Daily Market Analysis from ForexMart

Forecast for USD/JPY on October 21, 2021

The yen has been trading at large daily volumes since the beginning of the week, however, the quotes have been changing all this time in narrow ranges at the technical level of 114.10. The Marlin Oscillator has been moving down since the beginning of the week. Taken together, this means that big players are closing positions and the decline to the first support at 113.12. Consolidation below the level may strengthen the downward correction. A full reversal will take place after the price consolidates below the MACD indicator line at 111.40. After the correction to 113.12, the growth may continue to the range of 115.80-116.15. Unless, of course, the stock markets fail. US indices closed mixed yesterday.

On the four-hour scale, the price approached the MACD line, the Marlin oscillator was already in the downtrend zone. Accordingly, if the price settles below the level of 114.10, which coincides with the support of the MACD line, we expect the price to move towards the target at 113.12 - to the embedded monthly-scale price channel line.

S&P 500 has renewed its all-time high

Investors continue to monitor the third quarter's corporate earnings season, as well as assess the potential impact of the White House's attempts to raise corporate taxes. Already published the results of about 70 companies whose shares are included in the calculation of the S&P 500. Profits in 86% of cases turned out to be better than the consensus.

The index of manufacturing activity in Philadelphia in October fell to 23.8 points compared with 30.7 points a month earlier. Experts expected a less significant drop in the indicator calculated by the Federal Reserve Bank of Philadelphia, that is, up to 25 points. A negative value of the index indicates a weakening of activity in the manufacturing sector of the region, a positive value indicates an increase.

The index of leading economic indicators in the United States in September rose by only 0.2%, according to the research organization Conference Board, which calculates this indicator. In August, the rise was 0.8%. The Conference Board index shows the expected development of the country's economy in the next 3-6 months. It is calculated on the basis of ten key economic indicators, seven of which are known even before the publication of the indicator.

US existing home sales rose 7% in September to 6.29 million homes on an annualized basis, the highest since January, the National Association of Realtors (NAR) said in a report. Experts surveyed by Trading Economics predicted an average increase of 3.6%.

Meanwhile, the number of applications for unemployment benefits in the United States has updated the minimum since the beginning of the pandemic. The number of Americans applying for benefits for the first time fell by 6,000 last week to 290,000, according to a report by the US Department of Labor. At the same time, analysts on average expected an increase to 300 thousand.

The Dow Jones Industrial Average on Thursday decreased by 6.26 points (0.02%) - to 35603.08 points.

Meanwhile, the value of Standard & Poor's 500 increased over the day by 13.59 points (0.3%), amounting to 4549.78 points.

Nasdaq Composite increased by 94.02 points (0.62%) - up to 15215.7 points.

International Business Machines slightly increased revenue in July-September, but the result was worse than expected. The company's shares fell 9.6% in the trading session, becoming the leader of the decline among the Dow Jones.

Chemical company Dow Inc. achieved a profitable level in the third quarter, with adjusted numbers and revenues above analyst expectations. Nevertheless, its shares lost 1.05% in price.

In addition, among the components of the Dow Jones index, shares of Chevron Corp., American Express Co. fell by 1% or more. and Caterpillar.

Southwest Airlines Co. returned to profitable levels in the third quarter and increased revenue better than expected. However, the airline's shares were down 1.6%.

Telecommunications company AT&T Inc., one of the largest in the country, more than doubled its net profit in the last quarter, but its revenue fell due to the spin-off. Its securities fell 0.6%.

At the same time, the cost of HP Inc. jumped 6.9%. The personal computer and printer company has significantly raised its annual dividend and also improved its profit forecast for the next fiscal year.

Electric vehicle maker Tesla posted record net profit and revenue last quarter. The company's shares gained 3.3%.

Trading plan for EUR/USD on October 25, 2021

The EUR/USD pair's upward movement is an impulse. The upward target remains the Weekly Control Zone of 1.1717-1.1700. It is necessary to fix purchases when testing this zone.

Trading in an upward direction remains a priority. Today, the main plan is to retain purchases. Based on our plan, favorable prices were obtained during last week's second half, that is, when testing the WCZ 1/4 1.1625-1.1621. When retesting the high of the previous week, transferring the position to breakeven is necessary.

A three-day flat can be an excellent support in the future for the re-purchase the euro. It is not profitable to consider the option of selling, since this requires the formation of a "absorption" pattern of the daily level.

It is necessary to consider corrective patterns when trading upward for repeated purchases when exiting the local flat of the last three days.

Forecast for USD/JPY on October 26, 2021

As we expected on Monday, the price spent the entire day sideways. The close of the daily candle was white, and the upward sentiment remained. The growth target is 115.80, and the signal level for continued growth to the target is the resistance at 114.45, which stopped the price on October 15, 18 and 21. The Marlin Oscillator is moving horizontally, which keeps the likelihood of a continuation of the downward correction to the support of the price channel line at 113.12 at about 35% - just like yesterday.

On the four-hour chart, the Marlin Oscillator crossed the border into bull territory. The price develops growth under the balance and MACD indicator lines, which creates difficulties for it. The MACD line is located near the signal level of 114.45, respectively, the price transition above the signal level will give the price an accelerated growth. We are waiting for the development of events.

Gold will confidently reach the $ 3,000 mark in a few months

Gold has been recently rebounding a lot at the level of $ 1,800. However, experts believe that it will not only be able to break out of this narrow range but will also start a confident rally.

On Tuesday, the yellow asset failed to withstand the onslaught of a stronger US dollar and fell below the psychologically important level of $ 1,800, which it broke a day earlier. As a result, the session on the New York Stock Exchange COMEX bullion ended with a decline. Gold plummeted by 0.7%, or $13.40, dropping to $1,793.40.

Meanwhile, silver also changed the route to a downward one. Yesterday, the gray asset sank by 2.1% or 50 cents. It was last seen at the level of $24,088.

The main downward factor for precious metals was the growth of the US currency. On October 26, the dollar index rose 0.2%. The US dollar was supported by new economic statistics.

On Tuesday it became known that the American consumer confidence index rose to 113.8 in October compared to the revised value of 109.8 in September.

The prices for the yellow metal fell on the same day amid investors' profit-taking. Despite the decline in the value of the asset, experts emphasize that an upward trend remains on the gold's daily chart.

Analyst Chintan Karnani believes that bullion has a chance to continue its short-term rally if quotes break through the key level of $ 1,800 again. At this stage, gold has all the prerequisites to do this.

Now, when the whole world is afraid of rising prices again and is on the verge of hyperinflation, the demand for the precious metal is growing noticeably, since gold is traditionally considered one of the best tools for hedging inflationary risks.

Many traders have already realized that central banks are wrong and global inflationary pressure will not be temporary. Analyst David Garofalo predicts that when the majority understands this, gold will move to steady growth.

The expert believes that after this strong aftershock occurs in the precious metals market, the asset will not only break its previous record but also soar much higher than $ 2,000. According to him, the price of bullion can reach the $ 3,000 mark.

Moreover, this will not happen within a few years, as other analysts predicted earlier, but literally in a few months. The rally of gold will be very rapid, D. Garofalo is convinced.

At the same time, his colleagues warn investors about the existing risks. The growth potential of the precious metal may be severely limited by forecasts regarding a more rapid increase in real interest rates by the US Federal Reserve.

Analysts advise traders to monitor any comments from the regulator on the pace of future rate increases. The next meeting of the Federal Reserve, where this issue may be raised casually, will be held on November 2-3.

The central theme of the meeting should be the beginning of a reduction in bond purchases. Statements on this topic can also affect the value of gold. Experts predict that a more rapid curtailment of incentives will lead to a decrease in quotes.

EUR/USD: US dollar is behind the euro, although it secretly wants to take the lead

The Euro currency rose after the ECB's monetary policy meeting. However, experts believe that this fact has caused a significant blow to the dominance of the US dollar.

As a result of the meeting, the European regulator retained its previous monetary strategy. However, analysts are confident that representatives of the regulator may change the current decision and revise the quantitative easing (QE) programs at the next meeting.

The "dovish" comments of ECB chairman Christine Lagarde helped the euro to rise and bypass its dollar rival in the EUR/USD pair. In particular, the euro was supported by statements about inflation. The regulator expects further growth in the near future and subsequent decline during 2022. According to Lagarde, the eurozone economy continues to recover, although at a slower pace than expected.

The current situation allowed the EUR/USD pair to break through the upper limit of the current range and briefly rise to 1.1700. On Thursday, the bullish mood remained for this instrument, when it managed to reach a new monthly high of 1.1686. On the morning of Friday, the pair slightly lost its position, trading near the level of 1.1670. It was supported by the collapse of the US dollar across the entire spectrum of the market.

The US currency collapsed to its lowest level in a month on the background of the triumphant euro. Experts emphasize that this decline occurred at the maximum pace over the past two weeks. The disappointing data on US GDP also worsened the situation. According to the US Department of Commerce, this figure increased by 2% in the third quarter of 2021, which turned out to be worse than forecasts. It can be recalled that analysts expected GDP to rise by 2.6%. However, the spread of the COVID-19 delta strain and supply disruptions have made their own adjustments.

This year, the American economy showed higher growth rates, which contributed to the overestimated expectations of specialists. In the first quarter of 2021, US GDP increased by 6.3% per annum, and in the second quarter, it reached a record 6.7%. However, the indicators of the third quarter brought the markets below, disappointing with their statistics.

According to economists surveyed by The Wall Street Journal, supply disruptions will continue in the United States until the middle of next year. This problem, along with the shortage of goods, will negatively affect further production in the country. In such a situation, experts warn that consumer spending will sharply decrease, and inflation rates will remain high.

An additional factor that pressures the US dollar is the expectation of a reduction in the Fed's stimulus programs. Many experts believe that the regulator will begin to cut incentives starting next month and it will raise the interest rate in 2022. The implementation of such a scenario will allow the EUR/USD pair to test the level of 1.1680 and head to new peaks. According to currency strategists at TD Securities, extrapolating the strength of the euro may create problems in the EUR/USD pair before the Fed meeting, at which a reduction in incentives will be announced.

Forecast for USD/JPY on November 2, 2021

The USD/JPY pair's growth target is the 115.80-116.15 range. The USD/JPY pair grew by 5 points on Monday, breaking the signal level of 114.32 with the upper shadow of the daily candle.

It may seem that in case of a failed price transition above the signal level with a decreasing Marlin Oscillator, the price will continue to fall, but here another reading of the oscillator is connected: its decline, marked with a red line, is a correction from the growth marked with a thick azure line. Marlin has not yet left the territory of the positive trend, with a high degree of probability the oscillator may turn upwards from the current levels. Also, the 114.32 signal level can be determined by mistake, because yesterday the price reversed from earlier levels - from the peaks on October 15 and 18. To break the upward trend, the price needs to do a very strong thing - to overcome the support of the embedded line of the price channel of the higher timeframe near the price of 113.15.

The price convergence with the oscillator continues to develop on the four-hour chart. Under favorable circumstances, the Marlin reversal from the forming support can occur from the current levels. It will become an assertive growth after the price has overcome yesterday's high of 114.46. The growth target is the 115.80-116.15 range. The benchmark for this target is the August 2015 low and the January 2015 low.

Forecast for EUR/USD on November 2, 2021

On Monday, the euro corrected Friday's fall by 47 points to move above the target level of 1.1572. But this does not cancel the downward trend from October 29th – a reverse return of the price under 1.1572 will strengthen the price's desire for the previously noted target of 1.1448.

The Marlin Oscillator is in a positive trend zone, its rate of change after Friday's fall in the euro has slowed down. This creates preconditions for the formation of its convergence with the price when it drops to the target level of 1.1448. This is the main scenario. It can be broken with the price settling above the MACD indicator line, above 1.1628. The 1.1750 target will open.

The four-hour chart shows that the price growth took place below the balance indicator line, that is, in line with the general downward trend. The Marlin Oscillator went above the zero line a little yesterday, into the area of the growing trend, but it still cannot strengthen there. After the price settles below 1.1572, we expect the development of a downward trend.

US stock markets are gushing with records: news from the US supports euphoria

On Tuesday, the leading indicators of the US stock market soared to record highs amid spectacular internal statistics of companies from the United States. The published reports of large enterprises have significantly improved investor sentiment regarding their securities.

Another tangible growth factor for the main indicators of Wall Street was the restless expectation by stock market participants of the results of an important meeting of the US Federal Reserve.

As a result, the S&P 500 and NASDAQ Composite stock indexes were at historical highs for the fourth consecutive session. Thus, the first of them increased by 0.37% to 4630.65 points, and the second – by 0.34% to 15649.60 points.

Meanwhile, the DJIA indicator reported another record closing for the third session in a row, gaining 0.39% and breaking through the 36,000 mark (Tuesday's trading result – 36052.63) points for the first time in history.

The strong reporting of companies from the United States in the third quarter against the backdrop of the recovering economy after the pandemic significantly exceeded the expectations of market participants. Most major manufacturers were able to increase product prices, maintain a steady level of profit margin and take advantage of high demand by increasing their revenue.

Spectacular reports from the largest US manufacturers continue to provide tangible support to the stock market. At the time of writing, about 320 companies have published internal statistics.

According to analysts' forecasts, the profit of the companies that make up the S&P 500 index in the third quarter will increase by 40.2% compared to the same period in 2020.

Shares of the American pharmaceutical giant Pfizer soared by 4.1% after the company announced that it expects sales of the COVID-19 vaccine, created jointly with the German manufacturer BioNTech, to increase to $36 billion. In the third quarter of this year, Pfizer's net profit increased 5.5 times, and revenue - 8.5 times. In addition, the company's analysts have significantly improved the annual forecast.

The stock quotes of the electric car manufacturer Tesla lost 3% on Tuesday. The company plans to recall more than 11,000 electric vehicles. The reason for the recall is an error in the software. Another important downward factor for Tesla securities was a message on Twitter from the company's director, Elon Musk. In his social network account, the entrepreneur announced that the deal with the American company Hertz Global Holdings Inc. for the purchase of 100,000 Tesla electric vehicles remains unsigned.

Shares of ConocoPhillips oil company from the United States sank 2.1%. It is reported that in the third quarter the company returned to profit due to a jump in the cost of hydrocarbons. In addition, the adjusted indicator significantly exceeded analysts' forecasts.

The long-awaited results of the meeting of the US Federal Reserve System are still in the focus of attention of stock market participants this week. Experts expect that on Wednesday the regulator will approve plans to reduce the $120 billion bond purchase program adopted to support the economy during the coronavirus pandemic. In addition, traders are waiting for comments from the Federal Reserve regarding interest rates and the duration of the current surge in inflation.

In the US, strong data on the labor market spurred the growth of stock indices to new records

The Dow Jones Industrial Average rose 203.72 points (0.56%) to 36327.95 points. Standard & Poor's 500 rose by 17.47 points (0.37%), that is, to 4697.53 points. The Nasdaq Composite added 31.28 points (0.2%) to 15971.59 points.

Over the week, the Dow Jones Industrial Average gained 1.4%, the S&P 500 rallied 2%, and the Nasdaq Composite gained 3%.

Pfizer Inc. Shares jumped in price by almost 11% by the end of trading. The pharmaceutical company said preliminary results from a trial of a drug it developed to treat COVID-19 showed 89 percent effectiveness. Pfizer plans to request FDA approval for the drug and expects to be able to begin shipping this year.

Merck & Co., another pharmaceutical company that is also developing a drug to treat COVID-19, fell 9.9%. Merck said last month that its drug reduced the risk of severe illness in 50% of cases.

Peloton Interactive Inc. collapsed by 35%. The company lowered its revenue forecast for the current year to $ 4.4-4.8 billion from the previously expected $ 5.4 billion, admitting that it underestimated the impact of the lifting of restrictions in the economy on its business. Peloton's sales forecast for the upcoming holiday season - $ 1.1-1.2 billion - turned out to be worse than the average forecast of experts polled by FactSet at $ 1.49 billion.

The papers of the portable camcorder manufacturer GoPro Inc. jumped 7.9% on the company's strong quarterly earnings. Earnings excluding one-off GoPro factors in the last quarter amounted to $ 0.34 per share, exceeding the consensus forecast of experts at the level of $ 0.2 per share, revenue increased by 13% to $ 317 million with an average market forecast of $ 292 million.

Uber Technologies Inc., which beat market forecasts in the third quarter, gained 4.2%, while Airbnb, which posted a record quarterly performance, gained 13%.

According to FactSet, about 82% of the S&P 500 companies that published their earnings for the past quarter beat earnings that beat analysts' expectations.

The number of jobs in the US economy in October increased by 531 thousand, at a maximum rate in three months, the Department of Labor said. According to the revised data, in September the figure increased by 312 thousand, and not by 194 thousand, as previously reported.

Unemployment in the United States fell to 4.6% in October, the lowest level since March 2020, down from 4.8% in September.

Experts on average expected an increase in the number of jobs in October by 450 thousand and a decrease in unemployment to 4.7%, according to data from Trading Economics.

The situation in the labor market is a key factor in the decisions of the Federal Reserve System (FRS) regarding the future level of the base interest rate. Fed Chairman Jerome Powell said during a press conference following the November 2-3 meeting of the US Central Bank that the maximum employment in the US economy can be achieved by the second half of 2022.

At the last meeting, the Federal Reserve decided to start curtailing the asset repurchase program. The central bank said it will reduce the volume of asset buybacks in November by $ 15 billion and will continue to cut the program in December.

USD to climb higher amid possible key rate hike in 2022

Market participants have been expecting the Fed to raise the benchmark rate for several months. However, analysts are concerned about the possible negative impact on the US dollar, although this is a rather unlikely scenario.

Earlier this week, James Bullard, the president and CEO of the Federal Reserve Bank of St. Louis, said that in 2022 the Fed would raise the interest rate at least twice. The regularize is expected to complete the QE tapering in the middle of next year.

These measures will help keep inflation under control, he stressed. "If inflation is more persistent than we are saying right now, then I think we may have to take a little sooner action in order to keep inflation under control," Bullard said in an interview. Regarding the possible hike in the key rate three or four times in 2022, Bullard evasively replied that it might occur.

Mr. Bullard believes that the US economy will expand at a fairly rapid pace next year. In 2022, the unemployment rate is projected to decrease as well and inflation will return to the target level. The global supply chain disruptions are the main cause of currently high inflation. These risks are likely to persist throughout next year, he said.

Naturally, uncertainty over the key rate is weighing on the greenback. Bullard's statements about two to four rate hikes may undermine the US dollar's growth. Many analysts note that the Fed is gradually preparing markets for a key rate hike. They are sure that it may happen quite soon. The US currency is trying to hold at its current levels. At the same time, the EUR/USD pair is also making attempts to resume the upward movement. Most of its attempts are successful. On November 8, the greenback slightly dipped to 1.1588, but then recouped its losses. On November 9, the EUR/USD pair reached the level of 1.1604. If the pair breaks above 1.1600, it may test the level of 1.1650.

Currently, the greenback is trading slightly below its annual high. Now, there are rumors that Biden is considering the appointment of a new chairman of the Federal Reserve. This is also bearish for the US dollar. On November 4, the Biden administration discussed the possible appointment of Leil Brainard, a member of the Board of Governors of the Federal Reserve, to this post. If so, the US dollar may drop significantly. According to experts, Brainard is likely to stick to an extremely cautious approach to monetary policy tightening.

This week, market participants are awaiting the release of the US inflation report for October on Wednesday. Analysts predict a rise in inflation to 5.8% from 5.4%. If so, the US dollar may regain ground. Now, the US dollar has slightly declined amid inflation expectations. Yet, it may recoup its losses after the publication of inflation data.