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Market Focus

U.S. stocks plummeted Friday afternoon to close out another week in the red as investors weighed a bevvy of corporate earnings and braced for more aggressive monetary tightening by the Federal Reserve in the coming months. The S&P 500 plunged 2.8%, marking its second-worst day of the year, while Dow Jones wiped out 980 points in its worst day since October 2020. The Nasdaq Composite tumbled 2.6% as well. The losses followed remarks from Fed Chair Jerome Powell at an IMF panel Thursday signalling a 50-basis point rate increase was “on the table” for May, when the U.S. central bank holds its next policy-setting meeting. The Fed chair also reiterated that policymakers were committed to “front-end loading” inflation-fighting efforts.

The victory of Emmanuel Macron in France’s presidential election should be a relief for investors worried that a Marine Le Pen win would roil European markets. The euro, French bonds and shares from the nation’s banks are among the assets that should benefit from Macron’s win for a second term, according to money managers. The euro rose as much as 0.6% against the dollar in early Asia trading before trimming its advance to about 0.2% as of 7:48 a.m. in Hong Kong.

The risk of a victory by far-right nationalist and eurosceptic Le Pen had been keeping investors on edge, with some predicting European assets could suffer a selloff comparable to the euro crisis or Brexit.

“European investors are partying after the French exit polls: a potential black Monday is definitely averted,” said Fabio Caldato, a partner at Olympia Wealth Management.

Macron won 58.55% of the votes in Sunday’s runoff compared with 41.45% for Le Pen, according to the French Interior Ministry website. The nationalist leader conceded defeat in a speech to her supporters in Paris.

Main Pairs Movement:

The US Dollar’s (via the DXY Index) strong run continued through the third week of April, adding another 0.62%. The DXY Index has been positive in 12 of the 16 weeks thus far in 2022, good for a +5.69% YTD. The Euro pair, which spent most of the first four days of the week in positive territory, ended down by 0.11%. Cable dropped by 1.71%, its worst weekly performance since June 2021. USD/JPY added 1.69%, their seventh consecutive weekly gain.

The narrative behind the US Dollar’s ascent has remained consistent for much of this year: the Federal Reserve is on the verge of a series of significant rate hikes – evidenced by the recent comments by FOMC members – while other major central banks are not. Widening interest rate differentials are propping up the US Dollar.

Commodity-linked currencies also plummeted significantly amid easing crude oil prices and the broader greenback strength. Aussie dropped the most, down 1.73% Friday. Kiwi slid 1.46%, and Loonie surged 1.05%. Gold closed Friday at 1,932.35, down around $20 per troy ounce during the intraday trades. Crude oils gave back all their Thursday’s gains, with WTI trades at $100.40, and Brent at $104.40.

Technical Analysis:

USDJPY (4- Hour Chart)

USDJPY posted back-to-back gains heading toward 129 at the time of writing despite falling US Treasury yields and a risk-off market mood. During the US Fed Minutes, Powell added that the US Fed would not count on the supply side healing to help inflation, implying that the Fed is going to focus on the demand side. From the technical perspective, the intraday bias of USDJPY remains aggressively bullish as it continues to trade well above the bullish trendline. At the same time, the pair seems to be trading along with the 20 Simple Moving Average, behaving as a support pivot. The RSI indicator is steadily hovering within positive levels, and some follow-through buying interest is expected to boost USDJPY toward the next hurdle at 129.4043.

Resistance:  129.40

Support:  127.41, 126.18, 125.18

AUDUSD (4- Hour Chart)

AUDUSD has witnessed heavy selling pressure for the second consecutive day on Friday, tumbling to its lowest level since March. From the technical aspect, the bearish outlook is reinforced by the fact that AUDUSD has breached the descending wedge, setting the stage for a further depreciating move toward the next support at 0.7227. The oversold RSI reading seems unable to stop the current selling pressure. AUDUSD might need to climb above 0.7372 to regain and attract more buying interest.

Resistance: 0.7372, 0.7432, 0.7471, 0.7536

Support: 0.7277

GBPUSD (4- Hour Chart)

GBPUSD plunged to 18-month-lows around 1.2820 amid weak UK data and the US Fed’s continuously hawkish comments. Technically speaking, the outlook of GBPUSD on the four-hour chart remains heavily bearish following Friday’s sharp plummet, further breaking the bearish wedge. The RSI indicator has fallen well below the oversold territory on the four-hour chart. Even though the oversold condition might suggest that GBPUSD could stage a pullback correction, buyers are likely to stay on the sidelines until GBPUSD climbs back above 1.3002. On the downside, the next target aims for the psychological support at 1.2800, followed by 1.2730, the support level from October 2020.

Resistance: 1.3002, 1.3077, 1.3143

Support: 1.2800, 1.2730

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