Daily Market Analysis

Market Focus

The September stock-market selloff that started after the overheated tech shares were no longer attracting as much investment evolved this week into a more troubling sign for the U.S. economy.

Although stocks advanced Friday after lawmakers revived hopes for a fresh spending bill, the SP500 notched a fourth straight weekly drop. This time, it was not the big tech companies that contribute to the loss, instead, companies in the banking industry and commodity producers led the decline. Additionally, airlines are sinking the most since June.

Investors are concerned that despite the Friday’s rally, the U.S. economic growth is unlikely to accelerate any time soon. Subsequently, money flowed back to the safety of the stay-at-home trade. Zoom Video Communications rallied 68%, peloton jumped 10% and Amazon added 2.5%.

According to William Delwiche, an investment strategist at Baird, “the lack of fiscal stimulus and continued unrest ahead of the November election raise the risk that the pace of recovery will not just slow, but that activity may actually tick lower.

Market Wrap

Main Pairs Movement

US Durable Goods Orders were up a measly 0.4% in August, missing expectations of 1.0%, although Nondefense Capital Goods Orders Ex Aircraft jumped 1.8%. Equities bounce from lows, but the dollar maintains its strength. Subsequently, the EURUSD is challenging the weekly lows.

GBPUSD approaches its weekly low at 1.2674 as demand for the American currency extends into the final trading session of the week. Hopes for a UK trade deal with the EU doing little for Sterling.

DXY hits fresh two-month highs even as US yields decline. USDJPY about to end the week on a positive note, rebounding sharply from six-month lows.

It has been a mixed Friday for WTI as the price is moving sideways heading into the weekend. All of the excitement was last week when the OPEC+ JMMC decided to keep output levels at their current rate until December.

COVID-19 Data (EOD):

Technical Analysis:

XAUUSD (H4)

It has been a rough week for the gold as the yellow metal has fallen more than 4.36% since Monday. On Friday, gold begins to consolidate around the 1863 area. Currently we can see that the bulls of gold have failed to penetrate the 1876 level a few times while the bears were also unable to break below the 1849 threshold, suggesting that the gold’s consolidation may take place between the 1849 and 1876 interval for the near term. Looking ahead, with the RSI slowly climbing back from the oversold 30 region, we expect some of the buying power to provide support to the bulls; nonetheless, if the gold were to go back of its 1900 level, a substantial break through at 1876 is necessary.

Resistance: 1876, 1900

Support: 1849, 1813

USDCAD(H4)

The Loonie trades higher above 1.3380 and touches the1.3421 on Friday. Mainly supported by good U.S. economic data that was released earlier in the day, which includes an increase of 0.4% in American Durable Good Orders in August, the continued growing DXY (at the time of writing sits at 94.60, a gain of 29%), and the uninspiring crude oil’s performance (pulling back from $40.60 to $39.90 on Friday), the Loonie resumed its bullish momentum that took place two days ago. However, a strong resistance 1.3421 seems to be a price level that will not be break easily. At the same time, with the short-term moving average 15 continues to overpower moving average 60, a slightly bullish trend is a price action that can be expected.

Resistance: 1.3421, 1.3459

Support: 1.3344, 1.3264, 1.3145

AUDUSD (H4)

The AUDUSD came under renewed bearish pressure during the American session and plummeted to its lowest level in over two months. The Aussie is now trading around 0.7029, a 0.19% shrink from previous day. Moreover, the Aussie is losing around 3.75% on a weekly basis, the biggest percentage decline since early March. The increased DXY weighed down on the already declining AUD, but with the Aussie approaching the oversold area on RSI, we can expect a upward correction might take place soon.

Resistance: 0.7070, 0.7149

Support: 0.7014, 0.6971, 0.6923