Commodities plunged harshly amid the American trading hours, especially crude oil, which was down more than 10%

29 November 2021, 03:17

Market Focus

Global equities plummeted on Friday, with a new COVID variant discovered in South Africa raising concerns that new lockdown policies could be imposed, hindering the recovery of the economy once it gets widely spread. In Asia, Japan’s Nikkei 225 dropped 2.53%, and Hong Kong’s HSI slumped 2.67%. In the US, Dow Jones slid 2.52% to 34900.79, and the Nasdaq Composite declined 2.23% to 15491.66.

The World Health Organization is urging caution after two South African health experts, including the doctor who first sounded the alarm about the omicron variant, indicated that symptoms linked to the coronavirus strain have been mild so far.

“Understanding the level of severity of the omicron variant will take days to several weeks,” WHO said in a statement Sunday, adding that “there is currently no information to suggest that symptoms associated with omicron are different from those from other variants.”

The latest variant wreaked havoc in global markets on Friday, and early signs in Asia suggest an uneasy start to the new week as traders digest omicron’s initial impact and spread. Equity futures for Japan, South Korea and Australia pointed lower, while currencies were generally steady. The South African Rand strengthened.

The U.K. government will convene an urgent meeting of Group of Seven health ministers on Monday to discuss the latest developments, according to the country’s Department of Health. In the U.S., President Joe Biden will give an update also on Monday, the White House said.

Main Pairs Movement

After a warm and cosy Thanksgiving holiday, the global forex market got smashed as the unexpected fresh panic toward the newly found COVID variant frustrated sentiments. Commodities plunged harshly amid the American trading hours, especially crude oil, which was down more than 10%. The dollar index also dropped 0.74% due to concerns that Fed may postpone the interest rate hike schedule to July from June 2022.

Benefitting from the weakness of the Greenback, most major currencies posted gains against their American peer. Cable ended its weeklong decline and gained a mild 0.14% to 1.3337, and the euro pair even surged around 100 pips to regain the 1.1300 level. Safe-haven currencies were the best performers during Friday’s chaos, with USD/CHF plummeting 1.21% and USD/JPY diving to 1.82%, once breaching the key level 113.00. On the flip side, commodity-linked currencies got left behind oil prices crashed. AUD/USD went down 1.04%, while USD/CAD surged 1.11%.

Gold price got a roller-coaster ride on Friday, as the price first stretched north on the Europe session, and then rolled down accordingly after the US dollar’s fall amid the dismal Wall Street opening. Oil price got wrecked the most, as both WTI and Brent nosedived more than 10%, back to the price levels two months ago. WTI closed the day at $68.16, and Brent at $72.86.

Technical Analysis

EURUSD (4- Hour Chart)

EUR/USD advanced and gathered upside traction on Friday, continuing its previous rebound from 2021 lows under the 1.119 level. The pair started to see heavy buying in the early European session and touched a fresh weekly high near the 1.130 area at the time of writing. EUR/USD was supported by US dollar weakness, currently rising 0.87% on a daily basis. The falling US dollar is mainly due to the resurgence of coronavirus concerns, as a new variant appeared in Southern Africa. Investors now worry that if the new Covid-19 variant does spread globally and damages the global economic recovery, this will leave the Greenback more vulnerable to dovish Fed policy expectations. However, gains for the EUR/USD pair seem to be limited, as the dovish ECB and rising Covid-19 cases both acted as a headwind.

On the technical side, the RSI indicator is at 62 as of writing, suggesting that the bullish momentum should persist for a while before there’s a trend reversal. The MACD is also sitting way above the signal line, which means a strong upward trend for the pair. Looking at the Bollinger Bands, the price rose out of the upper band, therefore a trend continuation could be expected. In conclusion, we think the market will be bullish as the pair is eyeing a test of the 1.1374 resistance.

Resistance: 1.1374, 1.1464, 1.1608

Support: 1.1186, 1.1115

GBPUSD (4- Hour Chart)

After dropping to a yearly low near 1.328 area, GBP/USD rebounded slightly back on Friday. The pair was trading lower and struggled in negative territory during the Asian session, but was then surrounded by bullish momentum after the European session started. At the time of writing, the cable has reversed its intraday loss with a 0.02% gain for the day. GBP/USD gained some bullish traction today amid weaker US dollar across the board, as the benchmark 10-year US Treasury bond yield is falling nearly 7% and weighing heavily on the greenback. Meanwhile in the UK, after the new Covid-19 variant appeared in Southern Africa, the British Health Secretary Sajid Javid announced on Friday that flights from six African countries will be banned from now on.

For the technical aspect, the RSI indicator is at 39 as of writing, suggesting that the downside appears more favoured as the RSI still holds below the midline. As for the Bollinger Bands, the price is falling after touching the moving average, therefore the downward trend should remain. In conclusion, we think the market will be bearish given that its technical correction today could be temporary since the fundamental outlook doesn’t yet point to a steady recovery.

Resistance: 1.3390, 1.3514, 1.3607, 1.3698

Support: 1.3188

USDCAD (4- Hour Chart)

Following its previous three-day slide, USD/CAD rebounded sharply to the 1.278 area on Friday amid falling oil prices. The pair continued to climb higher most of the day and touched the highest level since September 22. USD/CAD had pulled back since then and surrendered some of its intraday gains, currently rising 0.86% on a daily basis. Despite the Greenback tumbling 0.75% today, USD/CAD still rallied amid risk-off market mood. The new South African Covid-19 variant, which has more mutations and evades vaccines, are pushing countries across the world to start implementing travel restrictions. Therefore the concerns about fuel demand sent the oil prices below $70 while underpinning the USD/CAD pair.

For technical analysis: the RSI is at 66 as of writing, suggesting the bullish momentum should persist for a while before there’s a trend reversal. Meanwhile, the MACD is now sitting above the signal line, which means an upward trend for the pair. As for the Bollinger Bands, the price has moved out of the upper band, dropping immediately back inside the band, therefore the suggested strength is negated. In conclusion, we think the market will be bearish as long as the 1.2828 resistance line holds. The pair is likely to experience technical correction after accelerating the upward move.

Resistance: 1.2828

Support: 1.2645, 1.2585, 1.2493