US500
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Wall Street indices finished yesterday’s trading mixed - Dow Jones and S&P 500 dropped while Nasdaq gained fueled by solid performance of Microsoft and NVIDIA
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US index futures caught a bid after close of the session following better-than-expected earnings release from Meta Platforms
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Meta Platforms jumped over 11% in the after-hours trading, following Q1 earnings release. Company reported Q1 EPS at $2.20 (exp. $2.03), revenue at $28.65 billion (exp. $27.65 billion) and revenue per user at $9.62 (exp. $9.30)
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Meta had 2.04 billion daily active users in Q1 2023 (exp. 2.01 billion) while monthly active users were reported at 2.99 billion - in-line with expectations. Meta’s Reality Lab reported a $3.99 billion operating loss and company expect this losses in the unit to increase this year
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Indices from Asia-Pacific traded mostly higher today - Nikkei and Nifty 50 gained 0.1%, Kospi moved 0.4% higher and indices from China traded up to 0.7% higher. S&P/ASX 200 was a laggard and dropped 0.4%
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DAX futures point to a slightly lower opening of the European cash session today
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The US House of Representatives passed a bill on spending cuts and debt ceiling. However, bill still needs to win backing in the Senate
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New prime minister of New Zealand Hipkins said that there will be no major tax changes in the upcoming budget announcement (May 18, 2023)
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Russian deputy prime minister Novak said that OPEC+ cooperation may be extended beyond this year (current agreement is valid until end-2023)
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Chinese industrial profits dropped 21.4% YoY in the January-March period. Profits were down 19.2% YoY in March alone
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Cryptocurrencies are trading higher - Bitcoin gains 1.6% while Dogecoin and Ethereum jump 1.7%
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Energy commodities trade little changed this morning - oil gains 0.3% while US natural gas prices drop 0.1%
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Precious metals benefit from USD weakness and trade higher - gold adds 0.6%, silver gains 0.7% and platinum jumps 1.1%
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AUD and NZD are the best performing major currencies while JPY and USD lag the most
US500 recovered part of yesterday’s losses after Meta reported better-than-expected earnings. Nevertheless, the technical picture remains bearish following the recent failure to break above the upper limit of the Overbalance structure at 4,190 pts.
USDJPY
USDJPY is one of the FX pairs that may see elevated volatility until the end of the week. This is because of a number of top-tier releases and events from the United States and Japan, scheduled for the final two days of the week. Traders will be offered a flash release of Q1 GDP report from the United States today at 1:30 pm BST and PCE inflation data for March tomorrow at 1:30 pm BST. In between those two releases, the Bank of Japan will announce its monetary policy decision.
The US GDP report is expected to show a slowdown in annualized growth rate from 2.6% in Q4 2022 to 2.0% in Q1 2023. PCE inflation for March is expected to show deceleration in core measure from 4.6 to 4.5% YoY. However, a rate decision from the Bank of Japan is potentially the biggest volatility event of the three. This will be the first BoJ meeting after Ueda took over as governor and because of that there are hopes that he may push for a change in BoJ’s ultra-loose monetary policy. While it looks rather unlikely that any major policy change will be delivered tomorrow, one cannot rule out significant changes in an accompanying statement. Any hints at a hawkish shift could be a significant driver for USDJPY moves.
Taking a look at USDJPY chart at H4 interval, we can see that the pair has been trading in an upward channel since late-March. Advance was halted recently at 61.8% retracement of the downward move launched on March 8, 2023 (134.77 area) and the pair started to pull back. However, unless we see a break below the lower limit of the channel and below the lower limit of the Overbalance structure later on, technical picture continues to favor buyers.
US100 tests 13,000 pts ahead of GDP data
Reading close to market estimates could be a positive for Wall Street and may help alleviate concerns around banking sectors. Simultaneously, it should be neutral for USD as it will be more reactive to Fed. A strong GDP reading could provide fuel for USD gains as it would boost odds for more hikes from Fed. This, in turn, could be negative for Wall Street. Weak GDP report may have mixed impact on Wall Street but would most likely be negative for USD.
US100 is trading in the 13,000 pts area. Yields resumed climb (drop on TNOTE) and suggest a pullback.
3 markets to watch this week
First week of May looks busy, especially the second half of it, as investors will be offered top-tier macro data from North America as well as rate decisions from Fed and ECB. Stock markets will continue to react to earnings. Among top earnings releases next week one can find Apple, AMD and Qualcomm. Be sure to watch GOLD, USDCAD and US100.
GOLD
Investors will get rate decisions from two major central banks next week - Fed on Wednesday, 7:00 pm BST and ECB on Thursday, 12:45 pm BST. Both banks are expected to deliver 25 basis point rate hikes. Forward guidance will be crucial - hint that rate hike cycle is about to be paused, or nears its end, could be an important mover for GOLD which has recently struggled to climb back above $2,000 per ounce. On the other hand, hawkish guidance would be negative for precious metals and can add more fuel to recent pullback.
USDCAD
While central bank decisions will be the most closely watched events in the week ahead, investors will also be offered some top-tier macro releases. USDCAD may experience elevated volatility on Friday as jobs reports for April from the United States and Canada will be released at 1:30 pm BST. Apart from that, USD may also see some moves on the release of manufacturing ISM (Monday, 3:00 pm BST), ADP employment report (Wednesday, 1:15 pm BST) and services ISM (Wednesday, 3:00 pm BST).
US100
Solid earnings reports from Meta Platforms, Microsoft and Alphabet helped lift sentiment towards the tech sector this week. Apple, the final of the 5 US mega-tech companies, will report earnings next week on Thursday after the close of the Wall Street session. Earnings reports from two semiconductor companies - Advanced Micro Devices (Tuesday, after market close) and Qualcomm (Wednesday, after market close) - may provide additional fuel for moves on Nasdaq-100 index (US100).
DE 30
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Friday marked the end of April trading and it ended with solid gains, sending DE30 to the highest level since January 2022 and US indices to back to resistance zones. For DE30 it was the fourth straight green monthly candle meaning that each month of 2023 has been positive so far.
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Monday trading has been subdued as trading is halted on most markets due to the Labour Day holiday. US indices are trading close to Friday’s session highs and JAP225 is adding around 0.5%.
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The Chinese PMIs were released over the weekend and they both were below expectations. The services index slid from 58.2 to 56.4 points but more worryingly the manufacturing one dropped from 51.9 to as low as 49.2 points, just around 4 months after the China reopening. It suggests that while domestic demand picked up on reopening, the global manufacturing keeps struggling.
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Adding to those concerns, the Australian PMI dropped from 49.1 to 48 points. However, manufacturing PMI in India expanded from 56.4 to 57.2 points in a rare showing of manufacturing strength.
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Investors were reminded of the US banking issues last week when the First Republic Bank kept suffering deposit flight and eventually the regulator announced that the Bank would be sold. The idea was to sell the Bank over the weekend, however, the process continues as of the Monday morning.
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The markets did not seem overly concerned though, using strong earnings reports from Microsoft and Meta to catapult stocks towards the 2023 highs.
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FX markets are bit mixed as of today with AUD being the strongest and the JPY the weakest currency. The JPY could be under pressure after the BoJ did not change the course of monetary policy with the new chairman at the helm.
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Crypto markets are sliding after strong gains in recent weeks while the majority of the commodity markets are down as well.
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The calendar for today is mostly focused on the US releases with the ISM (4pm CET) the key release.
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The week has a chance to be very eventful with the FOMC (Wednesday) and the NFP report (Friday) the main points on the calendar.
There’s a large divergence between the US500 that is at the resistance and AUDUSD just picking up off the support zone. The Fed meeting this week should clarify the picture for the markets.
AUDUSD
- Asian shares were mixed on Tuesday, with some markets closed or anticipating holidays.So far, markets do not react in any particular way to the latest development in the U.S. banking sector.
- Japan’s Nikkei 225 (JAP225) is down 0.3% to 29,150 with no trading sessions in Tokyo for the rest of the week due to the Golden Week holidays.
- EU main indices are expected to open slightly lower in today’s trading session, with Germany’s DE30 down 0.15% at 16,030 and France’s FRA40 down 0.08% at 7,460.
- US main CFD on indices are trading slightly higher, with US500 futures up 0.11% at 4,184 points and US100 futures up 0.13% at 13,300 points.
- The Reserve Bank of Australia (RBA) held a policy meeting at 5:30 (BST). Unexpectedly, RBA raised the official cash rate to 3.85%. This came as a surprise to investors who had expected the RBA to keep OCR unchanged.
- The Australian dollar rose to its highest level in a week due to an unexpected rate hike. In fact, the bank even suggested that there could be more rate increases in the future. AUDUSD is trading 1.2% higher at 0.6706.
- The Reserve Bank Board of RBA is concerned that predictions of continued high inflation will lead to bigger rises in both prices and wages. RBA also stated that soft landing will be difficult to achieve.
- Markets are bracing for the U.S. Federal Reserve’s upcoming interest rate decision, with oil prices and currencies remaining relatively stable. Oil Brent is trading at $79.4 and is up 0.05%. The US dollar depreciated slightly with EURUSD trading 0.12% higher at 1.0989.
- Morgan Stanley is reportedly planning to start a new wave of job reductions due to concerns about expenses and the delay in dealmaking recovery due to fears of a recession. Sources suggest that a cut of around 3,000 positions globally by the end of this quarter is discussed.
The AUDUSD currency pair has risen to its highest level in a week, reaching 0.6704 points after rising from 0.66199 points. Currently, there have been no observed corrections in the price movement.
DE30
On Wednesday, German Index DAX opened higher after a long weekend due to the Labor Day on Monday. Today’s stock market session in Europe brought a continuation of the uptrend. The German DAX (DE30) started strongly after the opening bell and set new highs for this year. However, the momentum did not last long, and a few minutes after the session started, profit-taking occurred, resulting in the DE30 being traded in negative territory.
From the technical analysis point of view, on the chart a false breakout above the consolidation level occurred. After DE30 dropped below the zone around 16,060 points, the decline accelerated and the price touched the EMA100 moving average, where the bulls came into play. If the moving average is defended and a hammer formation appears on the H1 chart, there is a possibility of a retest of resistance levels around 16,060 points. On the other hand, if the formation is invalidated and the price drops below the moving average, a further decline towards last week’s lows around 15,830 points cannot be ruled out.
GBPCHF All set to fall
GBPCHF is currently at 1.1198 in a range and looking for a breakout of slope support. We are in the start of a channel, and we are looking for a continuation to the 1.000 Fibo at 1.1149 with a further target the ATR target at the 1.1125 area.
Watch the USDX for direction. The average daily true range (ATR) for the pair is 69 pips per day and it’s 180 day average is 82 pips per day. USDX is currently moving up but at a range top-watch for it to short.
Gold confirms the breach
Gold prices confirmed breaching the symmetrical triangle’s resistance line and settled with a daily close above it, to resume the main bullish track and head towards achieving positive targets that start by testing the recently recorded high at 2048.70, supported by moving above the EMA50.
Therefore, we are waiting for more expected rise in the upcoming sessions, and the price needs to hold above 1992.20 to guarantee the continuation of the bullish wave, as breaking this level will press on the price to return to the correctional bearish trend again and open the way to visit 1957.30 areas on the near term basis.
USDCAD
Despite natural gas price sideways fluctuation between 1.950 support and 2.500 resistance, the major indicators provide the negative momentum again, to increase the chances of renewing the negative attempts in the near term and medium term period.
Succeeding to break 1.950 support line will open the way to form new bearish waves to target the historical support at 1.4800 followed by reaching the psychological support at 1.
Oil
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Major Asian stock indexes ended the session lower after yesterday’s slump on Wall Street.
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Chinese and Japanese markets were closed today for holidays.
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Retail sales data from Australia came in slightly better than expected. March retail sales came in at 0.4% on a monthly basis, against expectations of 0.3% month-on-month and the previous reading of 0.2% month-on-month.
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The Reserve Bank of New Zealand released its latest Financial Stability Report today.
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Governor Adrian Orr says that New Zealand’s financial system is well placed to handle the higher interest rate environment and international financial disruption.
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New Zealand’s labor market report for Q1 showed the addition of new jobs and a lower-than-expected unemployment rate.
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Data from NZ, combined with the RBNZ’s lack of stability concerns, increase the chances of a RBNZ rate hike at its next meeting. That is scheduled for May 24.
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NZD/USD rose on the session to highs just above 0.6250.
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Bank of Korea Governor Rhee spoke in an interview saying, amongst other points, that it’s a little bit premature to talk about a policy pivot.
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Across major FX the USD lost ground against a higher JPY, CHF, EUR and GBP. AUD and CAD lagged.
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Investors are awaiting a decision on interest rates in the US.
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In addition to the Fed decision, today will see the release of the ADP report and the ISM index for services, as well as data on US oil inventories.
Crude oil scored a weak session yesterday. OIL.WTI quotes are on track to test support at the round $70 level.
Gold - Chart of the Day
GOLD managed to break the key resistance at 2010.5$ during yesterday’s session, and left the local consolidation, which was related to the rebound on EURUSD. Earlier, the price of this precious metal reacted several times to the support at $1972, which resulted from the lower limit of the 1:1 structure. According to the Overbalance methodology, the upward trend is in force, and breaking the aforementioned resistance at 2010.5$, may open the way for an attack on the recent highs at 2048$. This evening, due to the FOMC decision, volatility on the USD should be elevated, and consequently we should see bigger movements on gold as well.
The decision should not come as a surprise because the market has long been considering the scenario of a 25 basis point hike and keeping the option of another hike in June. Nevertheless, investors will focus on the Fed announcement and the further trajectory of monetary policy. The key question is whether any interest rate cuts are being considered this year.
Gold
Gold prices rallied upwards sharply by today’s open, as the prices are affected by the FOMC rate hike, to surpass our waited target at 2048.70 and record new historical high at 2080, to hint the continuation of the bullish trend domination on the short term and medium term basis, but we notice that the price declines quickly to settle below 2048.70, which makes us prefer to stay aside until the price confirms its situation according to this level followed by detecting its next destination clearly.
The contradiction between the technical indicators provides another reason for neutrality, as stochastic shows clear negative signals now, while the EMA50 provides the continuous positive support to the price. Note that breaching 2048.7 and holding above it will lead the price to resume the bullish wave and achieve positive targets that reach 2098, while consolidating below it will press on the price to achieve intraday bearish corrections that target testing 2017 areas initially.
GBPUSD touches the target
The GBPUSD pair continued to rise yesterday to succeed touching 1.2580 level, noticing that the price begins today with new rise to attempt to confirm breaching this level, to continue suggesting the bullish trend for the upcoming period, reminding you that our next station is located at 1.2650.
The bullish channels continue to organize the suggested bullish wave, which gets continuous support by the EMA50, noting that holding above 1.2510 is important to achieve the waited targets, as breaking it will press on the price to achieve some intraday bearish correction before turning back to rise again.
Oil
Oil prices, including Brent and WTI, dropped more than 5% after yesterday’s FED meeting regarding interest rates. Oil.WTI dropped below $69 - the lowest level since March 24, 2023. Prices fell from $71.5 per barrel to as low as $63.6 per barrel. However, prices have rebounded slightly from lows. Higher volatility was caused by rising concerns about the global economy and demand. The re-emergence of US banking problems and OPEC+‘s unwillingness to intervene are also contributing factors. The collapse of First Republic Bank has increased the risk of recession in the United States and China’s post-COVID demand recovery is slower than expected. The oil producers’ calendar remains unchanged, with the next meeting scheduled for June.
Looking at the technical analysis of OIL.WTI on the H4 interval, after midnight the downward trend intensified and a tests of the lows from March occurred at $63.6 per barrel. However, the price decrease was temporary and bulls responded immediately at the support level resulting in a pro-growth hammer formation on the chart. If the upward trend continues, attention should be paid to two resistance levels. The first, at $71.30 is derived from measuring the 38.2% Fibonacci retracement of the last downward wave. The second resistance level is around $74 and set at the previous local lows and the next Fibonacci retracement - 50%. On the other hand, If the bearish sentiment extends, the support level should be at $66.30, which is the upper limit of the 1:1 formation breakout.
DE 30 Vulnerable to further losses
The DAX futures / DE30 is pulling back from the yearly high this week and testing the previous week’s low.
W1 chart
The horizontal trend line at 15,816 points seems to be holding. This offers the chance for a recovery - as in the past two weeks. A break to the downside could in turn mean targeting the breakout level at 15,698 points - then later the interim high at 15,463 points.
M15 chart
The sell-off has been stopped. However, this does not change the downward trend structure. As long as the DAX does not have higher highs and higher lows above the moving averages and a change in direction is confirmed by a crossover, the index is vulnerable to further losses.
USDCAD
As is usually the case for the first Friday of a new month, traders will be offered jobs data from the United States and Canada. Both reports will be released at 1:30 pm BST today, meaning that USDCAD is likely to experience a jump in short-term volatility around that hour.
Of course, the US report will draw more attention. The NFP report for April is expected to show an employment gain of 180k as well as an uptick in the unemployment rate to 3.6%. Wages are expected to increase 0.3% MoM but on an annual basis wage growth is seen staying unchanged at 4.2% YoY. Labour market data has been quite solid as of late and yet it did not discourage Fed from hinting that a pause in rate hike cycle is coming at the next meeting in June. Having said that, the impact of potential NFP beat today may be more short-term and won’t alter rate expectations. When it comes to Canadian data, employment is expected to have increased by 21.5k jobs in April while the unemployment rate also ticked higher, from 5.0 to 5.1%.
Taking a look at USDCAD chart at D1 interval, we can see that the pair has been trading sideways recently. An attempt to break above the 1.3675 resistance zone was made at the turn of April and May but bulls failed to push the pair above it. Pair started to pull back and is now testing and support zone ranging around 1.35 handle and marked with 200-session moving average (purple line), previous price reactions as well as 23.6% retracement of the upward move launched in June 2021.
EURUSD leans on the moving average
EURUSD pair tested the EMA50 that formed good support at 1.1010 and kept its stability above it, to start today positively and attempts to resume the main bullish trend, noticing that stochastic provides clear positive signals now, waiting to motive the price to provide more positive trades in the upcoming sessions, waiting to breach 1.1075 to confirm rallying towards 1.1150 as a next target.
Therefore, we will continue to suggest the bullish trend on the intraday and short term basis, noting that breaking 1.1010 will stop the positive scenario and put the price under additional negative pressure to head towards visiting 1.0945 level before any new attempt to rise.
