Daily Market Report
08 May 2023
After quite a volatile session, EUR/USD ended the week modestly up, managing at the same time to keep business above the key 1.1000 hurdle. Looking at the weekly chart, however, it seems to have emerged some signs of exhaustion in response to the (so far) inability of the pair to surpass the 1.1100 barrier.
Furthermore, Friday’s price action saw spot navigate in quite a broad range and mainly following dollar dynamics, particularly in the wake of the release of the US Nonfarm Payrolls for the month of April.
On this, the US economy surprised market participants once again after it created 253K jobs during last month (consensus was expecting +180K jobs) and the jobless rate slipped back to the 5-decade low at 3.4%. Additionally, Average Hourly Earnings – a barometer of wage inflation – also came on the strong side and rose 0.5% vs. the previous month and 4.4% from a year earlier.
Same volatile mood faced the greenback, although the USD Index (DXY) ended up with modest losses in the low-101.00s despite further recovery in US yields across the curve. In the German money market, the 10-year Bund yields reversed three daily drops and regained the 2.30% zone.
On the central banks’ front, ECB’s Board members Simkus and Müller defended the idea of further interest rate hikes in the next meetings, matching the hawkish message from the bank’s statement and its President Lagarde after the Council raised rates by 25 bps on Wednesday.
In the euro docket, the Construction PMI in Germany receded to 42.0 in April (from 42.9) and Retail Sales in the broader Euroland contracted 3.8% in March vs. the same month of 2022.
In the US, and other than the jobs report, Consumer Credit Change increased more than estimated to $26.51B in March.
EUR/USD is currently targeting the 2023 top of 1.1095 (April 26), and the next up-barrier to watch is the round level at 1.1100. Beyond that, the weekly peak at 1.1184 (March 31, 2022) will be in play just before another round level at 1.1200. Conversely, if the value drops, the May low at 1.0941 (May 2) is the initial point of support, ahead of the weekly lows at 1.0909 (April 17) and 1.0831 (April 10). The latter level is reinforced by the temporary 55-day SMA at 1.0816 and comes before the April low at 1.0788 (April 3) and the interim 100-day SMA at 1.0780. If this region is breached, the minor level at 1.0712 (March 24) could prompt a potential test of the March low at 1.0516 (March 15) to emerge on the horizon prior to the 2023 low at 1.0481 (January 6). The daily RSI appeared somewhat side-lined around 56.
Resistance levels: 1.1047 1.1095 1.1184 (4H chart)
Support levels: 1.0966 1.0941 1.0909 (4H chart)
Finally, some respite for the USD/JPY came in the form of a marked rebound on Friday.
In fact, after three straight sessions with losses, spot managed to regain composure and stage a noticeable comeback from weekly lows in the mid-133.00s (May 4) to the 134.80 region seen on Friday.
The daily bounce in the pair was accompanied by the corrective uptick in US yields across the curve and despite the USD Index (DXY) drifting lower, while the Japanese bond market saw the JGB 10-year yields extend the range bound theme above 0.40%.
There were no data releases scheduled in the “Land of the Rising Sun”.
In the event of additional losses, USD/JPY is expected to revisit the weekly low of 133.01 (April 26), which is supported by the provisional 100-day SMA at 132.80 and comes before the minor level at 132.01 (April 13). Further down, the April low of 130.62 (April 5) is followed by the March low of 129.63 (March 24) and the February low of 128.08 (February 8). The 2023 low of 127.21 (January 16) is the next downside target. On the flip side, the immediate hurdle emerges at the 200-day SMA at 136.97 prior to the May peak of 137.77 (May 2) and the 2023 top of 137.91 (March 8). Extra gains could revisit the weekly tops of 139.89 (November 30, 2022) and 142.25 (November 21, 2022). The daily RSI picked up pace and trespassed 53.
Resistance levels: 135.12 137.77 137.91 (4H chart)
Support levels: 133.49 133.01 132.01 (4H chart)
GBP/USD extended further its positive momentum, this time reaching levels last seen nearly a year ago well north of 1.2600 the figure. On a weekly basis, Cable closed the 8th consecutive week with gains for the first time since early-October/late-November 2004.
The main catalyst of the outstanding performance of the British pound in these past weeks can be found in the gradual decline in the US dollar as well as speculation that the BoE has still further to say when it comes to tightening its policy.
In the UK, the Construction PMI improved to 51.1 in April (from 50.7).
GBP/USD hit a fresh high for 2023 at 1.2652 on May 5, with buyers remaining focused on the May 2022 top at 1.2666 (May 27), the 200-week SMA at 1.2865, and the psychological level of 1.3000. Just the opposite, the immediate support level for Cable is at 1.2344 (April 10), which if breached, could put a test of the April low at 1.2274 (April 3) back on the radar, which appears underpinned by the interim 55-day SMA (1.2276). Further downside could potentially see spot drop to the key 200-day SMA at 1.1948, followed by the 2023 low at 1.1802 (March 8). The RSI surpassed the 64 barrier.
Resistance levels: 1.2652 1.2666 1.2772 (4H chart)
Support levels: 1.2547 1.2509 1.2435 (4H chart)
It was a positive week for the Aussie dollar overall.
Indeed, AUD/USD closed with gains in every session this week, managing to advance to 2-week highs past the 0.6750 region on Friday against the backdrop of persistent weakness in the greenback.
Also adding to the upbeat tone around the high-beta currency emerged the generalized optimistic session in the commodity complex in spite of the daily losses in the iron ore.
From the RBA, the Statement on Monetary Policy (SoMP) showed the central bank revised down its projections for growth and inflation, while the path for unemployment was reassessed to the upside across the forecast horizon.
Data wise Down Under, Home Loans expanded 5.5% MoM in March and Investment Lending for Homes rose 3.7% in March.
The AUD/USD left behind the key 200-day SMA (0.6727) and in doing so it has opened the door to extra gains. That said, the subsequent targets will be the weekly top at 0.6771 (April 20) and the April high at 0.6805 (April 14). Additionally, the key round level at 0.7000 is a potential target, ahead of the weekly top at 0.7029 (February 14) and the 2023 peak at 0.7157 (February 2). On the contrary, there is a possibility of a decline to the April low of 0.6573 (April 28), prior to the 2023 low at 0.6563 (March 10) and the weekly low at 0.6386 (November 10, 2022). The last level of support is the November 2022 low at 0.6272 (November 3). The daily RSI advanced past the 58 yardstick.
Resistance levels: 0.6757 0.6771 0.6805 (4H chart)
Support levels: 0.6685 0.6640 0.6620 (4H chart)
Prices of the ounce troy of the yellow metal reversed three daily gains in a row – including a new 2023 high at $2067 on May 4 – at the end of the week.
Furthermore, bullion briefly dipped just below the key $2000 mark before regaining some traction and ending the session with noticeable losses near $2015. ON a weekly basis, the precious metal charted the second advance in a row and seems to have embarked on a consolidative fashion for the time being.
The stronger-than-expected US jobs report poured cold water over expectations of a Fed’s potential pause at the June gathering amidst the current data-dependent stance from the central bank.
By the same token, US yields added to gains seen in the second half of the week and put the metal under further pressure, while the persistent selling bias in the dollar seems to have limited the downside somewhat on Friday.
Should the price of gold continue to increase, it will encounter resistance at various levels, with the 2023 high of $2067 (May 4) being the first hurdle, followed closely by the 2022 peak of $2070 (March 8) and the historical high of $2075 (August 7, 2020). On the contrary, if the ounce troy drops below the weekly low of $1969 (April 19), it may decline to the April low of $1949 (April 3) and then find provisional support at the 55- and 100-day SMAs at $1941 and $1908, respectively. Further downside could potentially see the price of gold retreat to the March low of $1809 (March 8) and ultimately to the 2023 low of $1804 (February 28).
Resistance levels: $2067 $2070 $2075 (4H chart)
Support levels: $1999 $1969 $1949 (4H chart)
The grey metal, like its cousin gold, had three consecutive positive days before ending Friday's session with marked losses around $25.60, all after clocking a fresh YTD high near $26.10. It was the metal’s first week with gains after two straight declines.
Higher US yields across the curve coupled with investors’ perception that the Fed might not interrupt its hiking cycle in June appear to have been enough to offset the daily retracement in the dollar and the broad-based bid bias in the commodity universe and the precious metals.
At the same time, the Gold/Silver Ratio added to Thursday’s losses and flirted with 4-day lows near 78.50.
Silver appears to want to break above the recent consolidation period in a more sustainable manner. If the price rises, the first point of resistance will be the 2023 high of $26.12 (May 5), prior to the April 2022 top of $26.21 (April 18). The 2022 peak at $26.94 (March 8), which precedes the round level at $27.00, emerges north from here. The weekly low of $24.49 (April 25), on the other side of the coin, serves as the metal's next level of support, ahead of a potential collapse from here towards the interim 100- and 55-day SMAs of $23.33 and $23.32, respectively. The 200-day SMA at $21.73 comes next before the minor support at $21.47 (March 16).
Resistance levels: $26.08 $26.66 $26.94 (4H chart)
Support levels: $25.14 $24.55 $24.47 (4H chart)
Prices of the WTI extended Thursday’s bounce and flirted with the $72.00 mark just to close around $71.30 at the end of the week.
The recovery seen in the second half of the week, however, did not prevent the commodity from closing the third week in a row with losses and approaching the key 200-week SMA ($66.86).
Crude oil regained traction on the back of alleviated recession concerns, which were in turn sparked after the solid prints from the US jobs report for the month of April. The offered stance in the greenback, in addition, was another driver of the daily uptick as well as rising speculation that the OPEC+ might announce another output cut at the cartel’s meeting next month.
In the docket, driller Baker Hughes said the oil rig count went down by 3 in the week to May 5, taking the US total active oil rigs to 588.
Crude oil prices remain under pressure despite the recent bounce. That said, the barrel of the WTI hit a new low for 2023 at $63.73 (May 4). If the December 2021 low of $62.46 (December 2) is reached, the commodity may fall even further to the key $60.00 mark per barrel. By contrast, sporadic bullish attempts are anticipated to confront resistance at the weekly high of $79.14 (April 24), which is in proximity to the critical $80.00 level. Following this, the 200-day SMA at $81.29 would come into play. If the commodity surpasses this level, it may aim for the 2023 top of $83.49 (April 12), prior to reaching the November 2022 peak of $93.73 (November 7).
Resistance levels: $71.77 $76.88 $79.14 (4H chart)
Support levels: $63.61 $62.42 $61.72 (4H chart)
A very positive session saw the three major US stock indices advance markedly at the end of the week, as the tech-heavy Nasdaq Composite rose 2.25% to 12235, the S&P500 gained 1.85% to 4136, and the Dow Jones climbed 1.65% to 33674.
The buying interest prevailed among traders on Friday, boosted by better-than-expected earnings results from megacap Apple, while mitigated banking fears also added to the sentiment.
In addition, firm readings from the US Nonfarm Payrolls for the month of April emphasized once again the resilience of the labour market and seem to have also spooked the spectre of an economic slowdown for the time being.
Further recovery in the Dow Jones should meet the first barrier at the May top of 34257 (May 1), which precedes the 2023 peak of 34342 (January 13) and the December 2022 peak of 34712. (December 13). If the previous top is broken, the April 2022 high of 35492 could be reached. Meanwhile, immediate contention aligns at the May low of 32967 (May 4), before the key 200-day SMA at 32717. Down from here, the 2023 low at 31429 (March 15) may provide additional support prior to the 2022 low at 28660 (October 13). The daily RSI leapt past the 52 level.
Top Performers: Apple, Walt Disney, Visa A
Worst Performers: Intel, Merck&Co, Procter&Gamble
Resistance levels: 33811 34257 34334 (4H chart)
Support levels: 33333 32937 31805 (4H chart)