Weekly Market Analysis: 26 September 2022

　　

What happened in the market last week?

The market moved with extreme volatility last week because of several significant data events.

• The Bank of Japan intervened in the market for the first time since 1998 by buying JPY, strengthening the JPY. This is anticipated to remain unchanged.
• Russia’s statement that they are willing to use nuclear weapons if necessary to defend the country, coupled with the fact that Russia is drawing Army reservists into the conflict with Ukraine, may indicate that they aim to expand their military.
• In addition, the Bank of England, Swiss National Bank, and Federal Reserve all increased their interest rates. These central banks highlight the rising inflation rates as the reason for the rate increases.
• Based on Powell’s speech, we may anticipate that the Fed may increase its interest rates by 100-125bps, although he stated that the decision will be based on data.

Last Week Market Pair Changes

The USD index (USDX) posted its largest weekly gain since March 2020 last week as the Federal Reserve’s third 75bps interest-rate hike and Chair Jerome Powell’s hawkish stance contributed to dramatically higher real yields.

• USD Index increased by 3.15%, causing EURUSD and AUDUSD to decline by 3.20% and 2.69%, respectively.
• GBPUSD also fell by 4.94%. As a result of the strong US dollar and the decision of Britain’s new finance minister, Kwasi Kwarteng unleashed historic tax cuts and huge increases in borrowing.
• For the week, all three major indexes posted losses. The SP500 decreased by approximately 4.64%, the NAS100 by 4.47%, and the DJ30 by 4.06%.
• Gold dropped 1.77%.
• Meanwhile, USOUSD (WTI) ended the week 6.54% lower as central banks worldwide intensified their anti-inflation efforts at the expense of economic development.

(All data taken from the MT4 VT Markets)

(Picture taken from forexfactory.com)

What to focus on this week?

This week will see a much lighter schedule of data releases compared to last week.

Some significant releases to watch out for include the CB Consumer Confidence and Core PCE Price Index in the US and the Gross Domestic Product in Canada.

US CB Consumer Confidence | 27 September 2022 

The US Consumer Confidence Index rose to 103.2 in August 2022, up from 95.3 in July. According to recent forecasts, Consumer Confidence in the US will increase more to 104, indicating that consumers are confident in the stability of their income and thus may be more inclined to spend.

Canadian Gross Domestic Product | 29 September 2022 

According to Statistics Canada, the Canadian economy expanded by 0.1% in June. The agency’s latest estimate for July has the economy contracting 0.1% m/m from the previous month.

US Core PCE Price Index m/m | 30 September 2022 

The Federal Reserve Board’s monthly report on consumer prices states that the CPI for Core PCE in the US, which excludes food and energy, rose 0.1% in July from a 0.6% increase in June. 

Core PCE prices are projected to increase by 0.5% in August.

Technical Analysis

USD Index

Last week, the USD index (USDX) experienced its greatest weekly increase since March 2020, as the Federal Reserve’s third 75bps interest-rate hike and Chair Jerome Powell’s hawkish posture contributed to significantly higher real yields. By ending the week at 112.81, USDX has broken previous Resistance levels.

On the Weekly Time Frame, the Stochastic Indicator is within the overbought level and is beginning to reverse. This technically indicates that the purchasing power has reached its peak. The price is currently going above the 20, 50, and 200-candle moving averages. This may signal that the price may decline this week due to a lack of data, even though this week’s price movement seems to have been higher.

Our Weekly Resistance levels at 113.83, 115.35, and 117.24, and the support levels at 111.94 and 109.16.

In the meantime, on the H4 timeframe, the Stochastic Indicator is above the overbought level and the price is moving above the 10, 50, and 200-candle Moving Averages, indicating that we may see some continuation for the week. However, be wary of the lack of data for this week, which may result in a weaker week for USDX.

Our H4 Resistance levels are at 113.83, 115.35, and 117.24, and the Support levels are at 111.94 and 109.16.

Gold (XAUUSD)

Gold prices fell last week because of a stronger US dollar, breaking our lowest support level of $1,659 and the 200-candle Moving Average. With the lack of US data this week, however, the recent rise in risk sentiment driven by Russia’s most recent action could push gold prices higher.

On a weekly timeframe, the Stochastic Indicators show a lowering entering the oversold level, indicating that Gold is declining. Gold prices have recently broken through the 200-candle Moving Average, indicating that further downward movement is possible if the price won’t move back up.

Our Weekly Resistance levels at $1,680, and $1,708 with the support levels at $1,618, and $1,563.

In the H4 period, the Stochastic Indicators show a mild upward rise, indicating that Gold may move higher in the short term. Meanwhile, the price is below the 20, 50, and 200-candle moving averages, indicating that the price will continue to decline.

Our H4 Resistance levels at $1,680 and $1,695, with the Support levels at $1,613 and $1,594.

NAS100

Last week, US stocks also declined due to the Federal Reserve’s third 75bps interest rate hike and Fed Chair Jerome Powell’s hawkish stance. Our support level for NAS100 has reached 11286.

On the Weekly timeframe, we can notice that the Stochastic Indicators are moving lower within the oversold level, while the price is moving below the 20- and 50-candle moving averages. It can break the 200-candle Moving Average, which indicates that the price may go lower and use the 200-candle Moving Average as resistance.

Our Weekly Resistance levels are at 11599 (200 MA), 11849 and 12130, with the support levels at 11037 and 10665.

On our H4 timeframe, we can see that our stochastic indicators are consolidating within the oversold level and the price is now moving below the 20, 50, and 200-candle Moving Averages. This indicates that potential lower movement is still intact. However, we must be wary of the short-term upward movement.

Our H4 Resistance levels are at 11484, 11718 and 11901, while the support levels are at 11097, 10954 and 10713.

DJ30

The decline of US stocks last week was due to the Federal Reserve’s third 75bps interest rate hike and Fed chair Jerome Powell’s hawkish stance. This contributed to significantly higher real yields. Our support level for DJ30 has reached 29985.

On the Weekly timeframe, we can notice that the Stochastic Indicators are moving lower within the oversold level, while the price is moving below the 20- and 50-candle moving averages and can break the 200-candle Moving Average, indicating that the price may go lower and use the 200-candle Moving Average as resistance.

Our Weekly Resistance levels are at 30651 and 31362, with the support levels at 28781 and 27642.

On our H4 timeframe, we can see that our stochastic indicators are consolidating within the oversold level and trying to reverse up. The price is now moving below the 20, 50, and 200-candle Moving Averages, indicating that potential lower movement is still intact. Investors must watch out for a short-term upward movement.

Our H4 Resistance levels are at 30004 and 30576, while Support levels are at 29507 and 29165.