On Thursday night, U.S. stock futures showed little movement, with the Dow Jones Industrial Average futures dropping slightly by 18 points or 0.05%. S&P 500 futures remained unchanged, while Nasdaq 100 futures rose 0.07%.

During regular trading on Thursday, the Dow decreased by approximately 110 points or 0.33%. The S&P 500 dropped 0.6%, and the Nasdaq Composite, which has a heavier focus on technology stocks, lost 0.8%. Tesla’s shares were one of the factors dragging down the Nasdaq, with a decline of nearly 10% after the company reported a sharp drop in net income for the first quarter compared to the same period in the previous year.

This week, the major U.S. stock market indices are likely to finish in the red, with the Dow and S&P 500 on track for their worst weekly performances since March. This earnings season brings more macro-level uncertainty than in the recent past.

Earnings season continues on Friday, with Procter & Gamble, Regions Financial, SLB, Freeport-McMoRan, and HCA Healthcare set to report earnings before the market opens. Investors will also keep an eye on the Purchasing Managers’ Index for the manufacturing and services sectors to gain insight into the economy.

On Thursday, all sectors in the stock market experienced a price decline of 0.60%, except for the Consumer Staples sector which increased by 0.06%. The Real Estate and Consumer Discretionary sectors saw the largest declines, at 1.19% and 1.48%, respectively. The Information Technology and Communication Services sectors also experienced significant declines, both down by over 0.75%. The remaining sectors saw smaller declines, ranging from 0.05% to 0.43%.

Major Pair Movement

On Thursday, disappointing U.S. economic data caused Treasury yields to fall, resulting in the dollar weakening and increasing the likelihood of further rate cuts by the Federal Reserve. The data included jobless claims, Philly Fed, existing homes, and the Conference Board’s Leading Economic Index, which all signaled that the battle against inflation would negatively impact growth and asset demand.

Despite a 3bp rise in 2-year bund-Treasury yield spreads, the EUR/USD remained relatively unchanged. The European Central Bank is expected to raise rates more than the Fed this year but holds hikes for a longer period.

While JGB yields remained steady, the yen advanced against the euro and sterling due to the upcoming Japanese CPI report and Bank of Japan meeting. The BoJ is likely to maintain its policy stance but may tweak its yield curve control if wage settlements remain strong. GBP/USD recovered from Thursday’s lows but still finished down 0.05%.

Friday will feature April S&P Global PMIs and retreating oil prices will also be watched as a global recession risk indicator.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD remained stable below 1.1000 due to mixed US equity markets and doubts about the market outlook. The European Central Bank’s accounts showed that the central bank would have signaled more rate hikes if not for the banking crisis, and a rate hike is expected at the May 4 meeting. US data was below expectations, with Initial Jobless Claims, Continuing Claims, and Philly Fed Manufacturing Survey lower than expected, and Existing Home Sales also dropped. On Friday, the S&P Global PMIs are due, which could affect market sentiment and benefit the US Dollar if the readings are negative.

According to technical analysis, the EUR/USD has been moving slightly flat and remains between the support and resistance levels from the previous day. The Bollinger band is also narrowing, indicating that the market is in a flat range. We are expecting better market movement today with the release of PMI data in the EU. The Relative Strength Index (RSI) is currently at 50, indicating that the EUR/USD is in a waiting condition.

Resistance: 1.0975, 1.1026

Support: 1.0923, 1.0877

XAU/USD (4 Hours)

On Thursday, XAU/USD rose above the $2,000 mark as financial markets became more cautious due to concerns about the economic future and the weak US dollar. Global stock markets traded softly, with US indexes rebounding slightly from early lows, and government bond yields falling after disappointing US data suggested an upcoming economic downturn. Initial jobless claims rose, while the Philadelphia Fed Manufacturing Survey and existing home sales both performed worse than expected in April. US Treasury Secretary Janet Yellen commented on the relationship between the US and China, stressing the importance of maintaining a constructive and fair relationship while warning of severe consequences for any violations of sanctions on Russia by Chinese companies. She also emphasized the need for the government to ensure the soundness of the banking system in light of the recent financial crisis.

Based on technical analysis, XAU/USD has risen back above the $2,000 mark but is still experiencing consolidation. It is currently trading in the middle band of the Bollinger band, indicating a neutral trend in the longer term. The Relative Strength Index (RSI) is hovering around 50, suggesting that XAU/USD is waiting for its next move.

Resistance: $2,010, $2,020

Support: $1,997, $1,990

Economic Data

Stock futures were slightly down on Wednesday night as investors evaluated the latest corporate earnings reports. The Dow Jones Industrial Average futures lost 43 points or 0.1%, while the S&P 500 futures dropped 0.2%, and Nasdaq-100 futures slipped 0.3%. Investors examined various reports released after the bell, including Tesla and IBM. Tesla fell 5% after reporting that its net income and GAAP earnings dropped by over 20% from a year ago. However, IBM rose almost 2% after expanding its margins.

Although investor attention has mostly shifted to quarterly results, reporting firms have not driven the broader market, according to William Northey, senior investment director at U.S. Bank Wealth Management. The S&P 500 closed slightly below its flatline on Wednesday, while the Nasdaq Composite ended higher, and the Dow closed 0.2% lower. Investors anticipate more earnings reports on Thursday, including releases from Alaska Air and AT&T.

On Wednesday, all sectors experienced a slight dip of 0.01%. The utility sector saw the biggest gain, rising 0.78%, followed by real estate at 0.55% and health care at 0.28%. Financials and consumer discretionary also saw positive gains at 0.26% and 0.02%, respectively. On the other hand, communication services experienced the biggest drop at 0.72%, while the materials and energy sectors declined by 0.31% and 0.25%, respectively. The information technology sector also fell slightly by 0.13%, while consumer staples and industrials decreased at 0.05% and 0.07%, respectively.

Major Pair Movement

The dollar index rose on Wednesday but subsequently retreated from its highs after being rejected at Monday’s peak. Along with the earlier-fueling risk-off flows, the gains in 2-year Treasury-bond spread yields also reached a zenith. The euro zone’s above-forecast core inflation readings limited the euro’s losses against the dollar, while the United Kingdom’s significantly above-forecast March inflation pushed sterling broadly higher. Sterling was left with 0.13 percent gains after falling from its highs, with this week’s lows concentrated near the rising 21-day moving average support. In late trade, the EUR/USD had recovered from its lows between Tuesday and Monday but was still down 0.13 percent.

As a result of the BoJ’s reaffirmation of its yield curve control policy, rising Treasury-JGB yield spreads to support the USD/JPY. JGB yields are once again being capped. Treasury yields are increasing as a result of the markets’ pricing out of anticipated rapid Fed rate cuts during March’s banking crisis and in response to US core inflation increasing to 5.6% and the unemployment rate decreasing to 3.5% in March. Wednesday’s elevated European inflation readings suggest that inflation is more persistent than anticipated and will require the ECB and BoE to raise rates further and for an extended period.

However, the market struggles to price in more than one additional 25bp Fed raise, followed by roughly 50bp of cuts by the end of the year. Divergent central bank policy outlooks place the dollar index in a precarious position above February and April’s trend lows of 100.80/78.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD pair rose as the US Dollar lost gains on Wednesday, but pulled back to 1.0950 due to market fluctuations. Eurozone inflation remained high at 6.9% YoY in March, with the ECB suggesting more rate hikes ahead. The ECB Chief Economist expects a hike in May, with data determining the size, and the ECB will release meeting minutes on Thursday. The odds of a rate hike in May by the Fed are 83%. The EUR/USD pair is waiting for the next catalyst to move above 1.1000 or downside. Market sentiment may benefit the Euro if the risk appetite is high.

According to technical analysis, the EUR/USD experienced a slight decrease on Wednesday and broke its previous support level. It is currently trading around the middle band of the Bollinger band. It is predicted that the market will continue to consolidate, with the possibility of a downward movement toward the support level at 1.0923. The Relative Strength Index (RSI) currently stands at 47, indicating a potential slight decrease for the EUR/USD.

Resistance: 1.0975, 1.1026

Support: 1.0923, 1.0877

XAU/USD (4 Hours)

On Wednesday, financial markets started in risk-off mode, leading to a firmer demand for the US Dollar across the FX board. As a result, XAU/USD fell to its lowest in over two weeks but has since grounded higher to trade around $1,995 a troy ounce. This sentiment was triggered by US Federal Reserve officials’ suggestions of the need for more rate hikes to control inflation in the United States. The UK’s annual Consumer Price Index was higher than anticipated in March, while the Eurozone confirmed the annual Harmonized Index of Consumer Prices at 6.9% in the same period. Government bond yields are also on the rise due to inflation-related concerns. The US indexes are currently trading mixed, while Asian and European indexes edged lower.

According to technical analysis, XAU/USD has rebounded after experiencing a significant drop on Wednesday. It is currently trading at the middle band of the Bollinger band, indicating a neutral trend in the long term. The Relative Strength Index (RSI) is hovering around the 45 levels, suggesting the potential for a slight upward movement.

Resistance: $2,003, $2,020

Support: $1,990, $1,975

Economic Data

The S&P 500 index closed nearly unchanged on Tuesday as investors analyzed a wave of corporate earnings reports and their impact on the US economy. The Dow Jones Industrial Average dipped slightly, while the Nasdaq Composite edged down a bit. Investors evaluated the latest batch of earnings reports, and although Bank of America beat first-quarter expectations, Goldman Sachs shares fell, and Johnson & Johnson’s stock dropped after the company beat estimates but lowered its 2023 guidance. Investors warn that profits topping already low expectations won’t matter to a market staring at a Federal Reserve that’s continuing to tighten into a potential recession.

Despite this, earnings season has so far proven resilient, and all the major averages are up since the period kicked off. However, more than eight out of ten traders anticipate a 25 basis point increase in interest rates next month, marking a stark contrast to the calls for a halt in hiking in March. Atlanta Federal Reserve President Raphael Bostic anticipates one more 25 basis point hike, followed by a hold at that level “for quite some time.” Earnings season continues with results from United Airlines and streaming giant Netflix.

On Tuesday, all sectors in the market saw an overall increase of 0.09%. Industrials, energy, and information technology were the top-performing sectors, with gains of 0.46%, 0.45%, and 0.41%, respectively. Materials and consumer staples also performed well, with gains of 0.40% and 0.33%. On the other hand, utilities, communication services, and healthcare sectors saw a decline of -0.51%, -0.65%, and -0.65%, respectively. The real estate sector had the biggest decline, down by -0.15%.

Major Pair Movement

On Tuesday, the dollar index decreased by 0.34%, despite the hawkish outlook of St. Louis Fed President James Bullard. The market is struggling to factor in more than one more 25bp U.S. interest rate hike. The dollar was impacted by the risk-on theme, which began when China’s Q1 GDP growth exceeded expectations. The ECB and BoE are expected to have more hikes, and the recovery of Chinese demand could assist non-U.S. exporters. Although Treasury yields and the dollar rebounded, the hawkish view remains at odds with the market, which is roughly pricing in only one more 25bp hike to 5%, followed by almost two 25bp rate cuts by year-end.

The EUR/USD rose 0.5%, while the GBP/USD increased by 0.4% due to the broader dollar setback and strong UK pay growth. GBP/USD traders are now focused on Wednesday’s UK inflation data, with overall inflation forecast at 9.8% versus 10.4% in February, yet vastly above the BoE’s 2% target. USD/JPY fell by 0.25%, and there is little U.S. data until Thursday, followed by Friday’s Global PMIs. Longer-term Treasury yields are driving prices, with the BoJ on hold.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD rose on Tuesday due to a weaker US Dollar, and it remained in a small range during the American session. The April German ZEW survey results were mixed, with the Economic Sentiment Index falling unexpectedly while the Current Situation Index improved. Wednesday’s economic calendar includes Euro Zone’s March Consumer inflation report, February Current Account, and Construction Output. The US Dollar fell on Tuesday, with little change in US yields and mixed performance on Wall Street. The Federal Reserve will release the Beige Book on Wednesday, and the latest comments from Fed officials suggest the possibility of one more rate hike. The market sees the ECB raising rates beyond May as Fed rate cuts got priced out, and the Euro Zone’s yields rose on Tuesday, offering support to EUR/USD.

Based on technical analysis, the EUR/USD saw a slight rally on Tuesday and broke the previous resistance level, reaching the middle band of the Bollinger band. It is expected that the market will continue to consolidate with a possibility of an upward movement toward the resistance level at 1.0998. The RSI is currently at a level of 51, indicating that the EUR/USD is in consolidation mode.

Resistance: 1.0998, 1.1026

Support: 1.0966, 1.0923

XAU/USD (4 Hours)

Gold initially rose on Tuesday, driven by optimism from China, reaching a high of $2,005.79 per troy ounce during Asian hours. However, the positive sentiment was short-lived as China’s Q1 Gross Domestic Product (GDP) showed that the economy grew by 2.2% in the three months to March, beating market expectations, but failed to boost risk appetite in European and American data. Wall Street opened lower but has since recovered slightly, and US Treasury yields remained stable. Despite the broad weakness of the US dollar, it found some demand during the European session due to tepid macroeconomic figures that weighed on high-yielding assets’ demand.

Based on technical analysis, XAU/USD is currently in a consolidation phase, but it has been able to move slightly higher and maintain its position above the $2,000 level. The price is currently situated in the middle band of the Bollinger band, which indicates a neutral trend in the market. The key support level is now at the $2,000 level. The RSI is hovering around the 45 levels but indicating that there is still potential for a slight upward movement.

Resistance: $2,010, $2,020

Support: $2,000, $1,990

Economic Data

What Are Retail Sales? 

Retail sales refer to the total amount of merchandise or goods sold to customers by a retailer. This can include a wide range of items, such as clothing, electronics, furniture, and more. Retail sales are an important indicator of the health of the economy, as they represent consumer spending, which accounts for a significant portion of overall economic activity.

In the United States, retail sales are closely monitored and reported by the government and other organizations as a key economic indicator. 

Understanding Retail Sales 

Retail sales data gives insights into customer behavior and buying habits. Retailers use it to make informed decisions about inventory, marketing, and pricing. Analyzing data also helps identify trends and changes in consumer preferences. This information is critical for product development and market expansion.

Additionally, retail sales data can be used by investors, policymakers, and economists to assess the overall health of the economy and make predictions about future growth and performance. 

How Is Retail Sales Data Calculated

Retail sales data is typically collected through a combination of surveys, point-of-sale (POS) systems, and other sources. The U.S. Census Bureau conducts a monthly survey of retail establishments to gather information on sales and inventory levels. This survey includes both brick-and-mortar stores and online retailers and covers a wide range of product categories.  

In addition to the survey data, the Bureau of Economic Analysis (BEA) also incorporates data from POS systems and other sources to create a comprehensive estimate of retail sales for a given period. 

How Does Inflation Impact Retail Sales

Inflation can have a significant impact on retail sales, as it affects the purchasing power of consumers. When prices rise due to inflation, consumers may be less likely to make discretionary purchases and may focus on purchasing only essential goods. This can lead to a decline in retail sales, which can have a ripple effect on the economy as a whole.  

On the other hand, low inflation can stimulate retail sales by making goods more affordable for consumers. Understanding the relationship between inflation and retail sales is critical for retailers, investors, and policymakers to make informed decisions about pricing and economic policies. 

Why Are Retail Sales Important

Retail sales are important for the economy because they show how much consumers are spending, which is a big part of economic activity. When retail sales are strong, it is usually a good sign for the economy because it suggests that consumers are confident and that the economy is growing.

Conversely, weak retail sales can be a sign of economic contraction, as consumers may be less willing to spend money during times of uncertainty or financial strain.  

Retail sales data is also closely watched by investors, as it can provide insights into the performance of individual companies and industries. 

Understanding the Basics of Rate of Inflation 

Rate of inflation refers to the percentage change in the general price level of goods and services in an economy over a specific period, usually a year. It is a key economic indicator that measures the rate at which prices are increasing, and it affects consumers, businesses, and the overall economy. A higher rate of inflation means that the same amount of money buys fewer goods and services, reducing purchasing power and potentially leading to economic instability.

Different Types of Inflation 

There are several types of inflation, and understanding each type is important to determine the appropriate course of action. 

One of the types of inflation is cost-push inflation, which occurs when the cost of production rises, leading to higher prices for consumers.  

Another type is demand-pull inflation, which occurs when the demand for goods and services exceeds the supply, resulting in higher prices.  

Deflation occurs when the rate of inflation goes negative, leading to a decrease in prices. 

Disinflation refers to the decrease in the rate of inflation over time.  

Reflation is the opposite of deflation, and it occurs when there is an increase in the rate of inflation after a period of deflation.  

Creeping inflation refers to a slow increase in the rate of inflation, while walking inflation refers to a moderate increase in inflation.  

Running inflation refers to a sudden and rapid increase in the rate of inflation.  

Finally, hyperinflation occurs when the rate of inflation becomes extremely high, leading to a loss of value of the country’s currency. 

The Effects of Rate of Inflation on the Economy 

The rate of inflation has a significant impact on the economy. When inflation is high, the cost of goods and services increases, which reduces purchasing power. This, in turn, leads to a reduction in demand for goods and services, leading to a decrease in production and eventually leading to unemployment. The increase in prices of goods and services also results in a decrease in the value of money. 

Inflation can also lead to higher interest rates, as central banks try to control the rate of inflation. This, in turn, leads to an increase in the cost of borrowing, making it more difficult for businesses to obtain loans to finance their operations. Additionally, inflation can also lead to an increase in the cost of living, leading to a decrease in the standard of living. 

Measuring Rate of Inflation 

The rate of inflation is typically measured by calculating the percentage change in the price level of a basket of goods and services over a period of time. There are different ways to measure the rate of inflation, but the most common methods are the Consumer Price Index (CPI) and the Producer Price Index (PPI).

The CPI measures the average price change of a basket of goods and services typically consumed by households. The goods and services included in the CPI are weighted according to their relative importance in the average household’s expenditure. The CPI is usually calculated on a monthly basis and is used to measure changes in the cost of living over time.

The PPI, on the other hand, measures the average price change of goods and services at the producer level before they reach the consumer. The PPI includes goods and services used in the production process, as well as intermediate goods and services. The PPI is often used as a leading indicator of future changes in the CPI.

To calculate the rate of inflation, you would compare the CPI or PPI from one period to another, usually a month or a year, and calculate the percentage change. For example, if the CPI was 100 in January and 105 in February, the rate of inflation would be (105-100)/100 = 5%.

Protecting Against the Rate of Inflation 

There are different ways of protecting against the rate of inflation. One way is to invest in assets that increase in value with inflation, such as real estate, stocks, and commodities. Another way is to invest in bonds, which can provide a steady stream of income and help offset the effects of inflation. 

Additionally, it is important to diversify investments across different asset classes to spread the risk. Another way to protect against inflation is to save in high-yield savings accounts or certificates of deposit (CDs) that offer interest rates that keep up with inflation. 

What is the Purchasing Managers’ Index (PMI) 

The Purchasing Managers’ Index (PMI) is an economic indicator that measures the health of a country’s manufacturing sector. It is based on a survey of purchasing managers in the manufacturing industry and provides valuable insight into the state of the economy. The PMI is considered a leading indicator, as it can signal changes in economic activity before they become apparent in official economic data. 

How the Purchasing Managers’ Index Works 

The PMI is based on a survey of purchasing managers in the manufacturing industry. The survey asks purchasing managers to rate various aspects of their business, such as new orders, production levels, employment, and prices. The answers are then compiled into a single index number that represents the health of the manufacturing sector. 

The PMI is calculated on a scale of 0 to 100, with a score above 50 indicating expansion in the manufacturing sector, and a score below 50 indicating contraction. The PMI is broken down into sub-indices for new orders, production, employment, supplier deliveries, and inventories. 

How the PMI Affects Economic Decisions 

The PMI is closely watched by economists, investors, and policymakers, as it provides valuable information on the state of the economy. A high PMI reading suggests that the manufacturing sector is expanding, which can lead to increased employment, higher wages, and a stronger economy. A low PMI reading, on the other hand, suggests that the manufacturing sector is contracting, which can lead to job losses, lower wages, and a weaker economy. 

Policymakers use the PMI to guide economic policy decisions. For example, if the PMI indicates that the economy is weakening, policymakers may consider lowering interest rates or implementing fiscal stimulus to stimulate economic growth. 

Why is PMI important

The PMI is an important economic indicator because it provides real-time information on the health of the manufacturing sector. The manufacturing sector is a critical component of most economies, as it provides jobs and drives economic growth.

A strong PMI reading suggests that the manufacturing sector is expanding, which can have positive spillover effects on other sectors of the economy. A weak PMI reading, on the other hand, suggests that the manufacturing sector is contracting, which can lead to job losses and lower economic growth. 

The PMI is also important for investors, as it provides information on the performance of individual companies and sectors. For example, a high PMI reading for the technology sector may signal that technology stocks are likely to perform well in the coming months. 

When is PMI released

The PMI is released on a monthly basis by a number of different organizations, including Markit and the Institute for Supply Management (ISM).

The PMI is typically released on the first business day of the month and covers the previous month. For example, the PMI for January would be released on the first business day of February. Investors and economists closely watch the PMI release date, as it can have a significant impact on financial markets. 

What Is the Industrial Production Index (IPI)? 

The Industrial Production Index (IPI) is an economic indicator that measures the production output of the industrial sector of a country. It includes the manufacturing, mining, and electric and gas utilities sectors. The IPI provides insight into the health of the economy and is used by policymakers, investors, and analysts to make informed decisions. The IPI is an important tool for predicting future economic growth or contraction. 

How Does the Industrial Production Index (IPI) Work? 

The IPI is calculated by the Federal Reserve Board in the United States and other central banks around the world. It is based on a survey of businesses and covers approximately 100 products across various industries. The survey tracks the quantity of goods produced, as well as the changes in production levels over time. The IPI is reported monthly and is seasonally adjusted to account for variations in production levels throughout the year. 

How to Calculate the IPI 

The IPI is calculated using a base year that is set at 100. The current production levels are compared to the base year, and the percentage change is reported as the IPI for that month. For example, if the production levels in the current month are 10% higher than the base year, the IPI for that month would be 110. This allows for easy comparison of production levels over time, as well as between different industries. 

Benefits of the Industrial Production Index (IPI) 

The IPI provides valuable information for businesses, investors, and policymakers. Businesses can use the IPI to monitor production levels in their industry and adjust their operations accordingly. Investors can use the IPI to make informed decisions about which companies to invest in based on their production levels. Policymakers can use the IPI to make decisions about monetary policy and to anticipate changes in economic growth. 

The IPI can also be used in conjunction with other economic indicators, such as the Gross Domestic Product (GDP), to provide a more comprehensive picture of the economy. The IPI is particularly useful for predicting changes in GDP, as it provides an early indication of changes in production levels. 

When is Industrial Production released? 

The Federal Reserve Board releases the IPI monthly, typically around the middle of the month. The data is available on the Federal Reserve website and is widely reported in the media. Investors and analysts typically pay close attention to the IPI release, as it can have a significant impact on the stock market and other financial markets. 

The S&P 500 rose by 0.33% on Monday as investors turned their attention to the latest batch of corporate earnings results. The Dow Jones Industrial Average also gained by 0.3%, while the Nasdaq Composite added 0.28%. As earnings season continues, investors are closely monitoring the results to gauge the health of corporate America.

State Street and Charles Schwab reported their earnings results before the bell, with Schwab’s shares rising by 3.9% despite a decline in deposits. However, State Street fell by 9.2% after missing estimates on the top and bottom lines. The financial sector is under particular scrutiny this earnings season following Silicon Valley Bank’s collapse last month, which led to a liquidity crisis and affected the broader sector.

The S&P’s communication services sector slumped by 1.3%, with declines from tech giants Alphabet, Netflix, and Meta Platforms leading the downside. Google’s parent company, Alphabet, fell by more than 2% as reports surfaced that Samsung is considering making Bing its default search engine.

Corporate earnings got off to a positive start last week as banking giants Wells Fargo and JPMorgan Chase beat expectations. Bank of America data shows that companies are hanging on despite inflation and higher rates, with 90% of the names that reported during week one topping EPS estimates. However, Stovall advises against drawing overall conclusions as reports from health care and communication services, which are expected to see double-digit year-over-year declines, are still pending.

The reporting period for financial companies continues this week with results from Bank of America, Goldman Sachs, and Morgan Stanley. Outside of financials, reports from electric vehicle heavyweight Tesla, IBM, and Netflix are also due out. Investors are waiting with bated breath to see how these reports will shape the market’s direction moving forward.

On Monday, the overall market saw a positive price change of 0.33%. The Real Estate sector had the highest increase in price with 2.23%, followed by Financials at 1.13%, and Industrials at 0.79%. Consumer Discretionary, Consumer Staples, and Materials all had moderate increases in price, with gains ranging from 0.59% to 0.68%. The Utilities sector had a slightly lower increase of 0.57%, while the Information Technology sector had the smallest increase at 0.39%. The Health Care sector experienced a slight decrease in the price of 0.10%, while both the Communication Services and Energy sectors saw a decrease in the price of 1.27%.

Overall, the market had a positive day with most sectors seeing an increase in price. Real Estate, Financials, and Industrials had the highest gains, while Communication Services and Energy saw the largest declines. The Health Care sector experienced a slight decrease in price, while the Information Technology sector had a small increase.

Major Pair Movement

On Monday, sterling fell 0.23%, breaching support at 1.2370. If this week’s key UK data are underwhelming and there is a close below that level, it could result in half of the March-February risk-off rise at 1.2175 being tested.

Following an unexpected increase in the New York Fed’s Empire State manufacturing gauge, the dollar index continued to rebound from its low on Friday, leading to an increase in Treasury yields against bunds, gilts, and JGBs. While the U.S. economic data has been mixed, the rise in core CPI to 5.6% in March and the low jobless rate have given strength to Fed hawks. It is anticipated that there will be another 25bp Fed hike in May or June, with current pricing of rates in Q3 being projected to remain high.

As a result of the slide in 2-year bund-Treasury yields spread by 7bp, EUR/USD fell 0.56%, with the next support being the rising 21-day moving average at 1.0880. USD/JPY rose 0.51% and is close to 61.8% of its March slide at 134.75, with possible hurdles at 136. The yen is becoming increasingly vulnerable to Treasury yield increases as 10-year JGB yields have risen back up to the BoJ’s 0.5% yield curve control cap, and Governor Ueda says that any policy shifts will take time.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD experienced its worst day in a month on Monday, losing over 50 pips and hitting a low of 1.0908 before rebounding to 1.0930. The Euro was the weakest among major currencies due to a stronger US Dollar, which was boosted by positive economic data from the US. The Empire Manufacturing Index rose unexpectedly from -24.6 in March to 10.8 in April, well above the market consensus of -18. The data strengthened expectations for a Federal Reserve (Fed) rate hike at the May 2-3 meeting, with the odds at 88%, according to the CME FedWatch Tool.

Despite higher Euro Zone bond yields, the Euro lost ground against its G10 rivals, including the US Dollar. European Central Bank (ECB) policymaker Martins Kazaks, who is considered a hawk, suggested the ECB could make a 25 or 50-basis point move in May. On Tuesday, the German ZEW Survey is expected, with the Current Situation Index predicted to have improved to -40 from -46.5 and the Economic Sentiment to 15.1 from 13. ECB’s Frank Elderson is also scheduled to deliver a speech.

Looking at the technical analysis, on Monday the EUR/USD experienced a significant decline, breaking below our support level at 1.0962 and causing the lower band of the Bollinger band to be pushed even lower. The next support level is now at 1.0921, and we expect the market to consolidate with the possibility of an upward move. The RSI is currently at a level of 40.

Resistance: 1.0974, 1.1026

Support: 1.0921, 1.0866

XAU/USD (4 Hours)

Gold prices started the week on a negative note, with XAU/USD hovering around $1,990 per troy ounce, after dropping to $1,981.16 at the beginning of the American session. The US Dollar gained strength, extending its Friday rally amid increasing risk-aversion. Although the Greenback’s advance pared during European trading hours, it bounced back due to persistent negative sentiment that kept US stock indexes in the red.

Market concerns focused on economic growth and the likelihood that the United States Federal Reserve (Fed) may decide to extend the tightening cycle beyond May. Last week’s US economic data came in weaker than expected, raising concerns about a possible recession before the end of the year. Additionally, a couple of Fed officials expressed hawkish views that suggest the central bank may not be finished tightening yet.

Rising US Treasury yields also provided further support to the US Dollar, with the 10-year Treasury note yields standing at 3.59%, up 7 basis points (bps) on the day, while the 2-year note offers 4.20%, up 10 bps.

Looking at the technical analysis, the XAU/USD is currently in a consolidation phase between our established support and resistance levels. The Bollinger band is expanding, suggesting that there may be potential for further movement. Our key support level remains at $1,990 while our resistance level is set at $2,005. The RSI is hovering around the 40 levels, indicating the potential for additional downward pressure.

Resistance: $2,005, $2,017

Support: $1,990, $1,984

Economic Data

US stock market futures for the S&P 500, Nasdaq-100, and Dow Jones Industrial Average have all seen gains, with attention turning to a week of quarterly earnings reports, particularly in the financial sector, where there is increased focus on the health of the sector after the collapse of Silicon Valley Bank. Notable names reporting this week include Charles Schwab, Bank of America, Morgan Stanley, Tesla, and Procter & Gamble. Corporate earnings got off to a positive start, with Wells Fargo and JPMorgan Chase beating expectations, but retail sales data showing a slowdown in consumer spending pulled markets lower on Friday.

US Treasury Secretary, Janet Yellen, believes that banks may become more restrictive with lending, which could allow the Federal Reserve to stop hiking interest rates. Yellen also stated that this tightening of lending could act as a substitute for further interest rate hikes. This follows the collapse of Silicon Valley Bank and the potential fallout from the episode. Despite Friday’s losses, the major averages posted solid weekly gains, in yet another sign of resiliency for this market.

On Friday, the overall stock market fell by 0.21%. The financial sector saw an increase of 1.05%, while the communication services and energy sectors saw small gains of 0.31% and 0.19%, respectively. The utilities and real estate sectors saw the largest drops of 1.11% and 1.68%, while the healthcare and materials sectors saw declines of 0.79% and 0.67%, respectively. The consumer staples and information technology sectors also saw losses of 0.58% and 0.51%, respectively, while the consumer discretionary and industrial sectors saw slight gains of 0.13% and -0.12%, respectively.

Major Pair Movement

On Friday, the dollar index increased by 0.6% due to above-forecast April Michigan consumer sentiment and 1-year inflation expectations, despite a 1% U.S. retail sales fall being dismissed by the Fed. This was accompanied by a rise in Treasury yields and increased rate-hike potential, indicating the market’s preparedness for a lower-than-expected retail sales result.

EUR/USD fell by 0.46% after reaching a new 1-year high at 1.10755 on EBS, as a result of the diminished Fed rate cut bets and the rise in 2-year Treasury yields, while USD/JPY surged by 0.88% breaching the mid-point of the March banking crisis slide at 133.77.

GBP/USD also experienced a decline in value by 0.84%. This was due to falling gilt-Treasury yield spreads and a delayed risk-off response to higher Treasury yields. As a result, prices fell from a minor new 10-month high to an uptrend line from late March, which caught last week’s lows.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD pair is facing difficulties in extending its recovery above the psychological resistance level of 1.1000, as investors remain cautious about the possibility of one more rate hike by the Federal Reserve (Fed). The monthly Retail Sales data released on Friday showed a contraction of 1.0%, higher than the expectations of a 0.4% decline. This, along with the hawkish commentary from Fed Governor Christopher Waller, has increased the odds of further policy tightening by the Fed, which led to a recovery in the US Dollar Index (DXY). Mixed views from ECB policymakers have also shifted investors to the sidelines, with Pierre Wunsch suggesting a rate hike of between 25 and 50 basis points in May, while Mario Centeno advocated a pause or a slowing in the interest rate hike spell.

Looking at the technical analysis, the EUR/USD price fell lower on Friday due to the positive impact of good retail sales data in the US. The price is currently pushing below the middle Bollinger band, targeting the lower band with a narrower band. Our support level now stands at 1.0962, and we anticipate the market to be in consolidation with the potential for a move higher. The RSI has moved back lower to the middle around the 50 levels, indicating that the market is taking a breather for the day.

Resistance: 1.1026, 1.1052

Support: 1.0962, 1.0921

XAU/USD (4 Hours)

The price of gold has reached a one-year high and is currently around $2,040. This is due in part to the weakening of the US dollar, as investors anticipate that the Federal Reserve will pause its rate-hiking cycle. Recent data, including the US Producer Price Index and Jobless Claims, suggest that inflation is easing and labor market conditions are loosening up, which further supports the view that the Fed will pause after hiking interest rates one last time in May. The IMF has also trimmed its global growth outlook for 2023, citing the impact of higher interest rates, which fuels recession fears and leads investors to favor safe-haven assets such as gold. However, traders are waiting for the release of US macro data, including monthly Retail Sales figures and the Preliminary Michigan Consumer Sentiment Index, before making any major moves.

Looking at the technical analysis, the XAU/USD price fell below the $2,000 level but has since rebounded. The price is now approaching the lower Bollinger band, and the bands are moving sideways. We have revised our key support level to $1,990 and our resistance level to $2,005. The RSI is hovering around the 42 levels, indicating the possibility of further downward pressure.

Resistance: $2,005, $2,017

Support: $1,990, $1,982

Economic Data

This week, market participants are eagerly awaiting some highly anticipated economic reports. The focus will be on key indicators such as CPI in Canada, the UK, and New Zealand, as well as Flash Manufacturing and Services PMI in the UK and the US. These much-awaited reports are crucial in helping traders and investors stay ahead of the curve and make informed decisions.

Here are the key events to watch out for:

New York Empire State Manufacturing Index | US (April 17)

The NY Empire State Manufacturing Index sank to -24.6 in March 2023 from February’s -5.8.

 Analysts anticipate a reading of -15 in April.

Claimant Count Change | UK (April 18)       

The number of people claiming for unemployment benefits in the UK fell by 11,200 in February 2023.

For March, analysts expect this trend to persist, with a projected decrease of 9,500.  

Consumer Price Index | Canada (April 18)

CPI in Canada rose 0.4% in February 2023, easing from 0.5% in January.

For March, analysts expect the index to increase by 0.3%. 

Consumer Price Index | UK (April 19)

UK inflation rose unexpectedly in February, with CPI up 10.4% annually from 10.1% in January. This was the first increase in four months. 

For March, analysts expect a lower reading of 10.2%.

Consumer Price Index | New Zealand (April 20)

New Zealand’s CPI jumped 1.4% in the fourth quarter of 2022 from the previous quarter.

For the first quarter of 2023, analysts forecast the index to increase by 1.6%.

Flash Manufacturing PMI and Flash Services PMI | Germany (April 21)      

In March 2023, the German Flash Manufacturing PMI was revised slightly higher to 44.7, while the Flash Services PMI was revised slightly lower to 53.7. 

For April, analysts expect the Flash Manufacturing PMI to be released at 45.5, while Flash Services PMI at 53.5.

Flash Manufacturing PMI | UK (April 21)

UK Flash Manufacturing PMI came in at 47.9 in March 2023, down from February’s seven-month high of 49.3.

Analysts expect a reading of 48.5. in April. 

Flash Manufacturing PMI and Flash Services PMI | US (April 21)  

The US Flash Manufacturing PMI came in at 49.2 in March 2023, up from 47.3 in February. Meanwhile, Services PMI was revised lower to 52.6.

For April 2023, analysts expect the US Flash Manufacturing PMI to be released at 48, while Flash Services PMI at 51.8.