Weekly Market Analysis: 09 May 2022
What happened in the market last week?
- The Reserve Bank of Australia declared a rate hike of 0.35%, a hawkish move by the central bank that may lead to a short-term rise in the Australian Dollar.
- The US Federal Reserve raises interest rates by 50 basis points to 1.00% and announces there will be two more 50 basis point hikes to come. The USD initially weakened as the USD Index broke through key lows, but this was short-lived as sentiment toward risk pushed the USD back up.
- The Bank of England likewise increased interest rates to 1%. But as the prospect of recession increased, stagflation concerns drove the GBP down.
- There was an increase in employment. However, the Average Hourly Earnings declined, and the unemployment rate increased, resulting in a mixed report from the NFP. This affects the recent market increases.
Last Week Market Pair Changes
- BTCUSD continued to be the most depreciated asset during the past week, falling 9.78% as risk sentiment rose due to the strengthening of the USD.
- The USOUSD (WTI) was the strongest, as it increased 6.28% after the European Union announced its plan to cease all oil purchases from Russia by the end of the year. EU will be refocusing its attention on market supply, where there are not enough barrels to meet forecast demand.
- The US Indices fluctuated somewhat last week in response to a mixed week in the United States. The DJ30 was down 0.80% from its opening price, the SP500 was down 0.79%, and the NAS100 declined 1.93%.
- The USD Index (USDX) gained 0.48%, causing several major currencies to depreciate against the USD, including a 0.45% decline in the AUDUSD and a 0.62% increase in the USDJPY.
- The GBPUSD fell by 1.89% after the Bank of England raised interest rates to their highest level since 2009 but also cautioned that the economy is in danger of entering a recession.
(All data taken from MT4 VT Markets)
What to focus on this week?
The US CPI and PPI numbers for April will be in the spotlight following last week’s Fed FOMC meeting focusing on inflation management. While Fed Chairman Jerome Powell argued against the probability of a higher 75-basis-point rise at future sessions, he conceded that ‘some pain’ may be felt if the central bank is determined to contain the inflationary surge.
Therefore, the degree to which prices have risen in April will be attentively monitored.
In addition, a series of Fed appearances are scheduled for the coming week, which will provide an update on the central bank’s thinking since the May FOMC meeting.
The USD Index (USDX) attempted to break through our resistance area of 103.50 to 103.92 after reaching 104.09, a level higher than March 2020. Currently, the USD Index fluctuates between 103.50 and 103.92.
With this week’s inflation data reported, we can expect the USD Index to continue to move within its range or even slow down. It may also fluctuate between 102.82 and 103.94.
Resistance: 103.92, 104.09
Support: 103.49, 102.82
Gold reached a low of $1850 last week before recovering and closing below our $1891 to $1916 support zone.
It may attempt to break lower again to reach our support levels at $1872 and test our subsequent support levels at $1850 in the upcoming week.
The H4 lower period reveals additional support levels at $1866 before the $1857 support levels.
Our weekly resistance levels remain unchanged at $1891, with an H4 resistance at $1906.
Resistance: $1891, $1906
Support: $1872, 1866, $1857, $1850