Market Focus

Wall Street indexes surged on Friday, posting its best day of 2022 so far after another turbulent session, ending a tumultuous week marked by mixed corporate earnings, geopolitical turmoil and an increasingly aggressive Federal Reserve. The S&P 500 posted a weekly victory on Friday, as an Apple-led recovery in tech sectors helped the broader market recover losses earlier this week when the Federal Reserve signalled a faster pace of interest rate hikes. At the end of the market, the Dow Jones Industrial Average rose 1.65 % to 34,725.47 points, the S&P 500 index gained 2.43% to 4,431.85 and the Nasdaq Composite Index added 3.13% to 13,770.57 points.

Of the 11 major sectors in the S&P 500, only the energy sector closed in the red. The technology sector was the biggest gainer, up 4.3%, the sector’s biggest one-day gain since April 6, 2020, followed by real estate and consumer services, which were up 3.38% and 2.92% respectively. In the tech sector, Apple rose 7% after it reported quarterly results that beat analysts’ expectations for better-than-expected iPhone sales despite being weighed down by supply chain issues. In addition, the tech giant said it expects supply chain issues to improve, boosting confidence in broader tech stocks. Facebook, Alphabet, Amazon and Microsoft all closed up more than 1%, up 2.40%, 3.23%, 3.11% and 2.81%, respectively. In the consumer sector, Visa surged more than 10% on the day as its fiscal first-quarter earnings and revenue topped Wall Street expectations as strong cross-border payments volumes drove growth.

Main Pairs Movement

The U.S. dollar extended a Fed-fueled rally on Thursday, with the U.S. dollar index hitting its highest level since July 2020 before entering a consolidation phase on Friday. At the close, the dollar index fell slightly by 0.01% to 97.217, hitting an intraday high of 97.441. Meanwhile, the ongoing conflict between Russia and Ukraine continued to weigh on sentiment.

EUR/USD fell more than 100 pips on Thursday, hitting 1.1132, its lowest level since June 2020. On Friday, the pair took a breather as the greenback entered a consolidation zone but needed to find some support near 1.1150. GBP/USD had a similar situation, falling for almost 10 consecutive days, with a cumulative loss of 2.84% in the past two weeks, and finally finding support around 1.33750.

Gold fell more than 1% for the second day in a row on Thursday, dipping below several key support levels. At Friday’s close, XAU/USD traded below 1,800 at 1791.95.

Bitcoin continued to trade in a tight range below $40,000 ahead of the weekend. Ethereum is trading near $2,500, making it difficult to make a decisive move in either direction, but at least some support area appears to have been built.

Technical Analysis

GBPUSD (Daily Chart)

Following the latest dismal US data that contained promising signs of easing US wage pressures last quarter, the dollar got weakened, which helped to push GBP/USD back above the 1.3400 level once. However, the greenback regained demand just hours later, forcing the pair to retreat from daily highs in the 1.3420s. The pair is now trading 1.3380, in line with its daily open price. Investors now have their eyes on the BoE’s rate decision on February.

On the technical front, the GBP/USD pair remains under selling pressure, with the RSI hovering at the familiar 30s territory, as well as the long-term downtrend and the benchmark DMAs capping Cable from the upside. The disappointing technical indicators sug.gest that the pound might resume its downward walks in the near term. On the downside, the next support for the pair lies around 1.3200, followed by 1.2800, a price last seen in October 2020.

Resistance: 1.3400, 1.3600, 1.3830

Support: 1.3200, 1.2800

 

EURUSD (Daily Chart)

After holding above 1.1200 for too many days before USD bulls launched an attack to knock down EUD, the shared currency barely advances in the day, lingering around the 2021 yearly lows’ territory. During the European trading hours, the pair dipped to 1.1122, jumping towards the daily high at 1.1173. This was attributed to USD month-end flows or some technical moves, as the US Core PCE came at 4.9%, further emphasizing the need for higher rates in the U.S. At the time of writing, the Euro pair is priced at 1.1144 as traded sidelined during the North American session.

As to technical, the price actions of the pair remains under all its major moving averages, while the RSI indicator is hovering near the oversold levels. On the downside, the next support level for the pair will appear at around 1.1000, followed by 1.0780. On the flip side, if the pair regains 1.1200, the next resistance lies at 1.1400, followed by the November highs of around 1.1620.

Resistance: 1.2000, 1.4000, 1.6200

Support: 1.1000, 1.0780

 

XAUUSD (Daily Chart)

Gold extended its fall, which had been going on since Wednesday when the FOMC issued the first monetary policy statement of 2022. During the New York session, at the time of writing, XAU/USD is trading at $1,788 a troy ounce, down 0.53% from its open price. The market sentiment has improved since the US cash equity markets opened. Nevertheless, European equity indices have been unable to get back in the green. Before Wall Street opened, the US Bureau of Economic Analysis unveiled the Federal Reserve’s favourite gauge of inflation, the Core Personal Consumption Expenditure (PCE) for December, which increased by 4.9%, higher than the 4.8% foresaw by analysts and 0.2% higher than the November reading.

From the technical perspective, Gold primarily follows the long-term downward sloping trend, despite some upside tractions in between. The pair now trades below all its major DMAs, with a bearish RSI indicating the lack of demand for the precious metal. On the downside, we expected some supports to appear at the $1,765 price level, followed by $1,720, which is a strong support level since the second half of 2021; on the contrary, a breach over $1,800 may attract robust buyers to push the pair further north.

Resistance: 1800, 1830, 1860

Support: 1765, 1720