Daily Market Report
15 May 2023
Another dreadful session for the European currency saw EUR/USD plummet to levels last traded back in early April in the 1.0850/45 band on Friday, a region also coincident with the 55-day SMA. Furthermore, the pair closed the week with stark losses after two advances in a row, confirming at the same time the formidable resistance zone in the 1.1100 neighbourhood.
Totally the opposite occurred in the greenback’s galaxy, where the USD Index (DXY) climbed to multi-week highs near 102.70, surpassing at the same time former monthly tops in the 102.40 region, an area above which the downside pressure in the buck should start to mitigate.
The continuation of the strong weekly recovery in the greenback was also accompanied by the move higher in US yields after a couple of sessions navigating with losses. Same situation in the German money market, where the 10-year Bund yields regained the 2.25% level.
More of the same when it came to ECB speakers, as regular hawk Board member J. Nagel emphasized that inflation is too high and called for a speedier pace of QT beginning in July. Price action in spot, however, paid little-to-no attention to these (and earlier) comments.
From the Fed’s playground, Richmond Fed T. Barkin said he is very open to further rate hikes.
Nothing scheduled data wise in the euro docket left all the attention to the release of the flash figures of the US Michigan Consumer Sentiment, which is expected to have worsened to 57.7 in May (from 63.5).
EUR/USD closed at 1.0848 on May 12, which is supported by the nearby 55-day SMA. The loss of this level exposes the weekly low of 1.0831 (April 10) ahead of the intermediate 100-day SMA at 1.0797, followed closely by the April low at 1.0788 (April 3). If this particular range is breached, it may trigger a potential test of the minor level at 1.0712 (March 24), which could lead to a further examination of the March low at 1.0516 (March 15), before ultimately approaching the lowest point of 2023 at 1.0481 (January 6). On the contrary, the current focus for the currency pair is on reaching the highest point of 2023 at 1.1095 (April 26), followed by the round level of 1.1100. If the pair continues to rise, the peak reached during the week at 1.1184 (March 31, 2022), along with another round level at 1.1200, will become significant factors in the future. The daily RSI melted to the sub-41 area.
Resistance levels: 1.0959 1.1006 1.1053 (4H chart)
Support levels: 1.0848 1.0831 1.0788 (4H chart)
USD/JPY kept the optimism well and sound in the second half of the week and ended Friday’s session well north of 135.00 the figure, or new multi-day highs.
The positive weekly performance was enough to leave behind previous losses and resume the uptrend with the immediate target at the YTD peak at 137.91 (March 8).
Extra upside in the pair came on the back of the acute rebound in the greenback, which largely surpassed the 102.00 barrier when measured by the USD Index (DXY), while the marked rebound in US yields across the curve also collaborated with the upside bias.
The Japanese docket was empty on Friday.
Before the May high of 137.77 (May 2) and the 2023 peak of 137.91 (March 8), the USD/JPY recovery faces an initial resistance level at the weekly high of 135.74 (May 12). This level is followed by the crucial 200-day SMA at 137.01. There is a possibility that the weekly highs of 139.89 on November 30, 2022, and 142.25 on November 21, 2022, could be retested if further gains are made. However, if the losses continue, spot is expected to test the weekly low of 133.01 on April 26. The interim 100-day SMA at 132.89 appears to provide further support for this support area. A minor contention level of 132.01 (April 13) appears prior to the April 5 low of 130.62, the March 24 low of 129.63, and the February 8 low of 128.08. The next downside target would be the lowest point in 2023, which would be 127.21 (January 16). The everyday RSI leapt above the 57 mark.
Resistance levels: 135.75 137.77 137.91 (4H chart)
Support levels: 133.74 133.49 133.01 (4H chart)
The intense march north in the greenback put the risk-associated universe under heightened pressure and forced GBP/USD to add to Thursday’s decline and revisit the mid-1.2400s, near monthly lows.
That said, Cable extended the rejection from 2023 tops around 1.2680 (May 10), an area coincident with a key resistance line off the top recorded on June 1 2021 at 1.4250.
Looking at the weekly chart, the pair halted an impressive 8-week positive streak after advanced nearly 9 cents since Mach lows in the 1.1800 neighbourhood.
From the BoE, Chief Economist H. Pill reiterated inflation remains undesirably high, although he expected a pronounced decline of consumer prices at the time when suggested that there is more work to do to bring inflation down.
Busy session in the UK docket: the GDP 3-Month Avg expanded 0.1% in March, the GDP expanded 0.3% YoY and flash GDP Growth Rate is seen increasing 0.2% YoY and 0.1% QoQ in Q1. In addition, the GDP contracted 0.3% MoM in March, the Goods Trade Balance deficit eased a tad to £16.356B, Construction Output expanded 4.1% in the year to March, Industrial Production contracted 2.0% YoY and Manufacturing Production 1.3% YoY, both prints for the month of March. Finally, the NIESR Monthly GDP Tracker rose 0.1% in April.
Should the downside in GBP/USD gain momentum, it is expected to face immediate support at the May low of 1.2435 (May 2) followed by the weekly low of 1.2344 (April 10). If these levels are breached, it could lead to a test of the temporary 55-day SMA at 1.2315, followed by the April low at 1.2274 (April 3). A further decline may potentially bring the pair to the significant 200-day SMA at 1.1958, prior to the 2023 low of 1.1802 (March 8). On the upside, the next level for Cable is currently targeted at the 2023 high of 1.2668 (May 8), with buyers also focused on the 200-week SMA of 1.2865 ahead of the psychological level of 1.3000. The daily RSI fell to the vicinity of the 48 yardstick.
Resistance levels: 1.2540 1.2567 1.2679 (4H chart)
Support levels: 1.2444 1.2386 1.2367 (4H chart)
AUD/USD accelerated the downside and decisively broke below the 0.6700 level to record multi-session lows in the 0.6640/35 band at the end of the week.
Like the other risk-linked assets, the Aussie dollar succumbed to the sharp rise in the greenback, prompting sellers to pull the pair further south from the May highs above 0.6800 (10 May).
The mixed note in the commodity complex saw a modest recovery in copper prices and iron ore, although this bounce did not lend support to the high-beta currency on Friday.
Down Under, no data releases were scheduled at the end of the week.
The weekly low of 0.6636 (May 12) is proving to be the immediate contention area for AUD/USD. Further weakening could lead to a decline towards the April low of 0.6573 (April 28), ahead of the 2023 low at 0.6563 (March 10) and ahead of the weekly low of 0.6386 (November 10 2022) and the November 2022 low at 0.6272. (November 3). On the flip side, the next upside barrier to watch out for is the May high of 0.6818 (May 10). Above this level, the critical round mark of 0.7000 could be a realistic target, followed by the weekly high at 0.7029 (February 14) and the 2023 high at 0.7157 (February 2).The daily RSI sank below 44.
Resistance levels: 0.6696 0.6818 0.6920 (4H chart)
Support levels: 0.6636 0.6620 0.6573 (4H chart)
Prices of the yellow metal dropped for the third session in a row on Friday, although they managed well to stay above the critical $2000 mark per ounce troy.
On a weekly basis, bullion charted small losses and reversed two advances in a row. The gradual weekly uptrend in place since March, however, appears so far unaltered.
The unabated recovery in the greenback aided by the strong rebound in US yields across the curve was too much for the precious metal, which kept the bearish tone unchanged in the last sessions.
In the meantime, gold should continue to track expectations of further tightening or a potential impasse in the Fed’s normalization process, particularly after inflation was found to be somewhat stickier than anticipated.
The $2000 region emerges as a psychological barrier for gold bears for the time being. The loss of this zone unveils a minor support level at $1999 (May 5), before reaching the weekly low of $1969 (April 19). Further down, we have the April low of $1949 (April 3), which gains reinforcement from the nearby 55-day SMA. This is then succeeded by the provisional 100-day SMA at $1919. If the downward momentum persists, the metal could potentially drop to the March low of $1809 (March 8), and there's even a chance of reaching the lowest point of 2023 at $1804 (February 28). On the upside, the primary obstacle will be encountered at the highest point reached in 2023 at $2067 (May 4). This will be followed by the 2022 peak of $2070 (March 8), and the all-time top of $2075 (August 7, 2020).
Resistance levels: $2022 $2048 $2067 (4H chart)
Support levels: $2000 $1969 $1949 (4H chart)
The stronger dollar in combination with the rebound in US yields across the curve prompted another negative performance in prices of the grey metal on Friday.
Indeed, silver prices dropped for the third session in a row to an area last visited back in early April below the $24.00 mark per ounce, giving away nearly 7% since Monday at the same time.
The broad-based mixed note in the commodity complex and the generalized bearish tone in the precious metals also added to the sour mood among traders.
Meanwhile, the Gold/Silver Ratio extended the upside and surpassed the 84.00 mark for the first time since late March, having advanced at the same time in every session during this past week.
Given the current price trend, silver is now right before the interim 55- and 100-day SMAs at $23.65 and $23.38, respectively. If the price continues to fall, the next support is at the 200-day line SMA at $21.85, followed by the 2023 low at $19.90 (March 10). On the other hand, those who are bullish should be aware of the first resistance level, which is the highest price recorded this year at $26.12 (May 5). This is followed by the April 2022 high at $26.21 (April 18) and then the 2022 high at $26.94 (March 8) before reaching the significant round mark of $27.00.
Resistance levels: $24.88 $25.91 $26.12 (4H chart)
Support levels: $23.72 $23.54 $22.80 (4H chart)
Omnipresent recession concerns bolstered by rising uncertainty surrounding the debt ceiling issue and lingering speculation that the Fed’s stance might remain tighter-for-longer all hurt the sentiment around the commodity and the rest of the risk complex on Friday.
In addition, the intense march north in the US dollar and recent poor results from the Chinese docket, which poured cold water over the perception of a strong recovery in China, collaborated further with the downward bias in prices of the crude oil.
Against that, prices of the WTI retreated for the third session in a row and closed the week around the key $70.00 mark per barrel, extending the negative streak for the fourth straight week.
In the calendar, driller Baker Hughes reported a drop of 2 oil rigs in the week ended on May 12, bringing the US total active oil rigs to 586.
Despite some recent progress, crude oil prices have fallen steadily in recent sessions. WTI, for example, hit a new 2023 low of $63.73 per barrel on 4 May. Oil prices could fall further to the crucial $60 level if the December 2021 low of $62.46 (2 December) is breached. Inconsistent upside, contrary to the norm, is likely to face a first obstacle at the weekly high of $79.14 (April 24), ahead of the key $80.00 level and the fundamental 200-day line SMA at $80.79. The 2023 high of $83.49 (April 12) follows ahead of the November 2022 high of $93.73 (November 7).
Resistance levels: $73.83 $76.88 $79.14 (4H chart)
Support levels: $69.99 $63.61 $62.42 (4H chart)
Equities measured by the US benchmark Dow Jones closed every day with losses in the last week, ending Friday’s session around the 33100 region, where the temporary 55-day SMA also converges.
Increasing jitters around the still unsolved debt ceiling in combination with the investors’ perception that the Federal Reserve might remain in the restrictive territory for longer than estimated and the multi-month drop in consumers’ sentiment (as per the Michigan gauge) all weighed on stocks along with the stronger dollar and higher yields.
Overall, the Dow Jones dropped 0.03% to 33300, the S&P500 retreated 0.16% to 4124 and the tech-heavy Nasdaq Composite deflated 0.35% to 12284.
If the Dow continues to decline, it may find support at the May low of 32937 (May 4), followed by the important 200-day SMA at 32754. In the event of further downside, the 2023 low at 31429 (March 15) could provide additional support before reaching the 2022 low at 28660 (October 13). Contrarily, the index is expected to encounter initial resistance at the May top at 34257 (May 1), before the 2023 high at 34,342 (January 13) and the December 2022 peak at 34712 (December 13). If the index surpasses the latter point, it could generate momentum towards the April 2022 high at 35492 (April 21). The daily RSI receded to the 46 zone.
Top Performers: IMB, Procter&Gamble, Home Depot
Worst Performers: Nike, JPMorgan, Salesforce Inc
Resistance levels: 33772 34257 34334 (4H chart)
Support levels: 33110 32937 31805 (4H chart)