US inflation expectations have fallen for the third consecutive day, testing the lowest level since November 5 at the end of the North American session on Monday

30 November 2021, 02:31

Market Focus

The US stock market rebounded moderately this Monday, with the S&P 500 index rising about 1.32%. Fearing that the newly discovered variant of Covid-19, which has been given the omicron designation, will trigger travel restrictions and global lockdowns, damaging global growth prospects, the index fell 2.3% on Friday to close below 4600 points. This is the first time it has closed below 4,600 so far in November. The index then returned to the 4,600 level to close at 4,655.26. The Nasdaq Composite Index rose 1.9% to 15,782.83, and the Dow Jones Industrial Average rose 236.6 points to close at 35,135.94.

Although the new variant may become more infectious and vaccine-resistant, it may be less harmful to the health of people who have been vaccinated or previously infected. As a result, the Covid-related stock market’s decline has become increasingly moderate, and the length of decline has become shorter.

The information technology sector performed well under the Standard & Poor’s 500 Index, with Apple (AAPL) moving up 2.19% and Microsoft (MSFT) trading up 2.11% on today’s stock market. In addition, the semiconductor industry performed better, with Lam Research (LRCX) going up 6.01%, Nvidia (NVDA) rising 5.95%, and Applied Materials (AMAT) moving up 5.53%.

Electric vehicle leader Tesla (TSLA) rose more than 5% on Monday. Electric car peer Rivian (RIVN) rose about 3.5%, while Lucid Motors (LCID) rose 1.8%. China’s electric vehicle leader Li Auto (LI) soared after reporting earnings, while Xiaopeng Motors (XPEV) rose more than 4%.

Main Pairs Movement

US inflation expectations have fallen for the third consecutive day, testing the lowest level since November 5 at the end of the North American session on Monday. As inflation fell sharply, the Greenback was also under pressure. Last Friday, the U.S. dollar index fell below the 96 level, but then successfully defended it and returned to above that level.

Although the pace of the US dollar has slowed, the trading prices of the US dollar against major competitors have mostly increased. The EUR/USD is trading around 1.12906, and the GBP/USD is working hard to defend the 1.3300 threshold. The USD/CAD traded at 1.27373, the AUD/USD was close to the year’s low of 0.7105 and the USD/JPY closed at 113.529.

After hitting $1,800 per ounce, gold fell slightly, ending at a trading price of approximately $1,782 per ounce. Crude oil prices also fell after reaching 72.9 closing at $70.04 per barrel.

Technical Analysis

EURUSD (4- Hour Chart)

After last Friday’s rebound to a weekly high near 1.133, EUR/USD lost its upside traction and declined on Monday. The pair was trading lower and dropped to a daily low in the early European session, now staying in negative territory under 1.129 level amid concerns about the new variant omicron. EUR/USD was undermined by the resurging US dollar and is currently losing 0.37% on a daily basis. The falling US dollar now rebound from last week’s low and pushed higher to above 96.40, as investors continue to favour the safe-haven Greenback and assets due to rising uncertainty following the discovery of the new omicron variant of the coronavirus in southern Africa. In Europe, the dovish ECB and rising Covid-19 cases might continue acting as a headwind for the pair.

On the technical side, the RSI indicator is at 50 as of writing, suggesting that there is no obvious trend now. But looking at the MACD indicator, the diminishing positive histogram indicates that the pair may experience some downward trend. As for the Bollinger Bands, the price sits near the moving average after falling from the upper band, therefore the downward trend could persist. In conclusion, we think the market will be bearish as long as the 1.1331 resistance line holds. A break below 1.1186 would target 1.1185, which was touched in July 2020.

Resistance: 1.1331, 1.1374, 1.1460

Support: 1.1186, 1.1185

GBPUSD (4- Hour Chart)

GBP/USD declined on Monday, falling from the 1.336 area and surrendering its modest intraday gains. The pair gained some bullish momentum and touched a daily top during the European session, but started to see heavy selling amid renewed US dollar strength. At the time of writing, the cable remained under pressure with a 0.26% loss for the day. Market mood deteriorated during the American session, which underpinned the US dollar and dragged Cable lower. The previous strong recovery in the equity markets earlier in the day has also lost its strength. However, expectations for an imminent interest rate hike by the Bank of England in December might limit the losses and cap the downside for the cable.

For technical analysis: the RSI is at 32 as of writing, suggesting that the bearish momentum should persist for a while before there’s a trend reversal. The diminishing positive histogram in the MACD indicator also points that the pair may experience some downward trend. As for the Bollinger Bands, the price dropped out of the lower band, therefore a strong trend continuation could be expected. In conclusion, we think the market will be bearish as the pair is ready to test the 1.3279 support, a daily close below that level suggests more losses ahead for Cable.

Resistance: 1.3390, 1.3514, 1.3607

Support: 1.3279, 1.3188

USDCAD (4- Hour Chart)

After last Friday’s rally to two-month highs, USD/CAD pulled back and dropped to the 1.273 area amid surging oil prices on Monday. The pair declined sharply in the early Asian session, but then rebounded back moderately and recovered most of its intraday losses. USD/CAD remains in negative territory and is currently losing 0.20% on a daily basis. WTI oil surged 3.42% today as investors considered that last Friday’s drop was overdone as the fluctuation was also exacerbated by thin liquidity conditions due to the Thanksgiving holidays in the US. Moreover, there still not enough is yet known about the new variant. Therefore the recent bullish momentum witnessed in oil prices supported the commodity-linked Loonie.

For the technical aspect, the RSI indicator is at 61 as of writing, suggesting that the upside appears more favoured as the RSI still holding above the midline. As for the Bollinger Bands, the price is consolidating between the upper band and moving average, indicating the USD/CAD has an upward bias. In conclusion, we think that the market will be bullish as the pair is testing the 1.2775 resistance. Concerns about decreasing demand for oil amid fears about the global spread of the Omicron Covid-19 variant might keep acting as a tailwind for the USD/CAD pair.

Resistance: 1.2775, 1.2849

Support: 1.2641, 1.2493, 1.2387