Daily market analysis

May 4, 2022

US stock advanced on Tuesday amid a better market mood, facing another volatile session as investors await the key Fed policy announcements later this week. The Fed is expected to raise rates by 50 basis points on Wednesday and traders will be closely watching for any clues on whether a 75 bps hike is possible in June. Meanwhile, the concerns about the rising inflation pressures and China’s Covid-19 spread still remained. Beijing will likely go into a strict city-wide lockdown like Shanghai if China authorities fail to contain the Covid-19 outbreak. On the economic data side, the Factory Orders and JOLTS Job Openings data from the US were better-than-expected, providing some support to the US dollar yesterday.

The benchmarks, S&P 500, Nasdaq 100, and the Dow Jones Industrial Average both rose on Tuesday amid uncertainty over the Fed’s policy announcement and slightly upbeat sentiment. S&P 500 was up 0.5% on a daily basis and the Dow Jones Industrial Average also advanced with a 0.2% gain for the day. Nine out of eleven sectors stayed in positive territory as the energy and financial sectors are the best performing among all groups, rising 2.87% and 1.26%, respectively. The Nasdaq 100 stayed in positive territory with a 0.2% gain on Tuesday and the MSCI World index climbed 0.4%.

Main Pairs Movement

The Reserve Bank of Australia raised its cash rate by 25 basis points. The Fed and the Bank of England will announce their decisions in the upcoming days, both could pull the trigger by 50 basis points. The 10-year U.S. Treasury yield peaked at 3% on Monday, while the German bund yield exceeded 1% for the first time since 2015.

EUR/USD hovered around 1.0510 in early Asian trade, while GBP/USD could not hold above the 1.2500 level. Commodity-linked currencies have edged higher against their US counterparts, with AUD/USD currently trading around 0.7090 and USD/CAD around 1.2840.

Gold is slightly higher, currently trading at around $1,866 per troy ounce. Crude oil prices are down, with WTI changing hands to $102.75 per barrel.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Tuesday, recovering from new 2022 lows below the 1.050 mark that touched last week. The pair were flirting with the 1.050~ 1.052 area during the Asian session, then started to see heavy buying and rebounded towards the 1.058 level heading into the US session. The pair is now trading at 1.0536, posting a 0.33% gain on a daily basis. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the profit-taking in the US dollar and the better market mood both weighed on the greenback. However, the better-than-expected Factory Orders data should limit the losses for the dollar. For the Euro, the dovish expectations that the ECB will not tighten its monetary policy as much as the Fed in 2022 might keep capping the upside for the EUR/USD pair.

For the technical aspect, the RSI indicator is 46 figures as of writing, suggesting that the downside is more favored as the RSI stays below the mid-line. As for the Bollinger Bands, the price fell from the upper band after touching it, which showed that the downside momentum should persist. In conclusion, we think the market will be slightly bearish as the pair is heading to re-test the 1.048 support, which is the 5-year low for EUR/USD pair. The falling RSI also signals a bear trend for the pair, so the rebound today seems corrective.

Resistance: 1.0649, 1.0810, 1.0921
Support: 1.0485

GBPUSD (4-Hour Chart)

The pair GBP/USD edged higher on Tuesday, regaining some positive momentum, and ended its slide that started last Friday amid the return of UK market participants from a bank holiday. The pair was trading higher after the market opening and touched a daily high around 1.256 level, then retreated back to surrender some of its daily gains. At the time of writing, the cable stays in positive territory with a 0.23% gain for the day. The renewed US dollar strength is mainly due to the upbeat Factory Orders and JOLTS Job Openings data from the US. The market focus now shifts to the key Fed and BoE policy announcements this week. For the British pound, the Fed/BoE policy divergence might acts as a headwind for the cable, as the nation’s central bank is worried about UK economic weakness. Investors now expect a 25 bps rate hike by the BoE.

For the technical aspect, RSI indicator 43 figures as of writing, suggesting that downside is more favored as the RSI stays below the mid-line. For the Bollinger Bands, the price failed to climb higher and crossed below the moving average, indicating a continuation of the downside trend. In conclusion, we think the market will be slightly bearish as the falling RSI suggests near-term losses for the pair. A break below the 1.2492 support should lead the cable to test its 2022 lows at 1.2430.

Resistance: 1.2585, 1.2761, 1.2865
Support: 1.2492, 1.2430

USDCAD (4-Hour Chart)

As the DXY index retreated to a daily low near the 130.05 mark amid the profit-taking in the US dollar today, the pair USD/CAD stayed under bearish momentum and extended its intraday losses. The pair saw fresh selling in early trades today but witnessed a goodish rebound to daily tops in the European session, now sliding back and refreshing its daily low below the 1.283 level. USD/CAD is trading at 1.2840 at the time of writing, losing 0.30% on a daily basis. The weaker US dollar across the board is dragging the pair lower, as US dollar bulls took profits ahead of the Federal Reserve meeting. On top of that, falling crude oil prices failed to push USD/CAD higher, despite WTI now hovering around the $103.50 per barrel area due to concerns about China’s Covid-19 spread. The latest news showed that China authorities are struggling to get the Covid-19 outbreak in Beijing under control.

For the technical aspect, the RSI indicator is 52 figures as of writing, suggesting that the downside is preserving strength as the RSI keeps heading south. As for the Bollinger Bands, the price failed to touch the upper band and fell towards the moving average, therefore the downside traction should persist. In conclusion, we think the market will be bearish as long as the 1.2902 resistance line holds. The falling RSI also reflects bear signals.

Resistance: 1.2882, 1.2940
Support: 1.2721, 1.2665, 1.2541

Economic Data

CurrencyDataTime (GMT + 8)Forecast
NZDEmployment Change (QoQ) (Q1)066:450.1%
NZDRBNZ Gov Orr Speaks07:00 
NZDRBNZ Press Conference07:00 
AUDRetail Sales (MoM) (Mar)09:300.6%
USDADP Nonfarm Employment Change (Apr)20:15395K
USDISM Non-Manufacturing PMI (Apr)22:0058.5
USDCrude Oil Inventories22:30-1.167M