- July 8, 2021
- Posted by: Analysis Team
- Category: FOREX, Technical Analysis
The Nikkei index declined sharply after recent data showed that foreigners were selling Japanese stocks. According to the Bank of Japan, they sold stocks worth more than ¥310 billion in June after selling an additional ¥147 billion in June. They have dumped the stocks in the past four consecutive months. This trend is partially because of profit-taking since the Nikkei index rose to the highest level in more than 31 years earlier this year. Investors are also concerned about the growth of the companies since the country’s recovery has been relatively slower than other countries. Foreigners also dumped Japanese bonds worth more than ¥190 billion.
Global stocks declined after the relatively hawkish FOMC minutes. The minutes showed that some Fed members were comfortable talking about tapering of asset purchases since the economy is doing relatively well. The unemployment rate is significantly below last year’s peak of almost 15% while the economy added more than 850k jobs in June. Further, there are concerns of the lingering supply shortages that will likely have a negative impact on the global economy. In the US, futures tied to the Dow Jones, Nasdaq 100, and S&P 500 index declined by more than 1% while the 10-year yield dropped to 1.68%. Similarly, in Europe, the DAX, FTSE 100, and CAC 40 also fell by more than 1%.
The USDCHF pair declined sharply, helped by the overall weak US dollar and the latest Swiss unemployment rate data. According to the Federal Statistics Office (FSO), the country’s unemployment rate declined from 3.2% in July to 3.1% in June. This decline was worse than the median estimate of 2.9%. The rate declined from 3.8% to 2.8% in non-seasonally adjusted terms. This rate is substantially better than that of other countries like Sweden, the UK, and the US. Elsewhere, German data showed that the country’s exports rose by 0.3% while imports rose by 3.4%.
The Nikkei 225 index declined to a low of ¥27,685, which was the lowest level since May 30. On the four-hour chart, the index moved below the lower side of the descending channel. It is also on the lower side of the Bollinger Bands. The Relative Strength Index (RSI) and DeMarker indicator have moved to the oversold level. Therefore, while the path of least resistance is lower, there is a possibility that a relief rally will happen soon.
The FTSE 100 index declined sharply as part of the overall sell-off of global stocks. The index declined to a low of £7,035, which was the lowest level since June 30. On the four-hour chart, the pair has moved below the Envelopes indicator. It is also along the lower line of the Bollinger Bands while the MACD has moved below the neutral line. Like the Nikkei 225 index, a brief relief rally is likely in the next few sessions.
The EURUSD pair rose to an intraday high of 1.1835. On the hourly chart, the pair is above the 25-day moving average. It has also moved substantially above this week’s low of 1.1780. The Relative Strength Index (RSI) has moved from the oversold level of 30 while the MACD has risen above the neutral line. Therefore, the pair may keep rising towards the resistance at 1.1850 during the American session.