Weekly Market Analysis: 25 April 2022

　　

Key points from last week

• Bank of England Governor Andrew Bailey stated that the UK central bank was walking a tight line between addressing inflation and dodging recession. He expressed concern that the economy might enter a recession if interest rates are raised too quickly. According to him, interest rates should not be increased as swiftly as anticipated by the financial markets.
• Federal Reserve Chairman Jerome Powell said now is the right time to act more aggressively. He is open to a 50-basis point rate hike in May. 
• Emmanuel Macron has been re-elected president of France following a resounding victory over opponent Marine Le Pen, who achieved the extreme right’s highest vote share in history. Macron won 58.55% to 41.45%—a much larger margin than anticipated.

What to focus on this week?

Bank of Canada Governor Tiff Macklem will speak before the House of Commons Standing Committee on Finance in Ontario. His testimony will focus on the pace and amount of rate increases. 

Some data to monitor this week will be the inflation data (CPI) for Australia, and the United States’ PCE Price Index and advance GDP data. The Bank of Japan will also announce its interest rate decision and monetary forecast.

A long-term fallout of the global economy is expected over the Russia-Ukraine conflict, said the IMF last week, as it lowered growth estimates for the year.

Big technology companies may have fared well during the pandemic, but one question remains: can Meta, Alphabet, Amazon, Microsoft, and Spotify continue to grow at such a rapid rate?

Investors are reportedly getting anxious following Netflix’s shocking membership loss last week. However, there is a distinction between a company solely focused on streaming TV and film shows and other technology enterprises.

Market Pair Changes

The NAS100 (NASDAQ) declined 4.09%, as shares of NFLX (Netflix) went down, followed by TSLA (Tesla) and FB (Facebook, Meta). 

SP500 (S&P 500) and DJ30 (Dow Jones) also dropped 3.08% and 2.25%, respectively, as a result of the Fed’s aggressive approach.

The USD Index (USDX) climbed 0.60%, driving several major currencies to depreciate against the USD, with the AUD/USD falling 1.98% and the JPY dropping 1.69%. 

GBPUSD fell the most, with a 1.62% decline, following the Bank of England’s non-aggressive note. 

(All data taken from MT4 VT Markets)

Technical Analysis

USD Index

The USD Index (USDX) successfully broke over the 100.99 resistance level, indicating potential upward momentum. Recorded on 20 April 2020, this marks the first time in two years that USDX has broken through all previous resistance levels. 

The previous upward resistance levels were 101.83 (25 March 2020) and 102.84 (24 March 2020).

In the H4 timeframe, the USDX trend is strong, implying that the price may continue to strengthen.

Resistance 101.83, 102.84

Support 100.99

Gold (XAUUSD)

Gold surged and attempted to break through our resistance level of $1993 but then dipped below our range level of $1965 due to Fed Chairman Powell’s encouraging remarks.

Gold is now trading inside our weekly range of $1891-$1916 and $1965-$1993.

Resistance $1965, $1993

Support $1916, $1891