Market Focus

U.S. stocks advanced on Wednesday as investors scrutinized a series of earnings reports while further digesting a hot print on inflation in the U.S. The S&P 500 climbed more than 1%, ending a three-day losing streak. The Nasdaq Composite outperformed and rose 2% as technology shares surged and Treasury yields pulled back across the curve. Investors received a number of quarterly reports from some major U.S. companies and stock index components early Wednesday morning. These included JPMorgan Chase (JPM) — the largest U.S. bank by assets — along with Delta Air Lines (DAL) and Bed, Bath & Beyond (BBBY).

Inflation is surging, central banks are on the move and now it’s earnings season. To top it all off, stock traders face the market-roiling potential of a monthly options expiration estimated at more than $2 trillion.

Roughly $495 billion in single-stock derivatives are set to expire Thursday, with another $980 billion of S&P 500-linked contracts and $170 billion in options tied to the State Street fund tracking the S&P 500 all running out as the holiday-shortened weekends, according to estimates from Goldman Sachs Group Inc.’s Rocky Fishman. Such volumes have been a source of volatility in the past year.

While nothing is ever assured in markets, indices have exhibited a consistent pattern of declining on days when contracts are closed out. This time around, it comes as stocks are suffering through yet another bout of volatility, with the S&P 500 notching only four positive days since the start of the month.

Main Pairs Movement:

Inflation, central banks and the Eastern European crisis remain in the eye of the storm, weighing on the market’s mood. The latest UK CPI climbed to a three-decade high of 7%, while the US one reads 8.5% YoY, both above anticipated figures.

The Bank of Canada increased benchmark interest rates by 50 bps to 1.00% and also announced plans to begin reducing the size of its balance sheet, starting April 25, given that it sees an increasing risk that expectations of elevated inflation could become entrenched. Earlier in the day, the RBNZ also decided to lift the official cash rate by 50 bps to 1.5%. On Thursday, it will be the ECB’s turn to announce its monetary policy decision.

Meanwhile, the German government has rejected the EU ban on Russian oil for now, while Moscow has declared that US and NATO vehicles delivering weapons on Ukrainian soil would be considered legitimate military targets.

The Euro pair is trading at around 1.0880, while Cable is just above the 1.3100 figure. The Aussie is trading sideways in the 0.7440 price zone, while Loonie closed in the red at 1.2565. The USD/JPY pair reached a fresh multi-year high of 126.31.

Gold maintains its uptrend, trading near a fresh multi-week high of $1,981.57 a troy ounce. Overall risk-off sentiments alongside the dollar’s weakness during the American session maintained the precious metal’s bid throughout the day. Crude oil prices continue soaring, with WTI setting above $103.50 a barrel, and Brent at $108.40.

Technical Analysis:

GBPUSD (4- Hour Chart)

GBPUSD is trading near an intraday high of 1.3100 as market players drop the US dollar. Market players are now betting on the BOE’s monetary policy meeting next week. From the technical perspective, GBPUSD’s intraday bias punctuates the bearish tone as it has successfully broken into the upper half of the 20 Simple Moving Average and the midline of the Bollinger band. At the same time, the upside momentum has also breached the descending trend line on the four-hour chart. However, in order to attract bulls, GBPUSD needs to close its intraday price above 1.3098 to fully reclaim its bullish momentum. As the RSI has not reached the overbought condition, GBPUSD still has room to extend further north.

Resistance:  1.3136, 1.3174

Support:  1.3098, 1.305, 1.2974

XAUUSD (4- Hour Chart)

Gold continues to climb, trading near a fresh multi-week high of $1981.57, alongside the US dollar’s weakness on Wednesday. From the technical aspect, gold maintains its bullish bias, continuing to favour the upside. On the four-hour chart, gold has breached the immediate hurdle at $1975, showing some upside strength. At the same time, gold is trading steadily above the 20 Simple Moving Average but within the upper bounce of the Bollinger bands, suggesting absent selling interest at the time being. Gold’s positive movement is expected to go on as the RSI has not fully reached the overbought territory, giving room for gold to extend further north toward $2001.

Resistance: 2001

Support: 1975, 1950, 1916

USDCAD (4- Hour Chart)

The Canadian dollar gained traction against the US dollar following the announcement from the Bank of Canada Governor Tiff Macklem that the BOC will raise interest rates to 1% in response to the inflationary pressure. USDCAD slid toward its support at 1.259 after the BOC raised 50 bps on its interest rate. From the four-hour chart, the near-term outlook of USDCAD has turned downside, piercing below the midline of Bollinger Band. Failure to defend the 1.2590-1.2600 level will attract some fresh sellings toward the next support at 1.2543. As the RSI is well above the oversold territory, USDCAD has plenty of room to move further south.

Resistance: 1.2700

Support: 1.2590, 1.2543, 1.2460