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Earlier on Thursday, OPEC and its allies appeared to have an agreement in principle to boost output by 400,000 barrels a day each month from August to December

Market Focus

All three major US stock indexes ended the session in positive territory. The Dow Jones Industrial Average added 131.02 points, or 0.38%, to 34,633.53, the S&P 500 put on 22.44 points, or 0.52%, to 4,319.94 and the Nasdaq Composite added 18.42 points, or 0.13%, to 14,522.38.

Earlier on Thursday, the Organization of Petroleum Exporting Countries and its allies appeared to have an agreement in principle to boost output by 400,000 barrels a day each month from August to December. It would also have extended the duration of the broader OPEC+ accord, setting the final expiry of the cuts in December 2022 instead of April.

That preliminary agreement was upended by the United Arab Emirates, which said it will block the deal until the baseline for its cuts is adjusted, effectively raising its production quota, delegates said.

“Any request to adjust the production quota would be like opening Pandora’s box,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. That could add up to a production increase of about 700,000 barrels a day for the UAE alone, and “other OPEC+ states might also request an adjustment.”

The standoff between the United Arab Emirates and the rest of the cartel could ultimately mean that OPEC+ won’t increase production at all, according to a delegate. Without a deal, it would fall back on existing terms that call for output to remain unchanged until April 2022. That would squeeze an already tight market, risking an inflationary price spike.

The dramatic turn of events leaves the market in limbo — just as inflationary pressures are fixating investors with oil above $75. It also tarnishes the cartel’s carefully reconstructed reputation, raising the specter of the destructive Saudi-Russia price war of last year.

Main Pairs Movement

The US dollar has started the month on a solid footing after closing June with a total 2.81% gain, being the best month in four and a half years. On Thursday, ahead of the highly anticipated Nonfarm Payrolls report, the dollar hit three-month highs but traded within narrow ranges as traders get set for more clues on whether the Federal Reserve will start to reduce monetary stimulus sooner rather than later. The U.S. dollar index rose to 92.601, the highest since early April.

The euro pair fell to 1.1837 as a fresh low amid upbeat domestic data, which Eurostat announcing that the Unemployment Rate declined to 7.9% in May, compared to analysts’ estimate of 8%. Additionally, Markit Manufacturing PMI edged higher to 63.4 in June and surpassed the market expectation of 63.1.

Sterling dropped on Thursday after Bank of England Governor Andrew Bailey warned against over-reaction to rising inflation in Britain. Cable slipped in morning trading to $1.3752, its lowest level since April.

Both antipodean pairs breached their critical support line and now trading at worse prices. NZD/USD dived below 0.7000, while AUD/USD violated the 0.7500 support line and trades at 0.7470 as of writing; the loonie pair ended the day at 1.2430.

Gold priced higher despite yet another surge in the US dollar, sitting at $1,776.30 in the close; Crude oil price headed to the north supported by demand optimism and increased output. WTI was at $75.00 and higher by 2.06% at the end of the day, while Brent bounced off the yearly high at $76.71 and closed with a modest gain at $75.58.

For the day ahead, it is all about the highly anticipated US Nonfarm Payrolls.

Technical Analysis

USDJPY (4- Hour Chart)

USDJPY advances further north and stands above 111.00 yardsticks ahead of Friday’s US Nonfarm Payrolls data. From the technical aspect, the break of the previous day’s resistance at 111.12 confirms USDJPY’s bullish outlook on the 4- hour chart. At the moment, further upside move remains optimistic on the cards amidst the current atmosphere. The pair has traded to the highest level since March 2020. The MACD signals that the pair is on the way to sustain its positive move; however, the pair might face an adjustment before heading toward the next immediate hurdle at 111.63 as the RSI reading is above 70, in the overbought territory.

Resistance: 111.63

Support: 110.91, 110.46, 110.10

EURUSD (4- Hour Chart)

EURUSD hovers around its support level at 1.1837 amid US mixed economic data today with upbeat US jobless claims and worst-than-estimate ISM Manufacturing PMI. From the technical viewpoint, EURUSD pauses its descending momentum, bouncing off the lows to push the RSI away from the 30 levels, the oversold condition on the 4- hour chart; however, the downside momentum of the pair does not end in the outlook since pushing the RSI above 30 will allow for more falls afterward. Moreover, momentum remains downside due to the pair continues to trade below the 50, 100, and 200 SMAs. On the downside, if the fall resumes, then it is expected to the pair head toward the next support at 1.1704, the lowest level since March.

Resistance: 1.1919, 1.1985, 1.2052

Support: 1.1837, 1.1704 

GBPUSD (4- Hour Chart)

GBPUSD tumbles to fresh monthly lows under the 1.3770 level during the American session after the comments from BOE’s Andrew Bailey. From the technical perspective, the earlier break of the support at 1.3793 has re-confirmed GBPUSD’s bearish trend, which signals that downside momentum remains robust on the 4- hour chart. It is expected to see the pair continue descending as the RSI is well above 30 readings, outside of the oversold territory, giving the pair rooms to extend further south. In the meantime, remaining to trade below the 50, 100, and 200 SMAs also suggests that the pair is under pressured. On the downside, the pair is expected to head toward its next support level at 1.3675, the lowest point since March.

Resistance: 1.3793, 1.4007

Support: 1.3675

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