Market Focus

US shares declined on Friday, failing to preserve their upside momentum and ended their three-day rally amid disappointing earnings results from social-media firms and weak economic data. Snap Inc.’s poor results and Twitter Inc.’s weaker-than-expected sales figure have both added to the concerns about online ad spending, which is one of the growing signs that tech companies are preparing for a recession. The Fed meeting this week will be the key focus for investors as the market mood remains fragile amid higher inflation, rapidly rising interest rates and recession fears, despite market participants expecting the Fed to take a more measured approach to tightening its monetary policy. In the Eurozone, Friday’s data showed that the business activity in Germany’s private sector contracted in early July and the Manufacturing PMI for the eurozone also fell below 50 for the first time in over two years. The eurozone economy looks set to contract in the third quarter as business activity starts to decline.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined on Friday as the S&P 500 dropped for the first time in four days amid recession fears and poor earnings results from tech companies. The S&P 500 was down 0.9% on a daily basis and the Dow Jones Industrial Average also fell 0.4% for the day. Eight out of eleven sectors stayed in negative territory with the Communication Services and the Information Technology sectors the worst performing among all groups, losing 4.34% and 1.38%, respectively. The Nasdaq 100 meanwhile dropped the most with a 1.8% loss on Friday, while the MSCI World index fell 0.5% for the day.

Main Pairs Movement

The US dollar was little changed on Friday, coming under renewed selling pressure and failing to climb above the 107.3 level as the data from the US pointed to a contraction in the private sector business activity in early July. The DXY index edged higher and touched a daily high after the release of German Manufacturing PMI, but then started to see fresh selling to extend its daily losses below the 106.2 level. The US S&P Services PMI dropped to 47 in July, which came in much weaker than the market expectation of 52.6 and pointed to a worrying deterioration in the economy.

GBP/USD advanced with a 0.16% gain on Friday amid the renewed weakness witnessed in the US dollar. On the economic data side, UK Retail Sales contracted by -5.8% YoY in June but the better-than-expected UK PMIs have eased some pressures for the Bank of England (BoE). The GBP/USD pair dropped to a daily low below 1.193 mark at the start of the European session, then regained upside traction to recover all of its daily losses. Meanwhile, EUR/USD was surrounded by bearish momentum during the first half of the day and was undermined by the dismal German PMI data. The pair was down almost 0.15% for the day.

Gold surged with a 0.55% gain for the day after climbing to a daily top near the $1738 mark in the early US trading session, as the precious metal attracted fresh buying amid a sharp fall in US bond yields. Meanwhile, WTI oil preserved its downside tractions and dropped to $95 area on Friday, as the restoration of the Nord Stream 1 gas pipeline dragged oil prices lower.

Technical Analysis

XAUUSD(4-Hour Chart)

Gold advanced above $1,725 at the time of writing on Friday. After the disappointing PMI data, the benchmark US 10-year Treasury bond yield lost more than 4%, diminishing the demand for the US dollar. From the technical perspective, gold staged a solid comeback after hitting the pivotal support of $1,680. With the RSI not yet reaching overbought territory and the MACD continuing to lend support, gold might be able to breach the resistance of $1,732. The acceptance of the midline of the Bollinger band would defend gold’s bulls.

Resistance: 1732.58, 1756.40, 1779.70

Support: 1680.99

USDJPY (4-Hour Chart)

USDJPY has managed to drop below 136.00 in the American session following the release of US economic data. USDJPY has reached the lowest in two weeks. From the technical perspective, the intraday bias now points to the downside as the pair has breached the bullish channel. The pair is about to post its four-hour close under the channel and the resistance of 136.28. The immediate support is seen at 135.67, followed by the 134.52 zone. The US dollar needs to recover back above 136.28 in order to remove the negative tone.

Resistance: 136.28, 136.95, 137.53

Support: 135.67, 134.52

EURUSD (4-Hour Chart)

EURUSD extended its recovery in the American trading session after the release of US data. From the technical perspective, EURUSD rebounded after reaching the lower band of the Bollinger Bands and the 20 Simple Moving Average. At the time of writing, the bulls have boosted EURUSD above the resistance of 1.0205, pointing to a bullish shift on the four-hour chart. If EURUSD can sustain its upside momentum towards the next hurdle of 1.0284,  the potential double-bottom pattern will suggest a bullish mode for the pair. In the meantime, the RSI indicator is currently trading within the positive territory, supporting the upside. On the contrary, an intraday close below 1.0205 could potentially open the door for a slide towards parity. Further price movement eyes the FOMC meeting next week.

Resistance: 1.0284, 1.0362, 1.0459

Support: 1.0205, 1.0109