Daily market analysis

April 21, 2022

U.S. equities closed mixed Wednesday as investors took in a host of quarterly earnings results and looked ahead to more data. The Dow gained to extend advances from the previous session. The S&P 500, and the tech-heavy Nasdaq Composite underperformed as Netflix (NFLX) shares slumped after the company posted an unexpected decline in quarterly subscriber numbers. The streaming giant posted its worst day since 2004, with the stock down just over 35% by the end of the trading day.

Tesla Inc. reported better-than-expected first-quarter results, underpinned by strong demand for its electric vehicles, with Elon Musk predicting the output will grow at a fast pace for the rest of the year despite supply-chain challenges.

The first major U.S. automaker to report financial results for the first three months, Tesla easily beat estimates with a record profit. It cautioned that production remains constrained by shortages and higher prices for key components, a common refrain for automakers due to global bottlenecks in supplies of parts such as semiconductors.

But CEO Musk said Tesla should be able to make up for any production shortfalls in the first half of the year from pandemic shutdowns at its factory in Shanghai and is on track to expand production to more than 1.5 million vehicles this year. It delivered about 936,000 cars in 2021.

“We may pull a rabbit out of the hat,” Musk said on a conference call Wednesday. “Q3 and Q4 will be substantially higher.”

Main Pairs Movement

The US dollar succumbed to profit-taking on Wednesday as US yields pared back from multi-year highs, burnishing the greenback’s investment appeal somewhat. The US Dollar Index (DXY) slid back 0.6% to the low 100.00s having hit its highest levels since March 2020 above 101.00 on Tuesday, weighed primarily by downside in USD/JPY as the yen received some overdue respite.

USD/JPY dropped just over 0.8% on the day to back under the 128.00 level, more than 1.2% below intra-day multi-decade highs at 129.40 hits earlier in the session. But at current levels near 127.75, the pair still trades over 1.0% higher on the week and over 5.0% higher on the month, with little sign of a more meaningful yen rebound unless the BoJ signals some sort of policy stance shift.

The euro and sterling gained some ground against the US dollar counterpart on Wednesday, with decent Eurozone Industrial Production figures and hawkish ECB chatter about a potential July hike boosting the euro. However, the main driver of EUR/USD’s 0.6% recovery to the 1.0850 area and GBP/USD’s 0.5% rebound to above 1.3050 were probably the broad dollar weakness.

The commodity-linked currencies were notable outperformers on Wednesday. AUD/USD jumped about 1.0% to near 0.7450, NZD/USD gained about 1.0% to reclaim 0.6800 and test its 50-Day Moving Average at 0.6813, and USD/CAD dropped to two-week lows under 1.2500.

Technical Analysis

USDJPY (4-Hour Chart)

USDJPY heads south after surging toward 129.00 earlier today; the more- than 2.5% drop in the US 10- year yield seems to be weighing on USDJPY on Wednesday. Technically speaking, USDJPY remains bullish on the four-hour chart despite the sharp decline on Wednesday. The 100% Fib. The Retracement level at 129.4 looks to be a static resistance as the pair confronts a technical correction after hitting the resistance. At the time of writing, USDJPY is heading toward the immediate support at 127.41; failure to defend the level will make USDJPY turn downside in the near- term due to falling below the 20 SMA. To the upside, as long as the pair can stay above the ascending trendline, the outlook of USDJPY would remain bullish.

Resistance:  129.4

Support:  127.41, 126.18, 125.18

AUDUSD (4-Hour Chart)

AUDUSD recovers to strong intraday gains around 0.7430, just a few pips below the weekly high. From the technical perspective, the outlook of AUDUSD turns positive on the four-hour chart following the breakout of the descending triangular trendline. In the meantime, the breakthrough of the resistance level at 0.7432 brings the pair to near-weekly highs. The acceptance above the next immediate hurdle at 0.7471 will re-confirm AUD’s bullish tone; at the same time, trading above the level would possibly attract some follow-through buying. As the RSI indicator has not yet reached the overbought territory, there are rooms for AUDUSD to trade further north while the MACD has turned positive today.

Resistance: 0.7471, 0.7536

Support: 0.7432, 0.7372

EURUSD (4-Hour Chart)

EURUSD regains traction, climbing above 1.0850 as the US dollar weakens against its rival currencies following the more- than 2.5% decline in the US 10- year yield. From the technical perspective, EURUSD heads positively for a second consecutive day but is still far from turning bullish overall. However, as the pair has finally traded above its 20 and 50 SMAs, EURUSD turns upside in the near- term. The pair is expected to head toward the next immediate hurdle at 1.0932 as the RSI indicator has not reached the overbought territory and is currently located within the positive level, giving EURUSD room to extend further north.

Resistance: 1.0932, 1.1039, 1.1126

Support: 1.0758

Economic Data

CurrencyDataTime (GMT + 8)Forecast
NZD
CPI (QoQ) (Q1)
06:452.0%
AUD
Retail Sales (MoM) (Mar)
09:301.0%
EUR
CPI (YoY) (Mar)
17:007.5%
USD
Initial Jobless Claims
20:30180K
USD
Philadelphia Fed Manufacturing Index (Apr)
20:3021
USD
Fed Chair Powell Speaks
20:30N/A