Market Focus

U.S. equities markets edged lower on the last trading day of the week. The Dow Jones Industrial Average lost 0.3% to close at 32899.37, the S&P 500 shed 0.57% to close at 4123.34, and the Nasdaq Composite dropped 1.4% to close at 12144.66. With the U.S. 10 year treasury yield soaring past 3%, market participants continue to sell off bonds. The energy sector was among the best performing sectors on Friday.

The S&P 500 index has arrived at a key support level near the 4123.33 price level. Analysts are predicting a potential rebound at this level, but it would depend on the key earnings reports in the week ahead. Earnings season continues this week with major companies such as Palantir Technologies, Walt Disney, Toyota, Rivian Automotive, WeWork, and Softbank all scheduled to report.

On this week’s economic docket, U.S. CPI data will be released on the 11^th, U.K. GDP data on the 12^th , and U.S. initial jobless claims and PPI on the 12^th as well.

Main Pairs Movement

The Greenback continues to be in high demand as global central banks begin to tighten their balance sheets. The Dollar Index climbed a further 0.11% on Friday to end the week up 0.43%.

EURUSD was able to stop its free fall on the last trading day of the week. The pair traded mostly sideways throughout the day and closed 0.04% higher. Growth concerns for the European Union continue to loom over the shared currency.

GBPUSD lost 0.21% over the course of Friday’s trading. With the BoE painting a less-than-optimistic economic outlook, the British Pound failed to attract buyers despite falling to multi-year low levels.

The Greenback surged against the Loonie on the last trading day of the week and USDCAD rose 0.59% to close out the week. The Canadian currency fared worse due to weak employment data and falling commodity prices.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Friday, rebounding from weekly lows following Thursday’s sharp sell-off. The pair was trading lower and dropped to the 1.049 level heading into the European session, then started to see fresh buying to erase most of its daily losses. The pair is now trading at 1.0574, posting a 0.32% gain on a daily basis. EUR/USD stays in the positive territory amid renewed US dollar weakness as the improving market mood has undermined the safe-haven Greenback and pushed EUR/USD higher. Despite the Nonfarm Payrolls data in April coming better than expected, it failed to provide strong support to the US dollar due to the slight downward revision of March’s reading. For the Euro, ECB’s Villeroy suggested that the bank’s policy rates could return to positive territory by the end of the year, which acted as a tailwind for the EUR/USD pair.

On the technical side, the RSI is at 55, suggesting that upside is more favoured as the RSI stayed above the midline, indicating bullishness. As for the Bollinger Bands, the price regained bullish momentum and crossed above the moving average. Therefore, the upside traction should persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.0622 resistance, a break above that level would target the next resistance at 1.0728.

Resistance:  1.0622, 1.0728, 1.0922

Support: 1.0485

GBPUSD (4-Hour Chart)

GBP/USD edged lower on Friday, remaining under heavy bearish pressure after the dovish BoE policy announcement on Thursday. Despite trying to stage a rebound during the European session after dropping to a daily low, the pair failed to preserve its upside traction and had to go back to licking its wounds. At the time of writing, Cable has started to see some buying while staying in negative territory with a 0.10% loss for the day. The US dollar was retreating from its highest level since late-2002 after the US April jobs report, but the prospects for further tightening by the Fed should limit the losses for the Greenback. For the British pound, the Bank of England softened its tone on the need for further tightening and warned about the risk of a recession in 2023. The concerns about the outlook for the UK economy might continue to act as a headwind for Cable.

On the technical side, the RSI is at 33, suggesting that the pair is facing selling pressure and reaching the oversold zone. For the Bollinger Bands, the price continues to move alongside the lower band so a continuation of the downside momentum can be expected. In conclusion, we think the market will be bearish as the price action has held its ground below the previous support at 1.2430. The GBP/USD pair is at risk of further losses and bears are eyeing the next key support level in 1.2274.

Resistance: 1.2631, 1.2761, 1.3060

Support: 1.2274

USDCAD (4-Hour Chart)

As the mood around the equity markets started to sour and drove some flow towards the US dollar, USD/CAD regained bullish momentum and refreshed its daily tops after the US/Canadian monthly jobs report. The pair flirted with the 1.282-1.285 area during the first half of the day, then attracted some buying and climbed towards the 1.290 mark in the US session. USD/CAD is trading at 1.2887 at the time of writing, rising 0.39% on a daily basis. Surging US Treasury bond yields have provided some support to the greenback, as investors expect that the Fed would need further tightening to bring inflation under control in future meetings. On top of that, falling crude oil prices failed to lift the commodity-linked Loonie higher amid unimpressive Canadian employment data, which showed that the number of employed people rose by only 15.3K in April.

On the technical side, the RSI is at 63 as of writing, suggesting that upside is preserving strength and the RSI, while bullish, is heading to the overbought zone. As for the Bollinger Bands, the price has rebounded from the lower band and then crossed above the moving average, therefore the upper band has become the profit target. In conclusion, we think the market will be bullish as the pair is ready to test the 1.2902 resistance. A break above that level would expose 1.2940.

Resistance: 1.2902, 1.2940

Support: 1.2725, 1.2544, 1.2473