Market Focus

U.S. stocks fell Thursday as investors continued to monitor a steady stream of corporate earnings results against a backdrop of elevated inflation and further Fed policy tightening. The S&P 500 dropped and erased earlier gains, Dow Jones also turned lower, and Nasdaq fell more than 2%, extending Wednesday’s losses when the tech-heavy index was weighed down by a slide in shares of Netflix. Meanwhile, Tesla (TSLA) shares rose after the electric vehicle-maker handily exceeded expectations in its fiscal first-quarter results.

After weeks of questions over whether Elon Musk is truly serious about acquiring Twitter Inc., his takeover bid got a lot more real on Thursday. The Tesla Inc. mogul has lined up about $25.5 billion in debt financing from Morgan Stanley and other financial institutions, according to a regulatory filing, as well as pledging to contribute an additional $21 billion of his own money through equity financing.

Though details are still scarce on how the billionaire will fund his share of the bid, it was a show-me-the-money moment that signaled Musk isn’t just trolling Twitter with his takeover interest. The move capped a whirlwind 17 days since Musk announced he had acquired a stake of more than 9% in Twitter — becoming its largest shareholder — before turning down a board seat and launching a hostile bid for the company.

Through it all, it’s been hard to tell whether Musk would follow through on his offer. Musk is a prolific tweeter — posting a mix of memes, questions and barbs — and has vowed to turn Twitter into a bastion for free speech. But a previous claim that he had secured funding to take Tesla private, an episode that drew a lawsuit from the U.S. Securities and Exchange Commission, has cast a shadow over his Twitter bid.

Main Pairs Movement:

Risk-off trading conditions, triggered in part by a rise in US yields amid hawkish Fed rhetoric, have seen the safe-haven US dollar outperform, especially against commodity-linked currencies like the Australian and New Zealand dollars, with respective losses of 1.0% and 1.1%. The US Dollar Index (DXY) reversed an earlier dip below the 100.00 level to rally back into the 100.60s, where it is trading with on-the-day gains of about 0.3%.

Fed Chair Jerome Powell, as expected, signaled that 50 bps rate hikes at upcoming meetings were likely, while even the usually more dovish-leaning FOMC member Mary Daly mentioned the possibility of a 75 bps move. The rate sensitive euro and sterling plummeted right after Powell’s talks, and USD/CAD rallied from under 1.2500 towards the 1.2600 mark as stronger oil prices failed to offer the loonie respite.

Meanwhile, higher yields in the US and elsewhere saw the yen struggle, though albeit perform a little better than its risk-sensitive peers amid safe-haven demand as stocks fell. USD/JPY gained about 0.4% to rally into the 128.30s, with bulls eyeing a potential retest of earlier multi-decade highs above 129.00 if US yields keep pushing higher and the BoJ continues reiterating its dovish stance while defending its yield curve control target range.

Technical Analysis:

USDJPY (4- Hour Chart)

USDJPY attracted some dip- buying buyers near the 20 Simple Moving Averages on Thursday. The US dollar is back to being bullish following the hawkish comments from the US Fed. On the technical side, the sharp corrective pullback that emerged overnight has created a parabolic rise for the pair, suggesting that the currency pair has attracted more buying interest. The outlook of USDJPY remains aggressively bullish as it continues trading within the ascending trendline and above the moving average. In the meantime, the RSI remains in the positive levels and has not reached the overbought territory, providing USDJPY room to extend further north.

Resistance:  129.4

Support:  127.41, 126.18, 125.18

AUDUSD (4- Hour Chart)

AUDUSD slid heavily toward 0.7370, erasing most of the gain from this week. From the technical perspective, AUDUSD has turned downside and is heading toward the next support pivot at 0.7372. The double top formation seems to be a convincing pattern for the pair to break below the support for a further near-term depreciating move. Failure to defend 0.7372 would reinforce the fact that AUDUSD is trading within the bearish triangular wedge, accelerating the downside momentum toward 0.7277. Moreover, the RSI has not yet reached the oversold territory and currently clings within the negative levels, signaling that AUDUSD still has room to drop further south. 

Resistance: 0.7432, 0.7471, 0.7536

Support: 0.7372, 0.7277

EURUSD (4- Hour Chart)

The euro gained strength against the US dollar earlier today as investors welcomed the hawkish comments from the ECB. However, EURUSD accelerated its slump toward 1.8050, erasing most of the gain in the US trading session. From the technical perspective, EURUSD faces a substantial resistance at 1.0932, failing to break through the level. On the four-hour chart, EURUSD has retreated and turned lower after the RSI hit near overbought readings, but is still holding within the positive levels. Moreover, the pair is still on the track of attracting buying interests as it stays above the 20 and 50 Simple Moving Averages, temporarily limiting the bearish potential of the pair.

Resistance: 1.0932, 1.1039, 1.1126

Support: 1.0758