Market Focus

US stock advanced on Thursday, performing its best three-day rally since May 2022 as the strength in the corporate sector has lent support to market sentiment. Tesla Inc. rose 10% for the day after its quarterly results beat estimates, while Apple Inc. and Amazon.com Inc. also climbed higher ahead of the release of their earnings reports next week. Despite the recent earning optimism and expectations that the Fed will take a more measured approach to tighten its monetary policy both acting as a tailwind for the equity markets, investors’ mood remain fragile with concerns about higher inflation and a potential recession. In the Eurozone, the European Central Bank decided to hike rates by 50 bps, which is the first hike in over a decade as the accelerating inflation and the ongoing crisis with Russia forced the ECB to act aggressively. On top of that, Gazprom resumed gas flows to the EU through the Nord Stream 1 pipeline, providing additional support to EUR buyers.

The benchmarks, S&P 500 and Dow Jones Industrial Average both advanced on Thursday as the US dollar weakened against its rivals and investors became more optimistic about earnings season. The S&P 500 was up 1% on a daily basis and the Dow Jones Industrial Average also advanced 0.5%. Nine out of eleven sectors stayed in positive territory with the Consumer Discretionary and the Health Care sectors the best performing among all groups, rising 2.25% and 1.51%, respectively. The Nasdaq 100 climbed the most with a 1.4% gain on Thursday, while the MSCI World index rose 0.8%.

Main Pairs Movement

The US dollar declined on Thursday, remaining under bearish momentum and failing to climb above the 107.3 level as the upside movement witnessed in the equity markets and dismal US data both exerted bearish pressure on the greenback. The DXY index edged higher and touched a daily high after the ECB’s monetary decision, but then started to see fresh selling to erase all of its intraday gains. The US Weekly Initial Jobless Claims rose to 251K in the week ending July 16, which came in worse than the market expectation of 240K. The Philadelphia Fed Manufacturing Index also dropped to -12.3 in July, weighing on the US dollar.

GBP/USD advanced with a 0.16% gain on Thursday amid the weaker US dollar. However, investors’ sentiment deteriorated due to factors like the ECB’s surprise monetary policy decision to hike rates by 50 bps. The GBP/USD pair dropped to a daily low below the 1.190 mark at the start of the US session, then regained upside traction to recover its daily losses. Meanwhile, EUR/USD witnessed heavy buying after the release of the ECB’s monetary policy decision, touching a daily top above 1.027 level. The pair was up almost 0.50% for the day.

Gold surged with a 1.30% gain for the day after climbing to a daily top near the $1720 mark in late US trading session, as the ECB’s decision to hike rate by 50bps has acted as a tailwind for the precious metal. Meanwhile, WTI oil extended its downside movements and dropped to $96 area during the US session as the resumption of gas flows from Russia’s Nord Stream 1 pipeline weighed heavily on oil prices.

Technical Analysis

XAUUSD(4-Hour Chart)

Gold rebounded from a fresh 2022 low of $1,680.82, and is now trading above $1,710 at the time of writing. The US dollar dimmed after the ECB announced its monetary policy decision, thus boosting gold. On the technical side, gold hints at a bullish correction as it has officially breached the bearish channel and the midline of the Bollinger Band, suggesting that the bulls initiated the upside momentum. In the meantime, the RSI indicator leans to the positive territory on the four- hour chart, indicating that buyers are back in the game and sellers are on the sidelines. To the upside, gold is expected to head towards the immediate resistance of $1,727.58. On the contrary, if gold cannot sustain its momentum above the bearish channel, then gains would be limited, triggering renewed selling pressure.

Resistance: 1727.58, 1756.40, 1779.70

Support: 1680.99

AUDUSD (4-Hour Chart)

AUDUSD hovers slightly below the resistance of 0.6911 on Thursday. From the technical perspective, the outlook of AUDUSD has turned upside on the four-hour chart after breaking the descending trendline during mid July. The four-hour chart shows that AUDUSD has settled above the 20 SMA but still remains below the longer SMA, suggesting that AUDUSD has not yet fully turned bullish in a longer term. The breakout of the current resistance will give AUD a boost towards the next level of 0.6982. Failure to overcome the current resistance would bottom AUD in the short term, heading towards 0.6824.

Resistance: 0.6911, 0.6982, 0.7053

Support: 0.6824, 0.6682

EURUSD (4-Hour Chart)

EURUSD staged a rebound following a larger-than-expected interest rate hike by the ECB. From the technical perspective, the four-hour picture has turned upside. EURUSD continued to move upward after hitting the dip back in mid-July. The pair was accelerating along with the ascending trend line and the 20 SMA. However, the bulls of EURUSD confronted rejections after reaching the upper band of the Bollinger Band and the overbought territory of the RSI indicator. EURUSD sellers look to take action, jumping to maintain bearish dominance. At the time writing, EURUSD is clinging on the ascending trend line; the bulls will continue to advance if EURUSD can hold above the level, then head towards the next immediate resistance of 1.0304. On the flip side, if EURUSD falls below the trend line, then it will turn bearish in the near-term, attracting more follow-through sellers.

Resistance: 1.0266, 1.0363, 1.046

Support: 1.0146, 0.9952