Daily market analysis

April 6, 2022

US stocks wavered on Tuesday, dragged down by losses in tech, as investors weighed remarks by Fed Governor Lael Brainard that indicated policymakers were ready to act more aggressively to rein in inflation. Investors also monitored reports indicating the US and EU are expected to unveil more sanctions against Russia on Wednesday. The S&P 500 tumbled 1.26%, and the Dow Jones shed 280 points after climbing for two straight trading sessions. The Nasdaq Composite plunged 2.3%, which is its biggest drop in three weeks, and erase gains from a tech rally that helped the index pop on Monday.

The U.S., European Union, and Group of Seven are coordinating on a fresh round of sanctions on Russia, including a U.S. ban on investment in the country and an EU ban on coal imports, following the discovery of civilian murders and other atrocities in Ukrainian towns abandoned by retreating Russian forces.

The governments plan to increase penalties on Russian financial institutions and state-owned enterprises and will sanction unspecified Russian officials and their family members, said White House Press Secretary Jen Psaki.

“You can expect that they will target Russian government officials, their family members, Russian-owned financial institutions, also state-owned enterprises. It’s a part of the continuation of our efforts to put consequences in place, hold Russian officials accountable,” Psaki told reporters Tuesday, adding that an announcement would come Wednesday.

On the news of the new penalties, the ruble seems unaffected and remained sidelined against the greenback.

Main Pairs Movement

The American dollar is the overall winner on Tuesday as it outperformed all of its major rivals. Diminishing chances of a diplomatic solution to the Russia-Ukraine conflict and central banks’ aggressiveness shifted the investors to again embrace the safe-haven greenback.

At the beginning of the day, the Reserve Bank of Australia abandoned its patient stance, announcing an unexpected boost to the local currency. Governor Philip Lowe dropped the sentence “prepared to be patient” from its usual statement and hinted at an interest rate hike in June; in the American afternoon, US Fed Governor Lael Brainard hinted at an aggressive reduction of the balance sheet and noted that combined with rate hikes would move monetary policy closer to neutral later this year. His words sent the yield on the 10-year Treasury note to 2.567%, now holding nearby. Looking ahead, the US FOMC meeting minutes will be published later today.

The Euro pair plunged to 1.0900 while Cable trades around 1.3076. Aussie managed to retain some of its post-RBA gains but pulled down from a fresh 2022 high of 0.7660.  USD/CAD nears 1.2500 as crude oil prices edged sharply lower, with WTI currently hovering around $101.50 a barrel, and Brent at $106.10. Gold traded as high as $1,944.56 a troy ounce, now struggling around $1,920, amid renewed demand for the greenback.

Technical Analysis:

AUDUSD (4- Hour Chart)

The Aussie maintains its strong bid tone against the US dollar on Tuesday as the Reserve Bank of Australia loses its patience with the inflationary pressure, signaling the interest rate hike in June. From the technical perspective, AUDUSD has now entered a bullish consolidated phase following the breach of the resistance at 0.7600. The current RSI reading has reached the overbought territory, implying that the upside strength of the currency might pause for a brief adjustment. The pullback might now seem to find a decent support level at 0.7600. Since the MACD indicator continues to support the buyers, some follow-through buying will be seen as a trigger to push AUDUSD toward the psychological resistance at 0.7700.

Resistance:  0.7700

Support: 0.7600, 0.7471, 0.7432

Gold (4-Hour Chart)

Gold turns south following a jump above $1940. On Tuesday, gold once surged above $1940, but rapidly pullback to nearly $1930 as the time of writing after the Federal Reserve Governor Lael Brainard indicates that the central bank needs to take action on inflation by shrinking the balance sheet rapidly. From the technical aspect, the four-hour outlook of gold remains neutral as gold continues to consolidate between $1950 and $1920. In the meantime, the RSI reading hovers around the midline, showing the lack of buyers and sellers. On the upside, gold needs to offer an initial hurdle above $1951.78 to reclaim a bullish stance. On the flip side, failure to defend the immediate support at $1923 will attract sellers to attack the four-day lows near $1915.

Resistance: 1951.78, 1974.4363

Support: 1923.7477, 1878.4351

EURUSD (4- Hour Chart)

EURUSD experiences a difficult time shaking off the bearish pressure since last week as the US dollar is supported by the hawkish Fed and the upbeat ISM Services PMI data. From the technical perspective, the outlook of the EURUSD remains bearish, developing below its moving averages. At the same time, the intraday downside pressure has dragged EURUSD below its immediate hurdle at 1.0969. The downside break-through, it will increase near-term selling interest. The support level awaits at 1.0806. On the upside, EURUSD needs to climb above the near-term ascending trend line, which is around 1.1018 in order to reclaim short-term upside momentum.

Resistance: 1.0969, 1.1069, 101150

Support: 1.0806

Economic Data:

CurrencyDataTime (GMT + 8)Forecast
GBPConstruction PMI (Mar)16:3057.8
CADIvey PMI (Mar)22:0060.0
USDCrude Oil Inventories22:30-3.016M