, Tesla CEO Elon Musk said on Twitter that the Model S Plaid may arrive in China “around March.”

Main Pairs Movement

The US dollar led the way and became the overall winner. In 2021, it set a new high against the euro and a multi-month high against other major competitors. Most of the dollar’s strength comes from US President Joe Biden, who HAS nominated Jerome Powell for re-election as chairman of the Federal Reserve.

The US 10-year bond yield finally rose by nearly 9 basis points to 1.62% in intraday trading. The current yield has returned to its highest level since last Wednesday and is currently only about 3 basis points lower than last week’s high of 1.65%. With the rise in yields, the US dollar index has also continued to roll to the year’s high of 96.502, and its upward trend seems to be endless.

The EUR/USD is currently hovering near 1.12400 and is in a sharp downward trend because it continues to suffer from the severe wave of Covid-19, and the dovish state is also the main key to the weakness.

The price of gold plummeted due to the strengthening of the U.S. dollar, trading at $1,803.00 per ounce. Crude oil prices are rising, and WTI is currently hovering around US$76.70 per barrel. 

Technical Analysis

EURUSD (4- Hour Chart)

After touching the lowest level since July 2020 under the 1.126 level, EUR/USD continued its bearish traction on Monday amid US dollar strength. The pair flirted with 1.128 level most of the day, but then dropped towards 1.124 area, currently losing 0.14% on a daily basis at the time of writing. The White House announced on Monday that Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden. The news provided strong support to the US dollar and sent the DXY index above the 96.4 level. In Europe, concerns about rising Covid-19 cases acted as a headwind for the Euro, as some countries in Europe may reimpose a full lockdown or bring back restrictions to tackle rising infections.

On the technical side, the RSI indicator is at 30 as of writing, suggesting that the pair is in the oversold zone, a trend reversal could be expected. Looking at the Bollinger Bands, the price is moving alongside the lower band, therefore the downward trend is likely to persist. In conclusion, we think that the market will be bearish as the Greenback is kept strong by hawkish Fed expectations. A potential move lower towards 1.1200 seems possible as the pair has broken the previous support.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1168

GBPUSD (4- Hour Chart)

Following last Friday’s slide, GBP/USD declined for the second day on Monday. The pair was trading in a range near the 1.344 area during the Asian and early European sessions, but started to see heavy selling after the announcement of Powell’s renomination as Fed chair. Cable rebounded slightly after touching a two-week low, currently losing 0.28 on a daily basis. The latest dovish comments from BoE governor Andrew Bailey over the weekend put some downward pressure on the GBP/USD pair. Moreover, the deadlock over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound.

From a technical perspective, the RSI is at 41 as of writing, suggesting tepid bear movement ahead. Meanwhile, the MACD is now sitting below the signal line, which means a downward trend for the pair. As for the Bollinger Bands, the price has moved out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think that the market will be bearish as the pair is eyeing a test of the next support, which is at 1.3353. Given that there aren’t any major market-moving UK macro data today, investors await Tuesday’s UK PMI reports for trading impetus.

Resistance: 1.3514, 1.3607, 1.3698

Support: 1.3353, 1.3188

USDCAD (4- Hour Chart)

After a five-day rebound from 1.25 area, USD/CAD climbed higher on Monday amid stronger US dollar across the board, now targeting at 1.27 level. The pair jumped to a monthly top after Powell’s renomination, paring its initial intraday losses. USD/CAD was last seen trading at 1.2695, currently posting a 0.45% gain on a daily basis. Even though WTI crude oil has risen 1.15% for the day, the resurging oil prices failed to underpin the commodity-linked loonie. On top of that, expectations that the Fed will hike rates by the middle of 2022 also acted as a tailwind for the pair, as hawkish Fed speculations were reinforced by elevated US Treasury bond yields.

For technical analysis: the RSI is at 75 as of writing, suggesting that the pair is near the overbought zone, a trend reversal could be expected. But looking at the MACD indicator, the MACD is now sitting above the signal line, which means that the upward trend could persist. As for the Bollinger Bands, the price has moved out of the upper band, therefore a strong trend continuation could be expected. In conclusion, we think the market will be bullish as the pair already broke the previous 1.2648 support, a break above 1.2775 could intensify the bullish tone.

Resistance: 1.2775, 1.2896

Support: 1.2585, 1.2493, 1.2387