Market Focus

U.S. equity markets traded without significant movement on Friday. The Dow Jones Industrial Average gained 0.03% to close at 31261.9. The S&P 500 gained 0.01% to close at 3901.36. The Nasdaq Composite lost 0.3% to close at 11354.62. Devaluation of equities continues  as market participants assess soaring inflation. Growth and technology sectors continue to bear most of the brunt, although the consumer discretionary sector endured huge selloffs this week amid missed earnings estimates, slowed consumption, and lowered forward guidance.

The benchmark U.S. 10-year Treasury yield closed at 2.788% on Friday.

On this week’s economic docket, BoE’s governor Bailey is set to speak on the 23^rd, while Fed Chair Jerome Powell and ECB’s president Lagarde are both set to speak on the 24^th. The FOMC’s meeting minutes will be released on the 25^th. Interest rate decision of the New Zealand Central bank will be released on the 24^th. Germany GDP will be released on the 25^th. U.S. Q1 GDP and initial jobless claims will be released on the 26^th.

Main Pairs Movement

The Dollar Index rose 0.15% over the course of the last trading day of the week. Over the course of the week, the Greenback lost around 1.3% against a basket of major foreign currencies.

The euro fared worse against the Greenback on Friday, despite the broad market weakness of the dollar. Low consumer confidence and soaring energy prices continue to put downward pressure on the Eurozone’s economy and its currency.

GBPUSD rose 0.2% over the course of last Friday’s trading. The Sterling rose around 2% against the dollar after bottoming out at around the 1.22 price region. Cable will see tremendous volatility as the week progresses with policy statements from both the BoE and the Fed.

USDCAD rose 0.1% over the course of last Friday’s trading. The Greenback has fallen around 0.69% against the Canadian Loonie over the week starting from the 16^th. Rising commodity prices has allowed the Loonie to gain ground against the Greenback. Canadian core retail sales figures for the month of March will be released on the 26^th.

Technical Analysis:

EURUSD (4-Hour Chart)

The EUR/USD pair edged lower on Friday, failing to extend its one-week rally and fluctuating in a narrow range below 1.0600 in the absence of high-tier data releases. The pair attracted some buying and touched a daily high above the 1.059 level, then regained downside momentum and refreshed its daily low in the US trading session. The pair is now trading at 1.0562, posting a 0.18% loss on a daily basis. EUR/USD stays in the negative territory amid renewed US dollar strength, as the risk-on flow led to modest recovery in US Treasury bond yields, providing some support to the Greenback. The hawkish Fed and high inflation might continue acting as a tailwind for the dollar. For the euro, the Eurozone Consumer Confidence Index rose to -21.1 in May, which showed that EU consumers are struggling amid surging energy-driven inflation and a slowing economy. However, the fact that ECB policymakers continue to signal possible rate hikes in July could limit the losses for the pair.

On the technical front, the RSI is at 60, suggesting that the upside is more favoured as the RSI stays above the midline. As for the Bollinger Bands, the price resumed its decline and fell from the upper band, therefore some downside momentum can be expected for the pair. In conclusion, we think the  market will be bearish as long as the 1.0594 resistance line holds. On the downside, sellers can start booking their profits with a four-hour close below the 1.0507 support.

Resistance:  1.0594, 1.0622, 1.0728

Support: 1.057, 1.0464, 1.0355

GBPUSD (4-Hour Chart)

GBP/USD consolidated its weekly gains on Friday, sticking to modest gains and extending its weekly recovery amid better-than-expected UK macro data. The pair was trading lower during the Asian session, then started to witness fresh buying, recovering all of its intraday losses heading into the US session. At the time of writing, Cable stays in positive territory with a 0.01% gain for the day. Despite the US dollar seemingly suffering from profit-taking and sparking fears about the state of the US economy during the first half of the day, expectations for a more aggressive policy tightening by the Fed helped limit losses for the Greenback, keeping a lid on any meaningful upside for the GBP/USD pair. For the British pound, the upbeat UK Retail Sales data has provided some support to Cable, which rose by 1.4% on a monthly basis in April and came in much better than the market’s expectation.

On the technical front, the RSI is at 59, suggesting that the pair is facing some downside momentum as the RSI keeps heading south. For the Bollinger Bands, the price continued to remain under pressure and dropped towards the moving average, indicating that the negative traction should persist. In conclusion, we think the market will be bearish as the pair has failed to break above the 1.2499 resistance.  Only a violation of this support could be seen as a significant bullish development.

Resistance: 1.2499, 1.2631, 1.2761

Support: 1.2341, 1.2270, 1.2180

USDCAD (4-Hour Chart)

As the US dollar recovered some ground on Friday amid risk aversion, USD/CAD ended its slide to two-weeks lows and recovered towards the 1.2850 area. The pair was surrounded by bearish momentum and dropped to a daily low below 1.2780 level during the European session, but then regained upside traction to erase all of its daily losses. USD/CAD is trading at 1.2843 at the time of writing, rising 0.16% on a daily basis. The recovering US dollar continued to act as a tailwind for the USD/CAD pair, as the market mood started to turn sour in the US trading session. On top of that,  retreating crude oil prices also attracted some selling for the commodity-linked loonie as WTI has stabilised back towards the $109-per-barrel area. Analysts expect an agreement regarding the proposed EU ban on Russian oil imports could be reached at an EU council summit at the end of this month, despite the fact that there hasn’t been much  of an  update until now.

On the technical front, the RSI is at 49, suggesting that there is no obvious trend as the RSI lacks directions. For the Bollinger Bands, the price regained upside 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 might re-test the 1.2890 resistance. A four-hour close above that resistance could open the door for additional profits and confirm the bullish bias.

Resistance: 1.2890, 1.2966, 1.3046

Support: 1.2762, 1.2725, 1.2687