Market Focus

U.S. equities advanced on Monday, reversing earlier losses in the day amid worries about an escalating COVID outbreak in China added to jitters over U.S. economic growth, not to mention surging inflation and Fed policy tightening. The S&P 500 went up 0.6% to reach 4,296.12. Dow Jones climbed more than 200 points, or 0.7%, to close the day at 34,049.46, and the Nasdaq Composite rallied 1.3% to close just above 13,000. U.S. stocks bucked the trend of global equity markets, with the major stock indices in Europe and Asia declining significantly on Monday.

Well-known billionaire Elon Musk has agreed to buy Twitter Inc. for $44 billion, using one of the biggest leveraged buyout deals in history to take private a 16-year-old social networking platform that has become a hub of public discourse and a flashpoint in the debate over online free speech.

Investors will receive $54.20 for each Twitter share they own, the company said in a statement Monday. The price is 38% more than the stock’s close on April 1, the last business day before Musk disclosed a significant stake in the company, sparking a share rally.

Musk, one of Twitter’s most-watched users with more than 83 million followers, began amassing a stake of about 9% in January. By March, he had ramped up his criticism of Twitter, alleging that the company’s algorithms are biased and feeds cluttered with automated junk posts. He also suggested Twitter’s user growth was inflated by bots. After rejecting an invitation to join the company’s board, on April 14 he offered to take Twitter private, saying he’d make the platform a bastion of free speech and dropping other hints about the changes he’d make as owner.

The ideas verged from the practical – say, letting users edit tweets and combating the spread of bots – to the peculiar, such as a proposal to turn the company’s San Francisco headquarters into a homeless shelter.

Main Pairs Movement:

Despite an impressive recovery of US equities, the sentiments in the forex markets on Monday remained risk-off, with traders citing concerns about China’s lockdown as the major driver. Amid a sharp pullback in global bond yields as traders reassessed global growth prospects amid the rising risk of a wider shutdown of the world’s second-largest economy, the rate-sensitive, safe-haven yen was the best performing G10 currency.

USD/JPY is now trading around the 127.50 area, more than 1.5% below last week’s multi-decade highs above 129.00. The safe-haven US dollar also benefited as a result of risk-off flows and was the second-best performing major G10 currency, with the Dollar Index (DXY) hitting fresh highs since March 2020 in the upper 101.00s.

On the other hand, GBP/USD at one point plummeted under 1.2700 for the first time since September 2020 and was last seen down 0.7% in the 1.2740s, while EUR/USD dropped a similar percentage just above 1.0700 and also at fresh multi-month lows. Any euro relief in the wake of French President Emmanuel Macron’s re-election did not last.

Technical Analysis:

USDJPY (4- Hour Chart)

USDJPY witnessed some selling pressure on Monday despite the downside still lacking bearish conviction. The Japanese yen seemed to benefit from the prevalent risk-off mood, driving some safe- heaven flow. On the technical side, on the four- hour chart, USDJPY remains on the upside as it continues above the bullish trendline. At the time of writing, bulls are trying to defend the ascending trendline and support level at 127.41 from the intraday decline. As the RSI reading is still far from oversold, a convincing breakthrough of the trendline should pave the way for deeper losses and bring USDJPY further south toward 126.30. On the flip side, if the dollar succeeds in defending the trendline and the support level at 127.41, then it might be able to attract some fresh buying interests.

Resistance:  129.40

Support:  127.41, 126.30, 125.34

AUDUSD (4- Hour Chart)

The Australian dollar underperformed amid China’s “zero Covid” policy-induced lockdown. The underperformance of the Aussie has dragged AUDUSD to its lowest since late February. From the technical perspective,  the outlook of AUDUSD continues to be bearish, turning more downside as the pair has traded further south below the descending trendline. At the moment, the downside looks limited until it breaks the next support at 0.7093 as the RSI indicator has reached the oversold territory, suggesting that further moves will attempt a recovery. However, AUDUSD might need to climb above 0.7277 in order to gain some follow-through buying, as moving beyond the 0.7277 resistance might negate the negative bias in the near-term.

Resistance: 0.7170, 0.7227, 0.7372

Support: 0.7093

GBPUSD (4- Hour Chart)

GBPUSD crashed through 1.2750 and is heading toward 1.2700, the psychological support. From the technical aspect, the outlook of GBPUSD remains intensely bearish on the fact that it has fallen below the major psychological support at 1.3000 last week. At the moment, there are no major support levels between 1.2700 and 1.2500 aside from the September 2020 low of 1.2674. The downside of GBPUSD might show some slowdown as it is trading in oversold territory. The market mood, however, needs to turn neutral before GBP sellers decide to book their profits.

Resistance: 1.2800, 1.2730, 1.3002, 1.3077, 1.3143

Support: 1.2700, 1.2674