Daily Market Analysis

Market Focus

U.S. equities markets rallied on Thursday’s trading. The Dow Jones Industrial Average rose 1.61% to close at 32637.19, the S&P 500 climbed 1.99% to close at 4057.84, and the Nasdaq composite gained 2.68% to close at 11740.65. Wednesday’s rebound could be a short term recovery after equities saw heavy selling over the past month. Global macroeconomic factors still remain weak, thus market participants should still be aware of downside risks and enhance risk management. 

The consumer discretionary sector built on Tuesday’s momentum and gained the most out of all sectors in the S&P 500 index. Macy’s raised its 2022 profit outlook, while retail giant William Sonoma beat earnings estimates—Macy’s soared 19.3%, William Sonoma shot up 13%. Dollar Tree, a major discount retailer in the U.S., also enjoyed a 21.9% boost in share price after the company announced earnings that were better than estimated. 

The benchmark U.S. 10-year Treasury yield continued to fall and is currently sitting at 2.752%.

Elon Musk increased his personal commitment in the purchase of Twitter. Twitter’s share price surged 6.3% after Musk announced that he will increase his takeover bid to $33.5 billion; however, Musk is still on a mission to rid Twitter of “bot users”, and will not commit until a full vet of Twitter’s user base. 

Main Pairs Movement:

The Dollar Index sold off on Thursday’s trading. Market participants rotated out of the money market into equities as risk sentiment improved on Wednesday. The Dollar Index currently sits at around 101.717, which is a near term support level for the index. 

EURUSD rose 0.43% over the course of yesterday’s trading. The euro rose against the dollar amidst broad-based dollar weakness. Weak U.S. GDP report also allowed euro bulls to push the shared currency higher.

GBPUSD rose 0.16% over the course of yesterday’s trading. The British pound has gained back substantial ground against the dollar over the course of this month. Recently announced FOMC minutes, however, show that the Fed is ready to hike rates at least by 100 basis points over the course of the next two meetings.

USDCAD fell 0.34% over the course of yesterday’s trading. Commodities, specifically oil, surged once again as the WTI offshore rose above $114 per barrel, thus favoring the commodity-linked Canadian loonie.

Technical Analysis: 

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Thursday, ending its slide that started yesterday and recovering towards the 1.072 area amid risk-on market sentiment. The pair dropped to a daily low below the 1.067 level in the late Asian session, but then regained upside momentum and recovered all of its daily losses. The pair is now trading at 1.0718, posting a 0.40% gain on a daily basis. EUR/USD stays in the positive territory amid weaker US dollar across the board, as the generally positive tone around the equity markets and downbeat US data both undermined the safe-haven greenback. The US GDP report showed that the US economy contracted by a 1.5% annualized pace during the first quarter of 2022, adding to the concerns about the worsening global economic outlook. For the euro, the expectation that the European Central Bank could raise rates at some point in the summer continues acting as a tailwind for the pair, as rising eurozone inflation is pressing the ECB to announce quantitative restrictions.

On the technical front, the RSI is at 63, suggesting that upside is more favored as the RSI stays above the midline. As for the Bollinger Bands, the price rose from the moving average and climbed toward the upper band. Therefore, a continuation of the upside trend could be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.0736 resistance. Further gains could be expected if the pair break above that level.

Resistance:  1.0736, 1.0810, 1.0922

Support: 1.0651, 1.0549, 1.0464

GBPUSD (4-Hour Chart)

GBP/USD edged higher on Thursday, regaining bullish traction and rebounded slightly from the 1.255 area amid the improving market mood. The pair gathered bullish momentum and touched a daily high during the European session, but then lost its strength and surrendered most of its intra-day gains. At the time of writing, Cable has rebounded slightly and stays in positive territory with a 0.02% gain for the day. The minutes of the FOMC’s May policy meeting failed to provide standout hawkish surprises, as market participants now expect that the Fed could pause or slow down the rate hike cycle once rates have reached the neutral level later in the year. For the British pound, reports showed that UK Chancellor of the Exchequer Rishi Sunak could be about to announce a fiscal stimulus plan for UK consumers and low-income households, which has lent some support to Cable.

On the technical front, the RSI is at 59 as of writing, suggesting that buyers retain control of the pair’s actions as the RSI stays above the midline. For the Bollinger Bands, the price regained upside traction and climbed toward the upper band, indicating that the upside momentum should persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.2605 resistance. On the downside, a four-hour close below the 1.2487 support could favor the sellers and cause the pair to drop toward 1.2430.

Resistance: 1.2605, 1.2631, 1.2761

Support: 1.2487, 1.2430, 1.2341

USDCAD (4-Hour Chart)

As the risk-on market mood and the strong rally in the equity markets drove flow away from the US dollar on Thursday, USD/CAD extended its slide and refreshed daily lows below the 1.2780 mark. The pair reached a daily top above the 1.2845 level in the late Asian session, but then failed to preserve its upside traction and retreated back toward the 1.2780 area heading into the US session. USD/CAD is trading at 1.2785 at the time of writing, losing 0.24% on a daily basis. The speculations that the Fed could pause or slow down the rate hike cycle later this year exerted some bearish pressure on the Greenback, as the Fed could reassess the need for further tightening once rates have reached the neutral level. On top of that, surging crude oil prices also provided strong support to the commodity-linked Loonie as WTI rose to a weekly high near $114 per barrel area. The black gold was underpinned by the expectations for rising oil demand in the US as the peak driving season approaches.

On the technical front, the RSI is at 41, suggesting that the downside is more favored as the RSI stays below the midline. For the Bollinger Bands, the price remained under pressure and crossed below the moving average, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair is heading to test the 1.2767 support. A break below that support will lead to further losses and technical readings also favor a bearish continuation.

Resistance: 1.2859, 1.2902, 1.2966

Support: 1.2767, 1.2725, 1.2687