Daily market analysis

May 9, 2022

U.S. equities markets edged lower on the last trading day of the week. The Dow Jones Industrial Average lost 0.3% to close at 32899.37, the S&P 500 shed 0.57% to close at 4123.34, and the Nasdaq Composite dropped 1.4% to close at 12144.66. With the U.S. 10-year treasury yield soaring past 3%, market participants continue to sell off bonds. The energy sector was among the best performing sectors on Friday.

The S&P 500 index has arrived at a key support level near the 4123.33 price level. Analysts are predicting a potential rebound at this level, but it would depend on the key earnings reports in the week ahead. Earnings season continues this week with major companies such as Palantir Technologies, Walt Disney, Toyota, Rivian Automotive, WeWork, and Softbank all scheduled to report.

On this week’s economic docket, U.S. CPI data will be released on the 11th, U.K. GDP data on the 12th, and U.S. initial jobless claims and PPI on the 12th as well.

Main Pairs Movement
The U.S. Greenback continues to be in high demand as global central banks begin to tighten their balance sheets. The Dollar Index climbed a further 0.11% on Friday to end the week up 0.43%.

EURUSD was able to stop its free fall on the last trading day of the week. The pair traded mostly sideways throughout the day and closed 0.04% higher. Growth concerns for the European Union continue to loom over the shared currency.

GBPUSD lost 0.21% throughout Friday’s trading. With the BoE painting a less than optimistic economic outlook, the British Pound failed to attract buyers despite falling to multi-year low levels.

The Greenback surged against the Loonie on the last trading day of the week. USDCAD rose 0.59% to close out the week. The Canadian currency fared worse due to weak employment data and falling commodity prices.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Friday, rebounding from weekly lows following Thursday’s sharp sell-off. The pair was trading lower and dropped to the 1.049 level heading into the European session, then started to see fresh buying to erase most of its daily losses. The pair is now trading at 1.0574, posting a 0.32% gain daily. EUR/USD stays in the positive territory amid renewed US dollar weakness, as the improving market mood undermined the safe-haven greenback and push EUR/USD higher. Despite the Nonfarm Payrolls data in April comes better-than-expected, it failed to provide strong support to the US dollar due to the slight downward revision of March’s reading. For the Euro, ECB’s Villeroy suggested that the bank’s policy rates could return to positive territory by the end of the year, which acted as a tailwind for the EUR/USD pair.

For the technical aspect, the RSI indicator is 55 figures as of writing, suggesting that the upside is more favored as the RSI stays above the mid-line. As for the Bollinger Bands, the price regained bullish momentum and crossed above the moving average, therefore the upside traction should persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.0622 resistance, a break above that level would target the next resistance at 1.0728. The rising RSI also reflects bull signals.

Resistance: 1.0622, 1.0728, 1.0922
Support: 1.0485

GBPUSD (4-Hour Chart)

The pair GBP/USD edged lower on Friday, remaining under heavy bearish pressure after the dovish BoE policy announcement on Thursday. Despite trying to stage a rebound during the European session after dropping to a daily low, the pair failed to preserve its upside traction and continued to lick its wounds. At the time of writing, the cable started to see some buying stays in negative territory with a 0.10% loss for the day. The US dollar keeps retreating from its highest level since late-2002 after the US April jobs report, but the prospects for a further tightening by the Fed should limit the losses for the greenback. For the British pound, the Bank of England softened its tone on the need for further tightening and warned about the risk of a recession in 2023. The concerns about the outlook for the UK economy might continue to act as a headwind for the cable.

For the technical aspect, the RSI indicator is 33 figures as of writing, suggesting that the pair is facing selling pressure and reaching the oversold zone. For the Bollinger Bands, the price continues to move alongside the lower band so a continuation of the downside momentum can be expected. In conclusion, we think the market will be bearish as the bear had held its ground below the previous support at 1.2430. The GBP/USD pair is at risk of further losses and bears are eyeing the next key support level at 1.2274.

Resistance: 1.2631, 1.2761, 1.3060
Support: 1.2274

USDCAD (4-Hour Chart)

As the mood around the equity markets started to sour and drove some flows towards the US dollar, the pair USD/CAD regained bullish momentum and refreshed its daily tops after the US/Canadian monthly jobs report. The pair flirted with the 1.282~1.285 area during the first half of the day, then attracted some buying and climbed towards the 1.290 mark in the US session. USD/CAD is trading at 1.2887 at the time of writing, rising 0.39% daily. The surging US Treasury bond yields have provided some support to the greenback, as investors expect that the Fed would need further tightening to bring inflation under control in future meetings. On top of that, falling crude oil prices failed to lift the commodity-linked loonie higher amid unimpressive Canadian employment data, which showed that the number of employed people rose only by 15.3K in April.

For the technical aspect, the RSI indicator is 63 figures as of writing, suggesting that the upside is preserving strength and the RSI is heading to the overbought zone. As for the Bollinger Bands, the price rebounds from the lower band and then crosses above the moving average, therefore the upper band becomes the profit target. In conclusion, we think the market will be bullish as the pair is ready to test the 1.2902 resistance. A break above that level would expose 1.2940 and the rising RSI also reflects bull signals.

Resistance: 1.2902, 1.2940
Support: 1.2725, 1.2544, 1.2473