Daily market analysis

May 25, 2022

U.S. equities markets endured another sell-off throughout Tuesday’s trading. The Dow Jones Industrial Average climbed 0.15% to close at 31928.62. The S&P 500 lost 0.81% to close at 3941.48. The Nasdaq Composite slid 2.35% to close at 11264.45. The technology sector and consumer discretionary sector bore most of the blunt.

The technology sector sold off after Snapchat issued a warning of a slowdown in online advertising revenue. Share of the social media giant fell 43% after the company stated that it would miss earnings and revenue targets for the current quarter. Meta platforms and Alphabet were also affected, shares of the respective company dropped 7.6% and 5%. 

The benchmark U.S. 10-year Treasury yield continues to fall further and is currently sitting at 2.756%. Fear of recession has driven bond prices higher as market participants rotate into fixed-income securities. Bond prices and yields move in opposite directions. New home sales dropped 16.6% for April.

Main Pairs Movement

The Dollar Index, which measures the U.S. Dollar against a basket of major foreign currencies, continued to fall for the second day. The Dollar Index lost 0.32% throughout yesterday’s trading.

The Euro rose 0.4% against the dollar throughout yesterday’s trading. The Euro continues to be favored as the ECB hints at a possible rate hike as soon as July. The change in monetary policy would see the ECB exit a decade-long negative interest rates environment.

GBPUSD lost 0.46% throughout yesterday’s trading. Britain’s disappointing PMI data send the Sterling falling against the Dollar, but Cable was able to limit its losses amid a broad-based Dollar weakness.

USDCAD rose 0.4% over the previous trading day. The Canadian Loonie fell as oil prices retraced back below the $110 per barrel mark. The Canadian CPI rose to 6.7% for March, exceeding expectations of 6.1%.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Tuesday, continuing its rally that started on Monday and climbed higher toward a monthly high above the 1.0730 mark amid hawkish ECB commentary. The pair was trading lower and touched daily lows during the Asian session, but then staged an impressive rebound to recover all of its daily losses heading into the US session. The pair is now trading at 1.0733, posting 0.42% gains daily. EUR/USD stays in the positive territory amid renewed US dollar weakness, as the weaker-than-expected US PMI data exerted bearish pressure on the greenback and make it difficult to find demand. The headline US Services PMI came in at 53.5, which is below expectations for a reading of 55.2 and indicated that growth momentum is losing. For the Euro, ECB President Christine Lagarde’s hawkish comments continued to act as a tailwind for EUR/USD, as she said that rates are likely to be positive at end of the third quarter.

For the technical aspect, the RSI indicator is 75 figures as of writing, suggesting that the pair is facing heavy bullish pressure as the RSI reached the overbought zone. As for the Bollinger Bands, the price continued to move alongside the upper band, therefore a continuation of the upside trend could be expected. In conclusion, we think the market will be bullish as the pair is testing the 1.0728 resistance. A four-hour close above that level could lead the pair toward the 1.0800 area.

Resistance:  1.0728, 1.0810, 1.0922

Support: 1.0661, 1.0549, 1.0464

GBPUSD (4-Hour Chart)

The pair GBP/USD declined on Tuesday, losing its recent upside strength, and tumbled back below the 1.2500 mark after the release of downbeat UK PMI data. The pair were flirting with the 1.2560~1.2590 area during the Asian session, then started to see heavy selling and retreated to a daily low below the 1.2480 level in the European session. At the time of writing, the cable stays in negative territory with a 0.33% loss for the day. The US Services PMI data in May missed the market expectation of 57.3 by a wide margin, suggesting that the business activity is starting to lose momentum. But the broad US dollar weakness failed to lend support to the GBP/USD pair today. For the British pound, the weaker UK PMI data released earlier in the session have dampened the prospect of further BoE monetary tightening and added fears about a possible recession this year. Therefore, the cable came under selling pressure today as a dismal PMI report signals a slowing in the rate of economic growth.

For the technical aspect, the RSI indicator is 58 figures as of writing, suggesting that the upside is more favored as the RSI stays above the mid-line. For the Bollinger Bands, the price regained bullish strength and crossed above the moving average, indicating that the upside traction should persist. In conclusion, we think the market will be bullish as long as the 1.2487 support line holds. A sustainable strength above that level will favor the bulls and the rising RSI also reflects bull signals.

Resistance: 1.2587, 1.2631, 1.2761

Support: 1.2487, 1.2341, 1.2180

USDCAD (4-Hour Chart)

As the Canadian dollar remained one of the worst performers during the US session on Tuesday, the pair USD/CAD regained its upside strength and reached a six-day high above the 1.2860 mark. The pair stayed quiet during the Asian session in the 1.279~1.281 area, then attracted fresh buying and extended its intra-day gains toward the 1.2870 level in the early US session. USD/CAD is trading at 1.2844 at the time of writing, rising 0.59% daily. The weaker-than-expected US PMI data weighed on the US dollar today but failed to drag the USD/CAD pair lower amid the falling loonie. On top of that, the sliding crude oil prices also exerted bearish pressure on the commodity-linked loonie as WTI dropped back toward the $109 per barrel area. Oil traders will remain focused on geopolitics headlines as the EU’s proposed ban on Russian oil looks increasingly unlikely.

For the technical aspect, the RSI indicator is 54 figures as of writing, suggesting that the upside is losing some momentum but remained within positive levels. For the Bollinger Bands, the price crossed above the moving average and moved toward the upper band, therefore the upside traction should persist. In conclusion, we think the market will be bullish as the pair is testing the 1.2847 resistance. A break above that resistance could be seen as a confirmation of the bullish trend in the near-term outlook.

Resistance: 1.2847, 1.2890, 1.2966

Support: 1.2763, 1.2725, 1.2684

Economic Data

CurrencyDataTime (GMT + 8)Forecast
NZDRBNZ Interest Rate Decision10:002.00%
NZDRBNZ Rate Statement10:00 
NZDRBNZ Press Conference11:00 
EURGerman GDP (QoQ) (Q1)14:000.2%
EURECB President Lagarde Speaks16:00 
USDCore Durable Goods Orders (MoM) (Apr)20:300.6%
USDCrude Oil Inventories22:30-0.737M