Daily Market Updates
22 May 2022
Following a short-lived drop to the 1.0480 region during early trade, EUR/USD then managed to regain poise and advanced firmly to fresh highs past the 1.0600 mark on Thursday, printing at the same time new 2-week highs.
Once again, sellers prevailed around the greenback on the back of the solid return of the appetite for riskier assets, while the resumption of the demand for the fixed-income space put yields under further pressure on both sides of the Atlantic.
Still around the buck, hawkish comments from Philly Fed P.Harker (2023 voter, hawk) late on Wednesday joined most of his colleagues’ view of a 50 bps rate hike at the June and July meetings. Harker also noted risks of negative growth at the time when he ruled out a deep recession (… and a light recession will be like…?).
In the docket, the Current Account surplus in the euro area widened to €8.66B in March. From the ECB Accounts, some members of the Council defended the importance of acting quickly in order to demonstrate the Council’s pledge to achieve price stability.
In the US, Initial Claims rose by 218K in the week to May 7 and the Philly Fed Manufacturing Index deteriorated to 2.6 for the current month. Additional data saw the CB Leading Index contract 0.3% MoM in April and Existing Home Sales contract 2.4% MoM also in April (5.61M units).
The continuation of the upside momentum in EUR/USD remains focused on the May high at 1.0641 (May 5). The breakout of the latter should expose a test of the temporary 55-day SMA at 1.0799 ahead of the 2-month line around 1.0870. Further north comes another weekly peak at 1.0936 (April 21) soon followed by the psychological 1.1000 yardstick. On the flip side, there is no support of note until the 2022 low at 1.0348 (May 12) ahead of the 2017 low at 1.0340 (January 3), which precedes the 2003 low at 1.0334 (January 3). A deeper retracement should put the round level at 1.0300 back on the radar before the minor support at 1.0205 (low December 19 2002). The RSI bounces to 49, while the trend stays firm despite the ADX comes down to 30.
Resistance levels: 1.0607 1.0641 1.0675 (4H chart)
Support levels: 1.0459 1.0349 1.0340 (4H chart)
USD/JPY came under further downside pressure and clinched new 3-week lows in the vicinity of the 127.00 zone on Thursday.
The persistent weakness in the greenback coupled with another negative performance of US yields dragged spot to levels last seen in mid-April just pips above the 127.00 mark.
Investors’ preference for the fixed income space prompted another daily pullback in US yields, where the 2-year note retreated to the 2.60% region, the 10y reference note came down to the sub-2.80% area and the 30y note breached the 3.00% mark.
In the Japanese docket, the trade deficit widened to ¥839.2B during April, Foreign Bond Investment rose to ¥370.8B in the week to May 14 and Machinery Orders expanded at an annualized 7.6% in March.
Further losses in USD/JPY now aim at the weekly low at 126.94 (April 26) before 125.10 (March 28 high). The loss of this level should open the door to a deeper decline to the weekly low at 121.27 (March 31) prior to the 100-day SMA at 120.26. On the other hand, the 2022 high at 131.34 (May 9) emerges as the initial hurdle ahead of 132.38 (April 15 2002 peak). Extra advance should revisit the April 2002 top at 133.82 (April 1) ahead of the weekly high at 134.98 (February 27 2002) and the round level at 135.00. The RSI recedes to 48, and the trend looks solid, as per the ADX around 45.
Resistance levels: 128.94 129.77 130.80 (4H chart)
Support levels: 127.02 126.94 126.23 (4H chart)
The resumption of the strong selling pressure in the US dollar motivated GBP bulls to return to the market and push cable back above the 1.2500 mark on Thursday, an area last seen at the beginning of the month.
That said, GBP/USD fully trimmed Wednesday’s marked pullback helped by the improvement in the risk-linked galaxy, while the uptick in UK 10y Gilt yields to the vicinity of 1.90% also supported the upbeat mood around the quid.
No news around the Northern Ireland Protocol and the political effervescence vs. the EU was good news for the sterling on Thursday, at the time when stagnation concerns also appear to have been relegated, albeit momentarily.
Data wise in the UK, the CBI Industrial Trends Orders expanded to 26 for the month of May (from 14).
Immediately to the upside for GBP/USD comes the weekly high at 1.2524 (May 19) prior to the May top at 1.2638 (May 4). The surpass of the latter should put a test of the interim 55-day SMA at 1.2864 back on the radar before the psychological 1.3000 level, which precedes 1.3089 (April 21 high). In the opposite direction, bears target the 2022 low at 1.2155 (May 13) soon followed by the May 2020 low at 1.2075 (May 18). No support levels of note are seen until the 2020 low at 1.1409 (March 20) in case that area is breached. The RSI improves to 47 and the trend appears robust, as noted by the ADX near 36.
Resistance levels: 1.2524 1.2580 1.2638 (4H chart)
Support levels: 1.2329 1.2155 1.2075 (4H chart)
Renewed oxygen in the risk complex propelled AUD/USD further north of the psychological 0.7000 mark to print new 2-week highs on Thursday.
Indeed, sellers kept dictating the mood around the greenback and motivated the US Dollar Index (DXY) to retreat to fresh 2-week lows at the time when commodities and USD-linked assets resumed the upside.
The upbeat note in the Aussie dollar contrasted with another decline in the AGB 10y yields, this time approaching the 3.20% area, or multi-week lows.
In the docket, the Australian labour market report for the month of April came in a mixed tone after the Unemployment Rate stayed put at 3.9%, the Employment Change rose less than expected by 4K persons and the Full Time Employment Change rose by 92.4K persons.
Further recovery in AUD/USD still needs to leave behind the May high at 0.7266 (May 5) as well as the 200-day SMA at 0.7261 to allow for the selling pressure to mitigate and therefore challenge the next hurdle of note at the temporary 55-day SMA at 0.7281. If the pair clears this area, then a probable test of the weekly top at 0.7458 (April 20) should emerge on the horizon ahead of another weekly peak at 0.7493 (April 12) and the 2022 high at 0.7661 (April 5). On the downside, there is initial contention at the 2022 low at 0.6828 (May 12) prior to 0.6776 (low June 15 2020) and then 0.6505 (May 22 2020). The daily RSI leaps to 47, although the trend appears anemic, as indicated by the ADX around 18.
Resistance levels: 0.7072 0.7135 0.7219 (4H chart)
Support levels: 0.6949 0.6872 0.6828 (4H chart)
Gold prices advanced sharply and reclaimed the $1850 region per ounce troy on Thursday on the back of the abrupt drop in the greenback and persistent weakness surrounding US yields along the curve.
The greenback quickly faded an initial bullish attempt and resumed its weekly decline, this time forcing the US Dollar Index (DXY) to break below the key 103.00 support.
In addition, investors shifted their attention to the bonds market amidst rising concerns over a global slowdown and a potential “hard landing” of the US economy.
Gold manages to leave behind the key 200-day SMA at $1836 and in doing so it has opened the door to a probable visit to the 100-day SMA at $1884, just ahead of the May high at $1909 (May 5). Further up aligns 1919 (April 29 top) - which appears bolstered by the 55-day SMA - prior to the April top at $1998 (April 18) followed by $2009 (March 10 peak). Sellers, in the meantime, faces the initial support at the May low at $1786 (May 16) ahead of the 2022 low at $1780 (January 28). A breach of the latter exposes the December 2021 low at $1753 (December 15) before the September 2021 low at $1721 (September 29).
Resistance levels: $1849 $1858 $1892 (4H chart)
Support levels: $1807 $1786 $1753 (4H chart)
Prices of the ounce of silver revisited the boundaries of the key $22.00 mark on Thursday, printing at the same time new multi-session peaks.
The weaker note in the US dollar lent further support to the precious metals and commodities, bolstering at the same time the weekly recovery in the grey metal. Diminishing US yields also collaborated with the upbeat tone in silver, at the time when investors continued to seek refuge amidst increasing worries over the health of the economy in the longer term.
Considering the daily advances in both the grey metal and its cousin bullion, the Gold/Silver Ratio reversed Wednesday’s gains and charted modest losses above the 84.00 yardstick.
Immediately to the upside in silver comes the so far weekly top at $21.98 (May 19) prior to the May high at $23.27 (May 5). Once cleared, the 200-day SMA at $23.59 should emerge on investors’ horizon before the 100- and 55-day SMAs at $23.83 and $24.19, respectively. Further north comes the April top at $26.21 (April 18) ahead of the 2022 peak at $26.94 (March 8). If the metal breaches the 2022 low at $20.46 (May 13) then it should open the door to a visit to the round level at $20.00 prior to the June 2020 low at $16.95 (June 15).
Resistance levels: $21.96 $22.63 $23.27 (4H chart)
Support levels: $21.26 $20.82 $20.43 (4H chart)
Prices of the barrel of the American reference for the sweet light crude oil managed to reverse an earlier drop to the $105.00 mark and ended with strong gains on Thursday.
Despite the positive session, crude oil remains under pressure as fears over an economic slowdown remained on the rise and were also reinforced by poor results from the US docket in combination with unabated hawkish comments from the Fed’s rate-setters as of late and Chinese softer-than-expected data also recorded in past sessions.
The intense sell-off in the buck, in the meantime, appears to have motivated the U-turn in prices of the WTI on Thursday, as the US Dollar Index (DXY) tumbled to fresh 2-week lows well below the 103.00 mark.
In case WTI breaks below the weekly low at $104.99 (May 19), it should accelerate losses to another weekly lows at $98.23 (May 11) and $95.34 (April 25). South from here, the commodity faces the next support at the April low at $92.96 (April 11) ahead of the 200-day SMA at $85.28 and the weekly low at $81.94 (January 24 low). The immediate up barrier is expected at the May top at $115.53 (May 17) before the weekly high at $116.61 (March 24). If WTI surpasses the latter, then it should challenge the 2022 peak at $129.42 (March 8) ahead of the round level at $130.00. North from here comes the 2008 high at $147.27 (July 11).
Resistance levels: $112.31 $115.53 $116.61 (4H chart)
Support levels: $105.09 $103.91 102.64 (4H chart)
US equities tracked by the three major stock indices traded on a mixed note on Thursday. That said, the Dow Jones lost 0.53% at 31323, the S&P500 lost 0.20% at 3915, while the tech reference Nasdaq Composite gained 0.33% at 11455.
Investors remained cautious despite the favourable sentiment in the risk complex, particularly following the slump in the greenback, which dragged the US Dollar Index (DXY) to new 2-week lows south of the 103.00 mark on Thursday.
Poor results from the US calendar coupled with further disappointment around retailers’ reports and inflation fears kept the mood sour, while the positive performance from Microsoft, Alphabet and Amazon lifted the tech-heavy Nasdaq.
If sellers push harder, then the Dow Jones could revisit the 2022 low at 31016 (May 19) prior to the March 2021 low at 30547 (March 4). The breakdown of the latter should leave the index vulnerable to a deeper drop to the 2021 low at 29856 (January 29). On the upside, the weekly high at 32689 (May 17) emerges as the initial magnet for bulls prior to the May peak at 34117 (May 4). Further strength in the index could put a test of the key 200-day SMA at 34830 back on the radar before the April topat 35492 (April 21) and just ahead of the February high at 35824 (February 9). The RSI retreats to 34, and the trend looks feeble, as shown by the ADX above 22.
Top Performers: Home Depot, UnitedHealth, Boeing
Worst Performers: Cisco, Travelers, Procter&Gamble
Resistance levels: 32689 34117 35492 (4H chart)
Support levels: 31016 30547 29856 (4H chart)