Investor worries over First Republic Bank overshadowed excitement around Big Tech earnings, causing the Dow Jones Industrial Average to lose more than 200 points. First Republic Bank slid nearly 30%, extending losses after falling almost 50% on Tuesday. The regional bank reported a 40% drop in deposits to $104.5 billion in the first quarter, reigniting concerns about the health of the banking system.

Despite some market participants growing hopeful that e-commerce giant Amazon’s cloud business could show strong revenue growth, Alphabet shares finished down 0.1% after trading up earlier in the day. However, Microsoft climbed more than 7% to trade at its highest point in over a year after beating Wall Street’s expectations on the top and bottom lines in its latest quarter. This earnings week saw the Technology Select Sector SPDR Fund (XLK) add about 1.5% as investors increased their exposure to Big Tech.

Data released Wednesday morning showed that demand for long-lasting goods like appliances and computers was higher than economists expected in March, in a sign that the economy is showing resilience.

On Wednesday, the overall market saw a decline of 0.38%, while the Information Technology sector experienced a price increase of 1.73%. The biggest price declines were seen in the Utilities sector with a drop of 2.37%, followed by Industrials at 1.87% and Health Care at 1.41%. The Financials sector had a decline of 0.96%, while the Consumer Staples and Real Estate sectors both experienced declines of around 0.7%. The Communication Services sector saw a price decline of 0.62%, while the Energy and Materials sectors experienced larger declines at 1.28% and 1.18%, respectively.

Major Pair Movement

The US dollar index dropped by 0.37% on Wednesday, reversing the previous day’s trend of safe-haven flows into the dollar and yen. The focus shifted back to expectations of H2 rate cuts by the Federal Reserve, contrasting with anticipated rate hikes by the European Central Bank (ECB) and the Bank of England (BoE). Market volatility remained high, reflecting uncertainty over global economic conditions, geopolitical tensions, and the regulatory response to the US banking crisis.

The EUR/USD pair rebounded from its early intraweek low of 1.0960 on EBS, reaching a 13-month peak at 1.1096. The Federal Reserve is expected to hike rates by 25bps next week, followed by two 25bp cuts by year-end, while the ECB is fully priced for a 25bp hike in its May 4 meeting, followed by two more 25bp hikes by September, with no real rate cuts until 2024. The UK’s inflation rate of 10.1% presents a challenge for the BoE, but the sterling’s uptrend seems less strong than the EUR/USD pair. Late equity market and oil weakness may trigger renewed demand for the yen and dollar, with high beta pairs such as AUD/USD vulnerable unless upcoming US data alleviates recession concerns.

Technical Analysis

EUR/USD (4 Hours)

Although EUR/USD reached YTD highs on Wednesday, its short-term bullish outlook did not improve. The US Dollar strengthened, causing the pair to pull back from recent highs. This week, important data releases for the Eurozone are due, including consumer confidence data on Thursday, German inflation and EZ GDP growth on Friday, and the ECB meeting next week, where a rate hike is expected, but the extent of the hike is uncertain. While some data favors a 50 basis points hike, there are arguments for a more dovish approach due to renewed banking concerns and slowing inflation. The US Dollar posted mixed results on Wednesday, with the Euro outperforming, but the Dollar ended the day looking stronger as Wall Street slipped again. Important US data releases, including Q1 GDP and Consumer inflation, are expected on Thursday, ahead of next week’s FOMC meeting.

The EUR/USD pair has risen and broken above our resistance level, according to technical analysis. Currently, the price has moved above the middle band of the Bollinger band, with expectations of moving even higher and targeting the upper band. It is anticipated that the EUR/USD will reach the resistance level at 1.1073. The Relative Strength Index (RSI) is currently at 61, indicating a bullish market for the EUR/USD.

Resistance: 1.1073, 1.1131

Support: 1.1042, 1.1000

XAU/USD (4 Hours)

On Wednesday, Spot Gold (XAU/USD) struggled to surpass the $2,000 mark despite the improving market mood, while caution remains. US Dollar demand decreased due to positive earnings reports from large US corporations, but First Republic Bank’s troubles overshadowed it. Most Asian and European stock markets closed in the red, but Wall Street had modest gains. US data showed mixed results, and the US is set to publish Q1 GDP and Personal Consumption Expenditures Prices on Thursday.

Based on technical analysis, XAU/USD reached above the $2,000 level but then moved back below to $1,988 before going back higher and is currently at $2,000. XAU/USD has the potential to move even higher as the price is above the middle band and targeting the upper band of the Bollinger band. The Relative Strength Index (RSI) currently stands at 54, suggesting a neutral but bullish trend.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

Economic Data

Big Tech earnings, led by Alphabet and Microsoft, boosted US stock futures on Tuesday evening. Dow Jones Industrial Average futures gained 0.1%, S&P 500 futures added 0.4%, and Nasdaq 100 futures increased by 1.2%. Microsoft beat Wall Street’s expectations in its latest quarter and posted strong revenue from its Intelligent Cloud business segment, driving shares up by 8%. Meanwhile, Google’s parent company Alphabet reported better-than-expected revenue and a profit in its cloud business for the first time, causing shares to rise by over 2%.

However, regular trading on Tuesday saw the Dow fall by 1%, the S&P 500 finish 1.6% lower, and the Nasdaq Composite dropping nearly 2%. This was partly due to First Republic Bank reporting a 40% decrease in deposits to $104.5 billion in the first quarter, which reignited concerns about the broader banking sector and put pressure on the major averages.

Investors will continue to monitor earnings results from travel companies such as Boeing, Hilton Worldwide, Spirit Airlines, and Travel + Leisure before the bell on Wednesday. Additionally, durable goods and mortgage purchase data will be released on Wednesday morning, followed by the latest GDP update on Thursday and the Personal Consumption Expenditures Price Index – the Fed’s preferred inflation gauge – on Friday.

On Tuesday, all sectors of the stock market experienced a price drop, with the biggest losers being the information technology and materials sectors, down 2.09% and 2.15%, respectively. The consumer discretionary sector also suffered a significant drop of 2.05%, while the utilities and consumer staples sectors fared slightly better with only a 0.10% and 0.12% decline, respectively.

The decline was driven by a combination of economic and geopolitical risks, including concerns about central banks’ inflation fights, as well as uncertainty surrounding the ongoing banking crisis. The financials sector was among the hardest hit, down 1.76%, as investors worried about the potential impact of the crisis on the broader banking sector.

Major Pair Movement

Investors across markets and regions experienced a bleak day as a multitude of economic and geopolitical risks caused them to seek refuge in the US dollar and yen. Central banks’ fights against inflation were seen as contributing to the growing risks that investors were concerned about.

First Republic Bank’s quarterly report, released on Monday, caused alarm in the markets, revealing the precarious state of the bank after March’s banking crisis. Investors are now speculating on the possibility of the acute phase of the banking crisis turning into a chronic issue, with the Federal Reserve nearing the end of its aggressive rate-hiking cycle amid an increased risk of a recession.

This flight to safety was reflected in the 20 basis point drop in the 2-year Treasury yield and a 39 basis point surge in one-month T-bill rates. Investors were pricing in 70 basis points of rate cuts before year-end, with a 25 basis point hike next week slightly less favored. In addition, the 5-year U.S. sovereign CDS soared to its highest level since 2011, now above Spain’s, as the debt ceiling remained unresolved.

EUR/USD decreased by 0.64% as investors moved their funds to the safe-haven dollar causing the currency to dive from its Asia trading peak at 1.1068, reaching Monday’s 1.0966 lows on EBS. It is expected that the ECB will hike by 25bp next week, with a slightly lower Q3 peak, and a 25bp rate cut priced by February.

The USD/JPY fell 0.38%, indicating the unwinding of yen-funded trades, as the BoJ’s easy policies leave no room for added accommodation, unlike other central banks seen to eventually cut rates. The GBP/USD settled near its lows, while the AUD/USD fell 0.88%. The data calendar is set to heat up on Thursday and Friday ahead of the Fed and ECB meetings next week.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD declined significantly on Tuesday, dropping to as low as 1.0963 amid risk aversion and renewed banking concerns. Despite US yields decreasing, the US Dollar Index rose by 0.55%, while German bonds rallied, causing the German 10-year yield to fall by 6.5% to 2.34%. ECB officials continued to hint at more rate hikes, with market participants seeing a 25 bps rate hike as more likely. Positive US housing data exceeded expectations, reflecting resilience in the economy, while Thursday will see the US reporting Q1 GDP and consumer inflation.

According to technical analysis, the EUR/USD pair has fallen and was able to break below our support levels. Currently, the price has moved below the middle band of the Bollinger band, with expectations of moving even lower and targeting the lower band. It is anticipated that the EUR/USD will reach the support level of 1.0949. The Relative Strength Index (RSI) is currently at 44, indicating a bearish market for the EUR/USD.

Resistance: 1.0997, 1.1053

Support: 1.0949, 1.0916

XAU/USD (4 Hours)

On Tuesday, financial markets turned risk-averse, leading to a rise in demand for the US Dollar and gold (XAU/USD). The US Dollar initially gained on the news of major central banks reducing their dollar operations with the Fed from daily to once a week starting May 1, as well as discouraging data from the US. The CB Consumer Confidence Index fell in April, and any reading below 80 is viewed as a sign of a near-term recession. Despite Treasury yields being under pressure, the US Dollar remains strong, preventing XAU/USD from rallying beyond $2,000.

Based on technical analysis, XAU/USD has reached the $2,000 level and has the potential to continue upward toward the upper band of the Bollinger band, indicating a bullish market for today. The Relative Strength Index (RSI) currently stands at 53, suggesting a likelihood for further upward movement.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

On Monday, the Nasdaq Composite dropped as investors awaited corporate earnings reports from major tech companies and new economic data. The tech-heavy index closed at 12,037.20, down 0.29%, while the Dow Jones Industrial Average ended up 0.2% and the S&P 500 closed 0.09% higher. The market is eagerly anticipating earnings reports from high-interest companies like Alphabet, Microsoft, Amazon, and Meta this week, which marks the halfway point of earnings season. However, experts believe it may be difficult for tech stocks to rally on the back of financial reports as they have already significantly advanced this year.

In addition to earnings reports, investors closely monitor new economic data for insights into inflation and whether the Federal Reserve will announce another rate hike at its next meeting in May. GDP numbers for the first quarter and April’s consumer sentiment data are among the data points scheduled for release later in the week. While 76% of S&P 500 companies that have reported quarterly results so far have beaten analysts’ earnings estimates, first-quarter earnings for S&P 500 companies are expected to decline overall by 5.2%.

On Monday, energy saw the largest increase of 1.54%, followed by materials at 0.69% and health care at 0.56%. The overall change in all sectors was an increase of 0.09%. Information technology had the largest decrease at 0.42%, followed by real estate at 0.31% and financials at 0.20%. The communication services and consumer discretionary sectors also saw a slight decrease in stock prices.

Major Pair Movement

On Monday, the dollar index fell by 0.37% due to the euro’s strong gains, despite weakness in the yen. This is ahead of major central bank meetings this week and next, which are expected to confirm market beliefs that the ECB will take over the rate-hiking baton from the Fed this year, while the BoJ will not participate.

The euro was lifted by expectations of further ECB rate hikes of almost a full percentage point before year-end, as well as improving German business sentiment, the Bundesbank’s upwardly revised Q1 GDP expectations and strong euro zone PMI readings. ECB comments largely supported the rate-hike expectations. Meanwhile, the yen weakened due to BoJ Governor Kazuo Ueda’s statement that the policy would not be tightened at Friday’s meeting.

The sterling also rose, trading at its highest since April 14’s 10-month high at 1.2545, with the BoE further behind the inflation curve than the Fed. Investors are waiting for robust US data to further retrace March’s dive, and to see if the Fed will raise rates for the last time next week.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD started the week strong, reaching the 1.1050 level. However, doubts were raised about the sustainability of the move due to subdued activity and upcoming key data releases. Despite this, the Euro performed well on Monday, while the US Dollar weakened as risk appetite rose and US yields dropped. Wall Street’s equity prices turned positive, and US bonds rose, with the 10-year yield falling to 3.50% and the 2-year yield dropping to 4.14%. On Tuesday, the US will release data on the S&P/Case Shiller Home Price Index, New Home Sales, and Consumer Confidence, with Thursday’s Q1 GDP report being the most important.

The Euro was supported by expectations of more rate hikes from the European Central Bank (ECB), with ECB Governing Council member Pierre Wunsch stating that he would only agree to halt interest rate hikes once wage growth slows. The next ECB meeting is on May 4th, the day after the Fed’s meeting. Meanwhile, the German IFO survey showed mixed numbers, with the Expectations indicator improving from 91 to 92.2. Eurozone GDP data and German inflation will be released on Friday.

According to technical analysis, the EUR/USD pair has been exhibiting an upward trend, successfully surpassing previous resistance levels. At present, the price has climbed to the upper band of the Bollinger band, and it appears that the pair is making efforts to sustain its upward momentum. It is expected that the EUR/USD will reach a resistance level of 1.1073. The Relative Strength Index (RSI) currently stands at 71, indicating a bullish market for the EUR/USD.

Resistance: 1.1073, 1.1131

Support: 1.1042, 1.1000

XAU/USD (4 Hours)

On Monday, financial markets were cautious and spot gold (XAU/USD) consolidated at around $1,986 per troy ounce, with the safe-haven US dollar out of investors’ radar amid recession-related concerns. United States data, specifically the first estimate of the Q1 Gross Domestic Product (GDP) due to be published this week, could fuel, or cool such fears. The economy is expected to have grown at an annualized pace of 2% in the first quarter, lower than the previous quarterly reading of 2.6%. Meanwhile, European, and American stock markets struggled to attract speculative interest, trading a handful of points below their opening levels. The Nasdaq Composite was the worst performer, down 102 points. Government bond yields ticked lower, with the 10-year Treasury note yielding 3.52% and the 2-year note offering 4.15%.

According to technical analysis, the XAU/USD pair is approaching the $2,000 level, with its target set on the upper band of the Bollinger band after surpassing the middle band. This indicates the possibility of a higher movement today. The Relative Strength Index (RSI) currently stands at 53, having moved up from below, suggesting a potential for further upward movement.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

Economic Data

On Friday, the Dow Jones Industrial Average saw little change and ended the week in the red as investors analyzed earnings reports and concerns about underwhelming profits. The Dow rose 22.34 points, or 0.07%, to close at 33,808.96, while the S&P 500 increased 0.09% to settle at 4,133.52. The Nasdaq Composite climbed 0.11% to end at 12,072.46. However, all major indices closed the week lower, with the Dow falling 0.23%, the S&P slipping 0.1%, and the Nasdaq declining the most at 0.42%, breaking its winning streak.

The earnings season continued on Friday, and Procter & Gamble posted better-than-expected results and lifted its sales forecast, causing its stock to surge by 3.5%. According to FactSet, 76% of S&P 500 companies that reported earnings so far have surpassed analyst EPS estimates. Nevertheless, despite the companies’ overall strong earnings reports, stocks failed to gain traction, and some investors are worried about the possibility of a recession and an impending decline in earnings. In the upcoming week, earnings reports are expected from Big Tech companies Amazon, Alphabet, Meta Platforms, and Microsoft.

On Friday, the stock market experienced an overall increase of 0.09%. The Consumer Discretionary, Consumer Staples, and Health Care sectors saw the largest gains, increasing by 1.20%, 0.75%, and 0.68%, respectively. However, the Materials sector saw the biggest decline of 0.90%, followed by Energy and Financials, which were down by 0.59% and 0.39%, respectively. The Information Technology and Industrials sectors also experienced small declines, decreasing by 0.37% and 0.24%, respectively. The Communication Services and Utilities sectors had moderate gains, increasing by 0.32% and 0.30%, respectively, while Real Estate had a small gain of 0.17%. These data indicate a mixed performance across different sectors in the latest trading session, with some sectors seeing gains while others experienced losses.

Major Pair Movement

On Friday, the US dollar index initially weakened but later surged when unexpected US PMI strength was reported. However, the dollar was unable to maintain the data boost and lost those gains by the afternoon, as investors became skeptical of the PMI’s strength. The dollar was further weighed down by broader indications of a cooling economy and rapidly tightening lending standards. Despite the PMI beat, Treasury yields and Fed policy expectations only increased modestly.

The EUR/USD initially took the lead after the euro zone April PMI rose to an 11-month high, but retreated when US PMI posted a similar peak. ECB rate hike pricing was only marginally increased by the eurozone PMI beat, as there are already more than 80bp of additional hikes priced in by September with less than one 25bp cut before year-end. Sterling recovered from a 0.9% drop in UK retail sales, unaided by the best PMI reading in a year but bolstered by the failure of the US PMI beat to crack Tuesday’s lows. The USD/JPY rebounded but settled down 0.08%, boosted by Japan’s core-core CPI at its highest since 1981 ahead of next week’s BoJ. However, the BoJ is not expected to tighten the policy yet. Investors are now looking forward to the release of more US data, including April ISM reports, as they prepare for the May 3 Fed and May 4 ECB meeting conclusions.

Technical Analysis

EUR/USD (4 Hours)

On Friday, The EUR/USD pair had an indecisive week as the market searched for a catalyst. The outlook suggests a bearish tilt and the pair struggled to continue moving higher due to a risk-averse market environment. The US saw an improvement in the S&P Global Composite PMI to 53.9 in April, while the Eurozone saw a decline in manufacturing PMI to 45.5 but an increase in services PMI to 56.6. A disappointing reading in the upcoming S&P Global Composite PMI could revive fears of a US recession and weigh on the USD.

Based on technical analysis, the EUR/USD pair has been experiencing a slight upward movement and has successfully broken our previous resistance level. The current price is now situated at the upper band of the Bollinger band and appears to be making efforts to continue its upward trend. It is anticipated that the EUR/USD will reach our resistance level at 1.0999. The Relative Strength Index (RSI) is currently at 57, which indicates that the EUR/USD is in a bullish mode.

Resistance: 1.0999, 1.1026

Support: 1.0970, 1.0942

XAU/USD (4 Hours)

On Friday, the price of gold (XAU/USD) broke below the rangebound structure formed around $2,005 and fell below the psychological support level of $2,000. This was due to a recovery in the US Dollar Index (DXY) after a period of consolidation, as investors shifted their funds into the index. The Federal Reserve (Fed) has been advocating for more rate hikes despite signs of an easing labor market, as evidenced by the increase in weekly jobless claims to 245K. The upcoming release of the preliminary US S&P PMI data (April) is expected to be significant, with lower figures anticipated for both Manufacturing and Services PMIs. While a 25-basis point (bp) interest rate hike by the Fed in May seems expected, a further slowdown in US economic activities could increase the likelihood of no further rate hikes beyond May.

Based on technical analysis, XAU/USD has fallen below the $2,000 mark and is currently in slight consolidation. However, it is targeting the middle band of the Bollinger band from below, suggesting a potential for a higher movement today. The Relative Strength Index (RSI) is currently at 41 from below, indicating the potential for a higher move.

Resistance: $1,990, $2,005

Support: $1,974, $1,966

Market participants anticipate several critical economic reports this week, including the BOJ Rate Statement, US Advance GDP, and Core PCE Price Index. These key reports will provide valuable insights and help investors and traders make informed decisions. Don’t miss out on this opportunity to stay ahead of the curve.

Here are the key events to watch out for:

Consumer Price Index | Australia (April 26)

The annual inflation rate in Australia rose to 7.8% in Q4 2022 from 7.3% in Q3 2022. 

For Q1 2023, analysts expect a more moderate increase of 6.8%.

Advance GDP | US (April 27)

The US economy expanded at an annualised rate of 2.6% in Q4 2022. 

For Q1 2023, analysts predict a rate of 2.3%.  

BOJ Rate Statement | Japan (April 28)

During its March meeting, the Bank of Japan unanimously voted to keep its key short-term interest rate at -0.1% and the rate for 10-year bond yields at around 0%.

This month, analysts expect that the rate will stay the same as the board introduces new quarterly growth and price estimates in Kazuo Ueda’s first policy meeting.

Prelim Consumer Price Index | Germany (April 28)

Germany’s consumer price inflation reached a seven-month low in March 2023, recording a year-on-year rate of 7.4%, down from 8.7% in the previous two months. The figure remained well above the European Central Bank’s target of 2%. 

Analysts predict a further decrease in April 2023, with an expected rate of 7.0%.

Gross Domestic Product | Canada (April 28)

Canada’s economy jumped 0.5% in January 2023, following a slight contraction of 0.1% in December 2022. 

For February, analysts expect it to increase by 0.3%.

Core PCE Price Index | US (April 28)

Core PCE prices in the US, which exclude food and energy, rose by 0.3% month-on-month in February 2023, following a downward revision of 0.5% in the previous month.

For March 2023, analysts expect a 0.4% increase. 

Employment Cost Index | US (April 28)

Compensation costs for civilian workers in the US rose 1% in Q4 2022, a third straight slowdown, compared to a 1.2% increase in the previous quarter.

For Q1 2023, analysts expect the index to rise by 0.8%.

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

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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.