Equity Investors Attempt Rebound on Monday

7 June 2022, 01:46

Market Focus

US markets moved slightly higher on Monday as investors tried to rebound from a losing week. The Nasdaq Composite rose 0.40% while the S&P 500 was up 0.31%. The Dow Jones Industrial Average was once up as high as 300 points, but gave up some of its gain following the benchmark 10-year Treasury yield pushing above 3%, finishing with 0.1% at the end of the day. One of the major boosts from the equities markets was the news that Beijing, China had rolled back some Covid- related restrictions. At the same time, Chinese regulators are in the process of wrapping up their investigations into ride-hailing giant Didi.

UK Prime Minister Boris Johnson faced a vote of confidence on Monday. Johnson’s leadership has been wracked by several controversies, the biggest of which has been the partygate scandal when Johnson and other officials broke Covid lockdown restriction. Despite Boris Johnson eventually surviving the vote, 211 lawmakers voted in favor of Johnson and 148 lawmakers voted against him, and the growing discontent has truly impacted Johnson’s public standing.

Main Pairs Movement

Gold was down 0.48% on Monday as the US dollar was feeling the pull of gravity, which kept the downside in the precious metal. In addition, most of the European markets were on a holiday, and gold’s downside mainly came from the pressure of the US dollar.

USD/JPY portrayed a new high, above 131.00, as Japan’s easing monetary policy continues to weaken the Japanese yen. On the flip side, the Fed Vice-Chair Lael Brainard and Cleveland Fed President Mester repeated the statements which suggested higher odds favoring raising interest rates.

AUD/USD hovered around 0.7200 as markets awaited RBA policy on early Tuesday, and was down 0.21% at the end of the day.

Crude oil prices edged lower on Monday, buoyed by Saudi Arabia possibly raising its oil prices in July, but a higher output from OPEC+ weighed on the downside of oil prices. WTI was down 0.51% and trading at 117.689 at the end of the day.

Technical Analysis

EURUSD (4-Hour Chart)

The euro fared worse against the U.S. Dollar on the first trading day of the week. Market participants showed demand for the US greenback, which rose more than 0.3% after the American trading session began. The shared currency continues to trend upwards in the long term, but significant economic headwinds and a slow-to-react central bank poses long term upside limits to the EURUSD pair. Market participants will be focused on Thursday as the ECB is set to announce its monetary policy statement.

On the technical side, the resistance at 1.07614 remains unchallenged while support levels at 1.0695 and 1.06816 sits firm. RSI for the pair sits at 53.34, as of writing. On the four hour chart, EURUSD currently trades below its 50-day SMA, but above its 100 and 200-day SMAs.

Resistance:  1.07614, 1.07864

Support: 1.0695, 1.06816

GBPUSD (4-Hour Chart)

The British Pound traded lower against the Dollar on the first trading day of the week. Dollar demand surged as the U.S. 10 year treasury yield soared past 3%. Despite an upward equities market, market participants rotated into the U.S. Greenback to take advantage of rising yields. On the 7th, the U.K. is set for a vote of no confidence for prime minister Borris Johnson.

On the technical side, resistance for Cable sits firmly at the 1.25691 and 1.26539 price region, while support level at 1.24539 remains intact. RSI for the pair sits at 47.27, as of writing. On the four hour chart, Cabl currently trades below its 50-day SMA but above its 100 and 200-day SMAs.

Resistance: 1.25691, 1.26539

Support: 1.24539

USDJPY (4-Hour Chart)

The US Greenback surged against the Japanese yen on the first trading day of the week. Broad-based demand for the dollar resulted from the surging US 10-year Treasury yield. The better than expected job report from last Friday, provided much tailwind for the dollar. The BoJ maintains its long term easy money stance in order to prop up its export friendly economy; on the other hand, the Fed is set to raise at least 100 basis points more by the end of the year. Interest rate differentials between the two countries continue to favor dollar bulls.

On the technical side, USDJPY reached its historical high on the first trading day of the week and is continuing higher into the American trading session. Support level for USDJPY sits at 129.795 and 126.738, while resistance levels have yet to form. RSI for the pair sits at 52.99, as of writing. On the four hour chart, USDJPY currently trades well above its 50, 100, and 200-day SMAs.

Resistance: 133

Support: 129.795, 129.738