Weekly Market Analysis: 02 May 2022

　　

Key points from last week

• Australia had another increase in inflation, with the CPI coming in at 2.1% above projections.
• Gross domestic product in the United States declined 1.4% in the first quarter, falling short of analyst estimates of a 1% increase.
• Investors were expecting the Bank of Japan to intervene in the current Yen weakness, but the central bank remained dovish, weakening the Yen further.

What to focus on this week?

The market’s volatility could spike significantly this week as a result of multiple high-impact news, starting with the US ISM Manufacturing PMI. The momentum of re-opening Western economies from the pandemic is expected to soften some of the impacts brought about by the geopolitical conflict between Russia and Ukraine as well as COVID-19 disruptions. There is an expected boost in global growth in April (vs March), though we can see that the global growth is still low for 2022.

The RBA is expected to announce its first rate hike of the year, increasing rates from 0.1% to 0.25%. The Australian Dollar has depreciated recently and may continue to do so, unless the Reserve Bank of Australia announces additional rate hikes.

The US Federal Reserve will also meet on 3-4 May for its policy meeting. The meeting is said to be a crucial one as markets are highly anticipating for the Fed to raise its benchmark interest rate by 50-basis points in an attempt to wind down inflation.

Next up is the Bank of England’s anticipated announcement of a rate hike this week, with expectations for a 25-basis point increase. BoE Governor Andrew Bailey stated last week that the central bank may decrease the pace of rate hikes as recession fears mount.

The employment data from New Zealand and Canada will also be released this week as well as the US Non-Farm employment data that is predicted to increase by roughly 400K (versus 435K) and unemployment data to remain at 3.5% (vs 3.6%).

Market Pair Changes

The NAS100 (NASDAQ) declined 3.39%, capping a month-long fall of up to 4.98%. SP500 (S&P 500) also decreased 2.86%, with an 8.86% decline in April. DJ30 (Dow Jones) fell 2.06%, posting a 13.3% decline in April as a result of the Fed’s strong approach.

The USD Index (USDX) climbed 2.11%, driving several major currencies to depreciate against the USD, with the AUDUSD falling 2.62% and the CAD declining 1.11%.

(All data taken from MT4 VT Markets)

Technical Analysis

USD Index

The USD Index (USDX) successfully broke above our resistance levels of 101.83 and 102.84, rising as high as 103.93 and approaching the March 2020 peak of 103.94. 

At the moment, the USD Index ranges between 102.82 and 103.50.

With the probability of the Fed raising interest rates by 50-basis points, the USD Index’s chances of reaching and breaking the 103.94 level are increased.

In the H4 period, we can see that the USDX trend is slowing as the market prepares for this week’s Federal Open Market Committee meeting.

Resistance: 102.50, 103.94

Support: 102.82, 101.83

Gold (XAUUSD)

Gold fell to as low as $1872 last week, before easing up and closing within our support zones of $1891-$1916.

Gold may attempt to break below our support levels at $1891 and test our next support levels of $1872 and $1859.

Meanwhile, in the H4 lower timeframe, we can see that there are additional support levels in $1882 prior to the $1872 support levels.

Our weekly resistance levels remain at $1916, with a lower level of resistance at $1906 in H4.

Resistance: $1906, $1916

Support:  $1882, $1872, $1859