Daily market analysis

April 18, 2022

US equities stopped trading due to the holidays, while Asian stocks look set for a muted open Monday before Chinese economic data that may shed light on the impact of Covid lockdowns. Japan’s equity futures fell, while other markets, including Australia, Hong Kong, and a large portion of Europe, remained closed for Easter. Contracts for the S&P 500 and the Nasdaq 100, which are heavily weighted toward technology, fell.

According to Goldman Sachs Group Inc., the Federal Reserve will face a difficult task in tightening monetary policy sufficiently to contain inflation without triggering a US recession during the next two years. The Fed’s primary challenge is to close the wage gap and slow wage growth to a level consistent with its 2% inflation target by tightening financial conditions sufficiently to reduce job openings without sharply increasing unemployment, Chief Economist Jan Hatzius wrote in a research report published on Sunday.

Achieving a so-called gentle landing may be difficult, as historically big drops in the gap have occurred exclusively during recessions in the United States. “At face value, these historical tendencies indicate that the Fed confronts a difficult path to a smooth landing,” Hatzius said. A recession is not a foregone conclusion, Hatzius noted, because the Fed will benefit from post-Covid-19 normalizations in labor supply and durable goods prices. There are more instances of countries in the Group of 10 advanced economies – which includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom – that have successfully implemented a gentle landing, he said.

Main Pairs Movement

The economic data released this week in the United States were highlighted by the highest monthly increase in the Consumer Price Index (CPI) since September 2005. Households are feeling the pinch as a result of soaring prices for necessities, as evidenced by this week’s retail sales figures. However, underneath the surface, there are signs that pandemic-related inflation is beginning to ease.

Recent UK economic figures followed the global trend toward greater inflation and slower growth. The March CPI data release in the United Kingdom revealed that inflation pressures increased even further last month. Headline CPI is now at a 30-year high, quickening more than expected to 7% YoY.

Greenback won over most of its major rivals last week. The Euro pair closed the week 0.62 % lower at 1.0808, while Cable managed to climb 0.68% in the same period, last seen at 1.3055. The Japanese Yen depreciated by 1.67%, at 126.35 against the US dollar, while its Chinese peer stayed almost sidelined in value. Commodity-linked currencies were also limped during last week’s trading, with USD/CAD up 0.40% to 1.2572, and AUD/USD down 0.51% to 0.7458.

Technical Analysis

GBPUSD (4-Hour Chart)

GBPUSD steadies in a tight range above 1.3050 after the ECB’s policy decision yesterday. From the technical view of point, GBPUSD’s bears seem to face corrective action on the four-hour chart. The currency pair has been corrected to a near 50- period Simple Moving Average and now is providing an optimal opportunity for the buyers as the MACD turns positive, lending some support to bulls. At the same time, the RSI indicator continues to hover around the midline, suggesting the directionlessness of the price. Failure to defend the current support level will turn the currency pair to the downside, heading further south toward 1.2974.

Resistance: 1.3120, 1.3165, 1.3211
Support: 1.3064, 1.2974

AUDUSD (4-Hour Chart)

AUDUSD does not move significantly in a sleepy session on Friday; however, the downside looks ahead as the demand for the safe-haven dollar continues to gain traction. From the technical perspective, the outlook of AUDUSD looks downside since early April as the support level at 0.7471 was broken. And now, the bearish double top formation reconfirms AUDUSD’s bears. As the RSI has not reached the oversold territory and is within the negative area, AUDUSD has room to decline further south toward the next support at 0.7372. The bulls seem to lack momentum unless the pair climbs back above 0.7471.

Resistance: 0.7432, 0.7471, 0.7536
Support: 0.7372, 0.7277

EURUSD (4-Hour Chart)

EURUSD recovers above 1.0800 after suffering the heavy slump from Thursday. With the market moves subdued on Easter Friday, EURUSD edges slightly higher. From the technical aspect, the intraday bias continues to be bearish for EURUSD as the pair still trades below the 20 and 50 Simple Moving Averages. At the time of writing, despite EURUSD moving slightly higher on Friday, it faces the immediate support at 1.0758 and 1.0800, the psychological support; in case both levels turn into resistances, the pair can test 6- month lows if the levels fail to defend.

Resistance: 1.0932, 1.1039, 1.1126
Support: 1.0758

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CNYGDP (YoY) (Q1)10:004.4%
CNYIndustrial Production (YoY) (Mar)10:004.5%