On Tuesday, stock markets experienced a sharp decline due to concerns among traders about contagion in the regional banking sector ahead of the Federal Reserve’s rate decision. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all fell for a second consecutive session. Bank shares also declined, with the SPDR S&P Regional Banking ETF dropping more than 6%. Traders were questioning the stability of smaller regional financial institutions, including PacWest and Western Alliance, which declined by 27% and 15%, respectively.

The Federal Reserve’s two-day policy meeting, which began on Tuesday, is expected to result in the announcement of another quarter-point rate hike on Wednesday. Traders are pricing in a roughly 85% chance of a rate hike. Investors will be looking for clues about whether the Fed will keep rates steady after this meeting or further tighten monetary policy to fight inflation. Additionally, the U.S. Treasury warned on Monday that the country may hit the debt ceiling sooner than expected, which weighed on market sentiment.

On Tuesday, all sectors in the stock market experienced a decline of 1.16%. Among the sectors, energy was hit the hardest with a decline of 4.28%, followed by financials at 2.30%. Real estate and communication services also experienced significant drops of 1.74% and 1.78%, respectively. The remaining sectors also showed negative results, with consumer staples down 0.32%, health care down 0.49%, and information technology down 0.93%. Consumer discretionary was the only sector to show a slight increase of 0.16%.

Major Pair Movement

The US dollar index declined on Tuesday as below-forecast JOLTS and plummeting regional bank stocks caused Treasury yields to fall, resulting in renewed recession fears. The dollar lost ground against the yen, euro, and Swiss franc, while high beta currencies suffered. USD/JPY fell 0.67% as the S&P regional banking index dropped around 7% to its lowest level since May 2020. EUR/USD recovered from its risk-off lows and gained roughly 0.29% despite disappointing eurozone bank lending data, the first fall in core inflation since January 2022, and an unexpectedly large 2.4% drop in German retail sales. The focus is now on Wednesday’s ISM non-manufacturing and ADP releases, followed by the Fed’s announcement, which is expected to include a 25bp hike. The Fed will also have the Q1 loan officer survey and ongoing banking concerns to ponder beyond inflation and labor data.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD rose, breaking a two-day losing streak and reaching 1.1000, due to risk aversion in the market following a decline in stocks on Wall Street. The US JOLTS report showed lower-than-expected numbers. The Eurozone’s inflation rate in April increased slightly, with the core HICP dropping to 5.6%. The ECB is expected to raise interest rates on Thursday, with a 25 basis points hike predicted, but there are concerns about the potential risks of a 50 bps hike. The Q1 Bank Lending Survey revealed tight credit standards and a slowdown in credit demand. The Fed will make its decision on monetary policy on Wednesday, with a 25 basis points rate hike expected.

Based on technical analysis, the EUR/USD pair has experienced a slight upward movement and has successfully reached our previous resistance level. The current price is now situated above the middle band of the Bollinger band and is trying to reach the upper band. It is anticipated that the EUR/USD will reach our resistance level at 1.1026. The Relative Strength Index (RSI) is currently at 56, indicating that the EUR/USD is in a bullish mode.

Resistance: 1.1026, 1.1068

Support: 1.0984, 1.0962

XAU/USD (4 Hours)

The price of spot gold (XAU/USD) rose to a three-week high of $2,019.33 per troy ounce as the US dollar weakened due to disappointing US data and falling government bond yields. Stock markets fell amid concerns about the banking system, leading to increased demand for the safe-haven metal. The European Central Bank’s Bank Lending Survey showed a fall in demand for credit and tightening lending standards for companies. A group of US lawmakers urged the Federal Reserve to halt its rate hikes amid concerns about job losses and small businesses. The JOLTS Job Openings survey showed a decline in vacancies and an increase in layoffs, while Factory Orders rose slightly in March. US Treasury yields also fell as investors sought safety.

Based on technical analysis, the XAU/USD has moved back up and reached the resistance levels. It is currently situated at the upper band of the Bollinger Band and attempting to push even higher. The Relative Strength Index (RSI) is currently at 67, indicating that the XAU/USD may continue to rise and is currently in a bullish mode.

Resistance: $2,024, $2,035

Support: $2,006, $1,993

Economic Data

On Friday, the Dow Jones Industrial Average saw an increase, achieving its best monthly performance since January. The blue-chip index finished 0.8% higher, with the S&P 500 and the Nasdaq Composite also recording gains. The Dow rose by 2.5% for April, while the S&P 500 recorded a 1.5% monthly gain. More than half of S&P 500 companies have reported earnings so far, with 80% of those companies beating expectations, according to data from FactSet. As investors prepared for the Federal Reserve’s May policy meeting to begin, stock futures saw modest declines on Monday night.

During the regular trading session on Monday, the Dow, and Nasdaq Composite both experienced losses of about 0.1%, while the S&P 500 finished slightly below its flatline. Investors were focused on the bank sector after JPMorgan Chase won the weekend auction for troubled First Republic Bank. Additionally, investors will be monitoring data related to job openings, factory orders, and light vehicle sales, among other things. Companies such as Uber, Pfizer, and Molson Coors are set to report earnings before the bell, followed by Ford, Starbucks, Advanced Micro Devices, and Caesars Entertainment after the market closes.

Treasury Secretary Janet Yellen warned that the US may run out of measures to pay its debts as early as June 1, which investors are also watching for news on the debt ceiling.

On Monday, there was a slight decline of 0.04% in all sectors of the market, except for Health Care, which saw an increase of 0.59%, and Industrials and Utilities, which both saw a rise of 0.55% and 0.21%, respectively. Information Technology and Consumer Staples also saw minor gains of 0.18% and 0.09%, respectively. However, Real Estate and Consumer Discretionary both saw significant losses of 0.92% and 1.06%, respectively, while Energy experienced the largest decline of 1.26%.

Major Pair Movement

On Monday, the dollar index rose by 0.45% following the release of inflationary ISM data and JPM’s acquisition of FRC, which provided relief for the US bank crisis. This increase in the dollar index has increased the likelihood of a Fed rate hike on Wednesday, with a slightly higher probability of one more in June. This rise in the dollar index has also threatened to reverse the previous downtrend caused by the US banking crisis, which saw USD/JPY rates and risk-off-driven dive. However, USD/JPY soared on Monday, extending sharp gains following Friday’s dovish BoJ meeting.

EUR/USD fell by 0.4% after testing the 21-day moving average on Friday and last week’s lows. If the U.S. JOLTS and Wednesday’s ISM non-manufacturing and ADP reports favor a more hawkish Fed, there is an increased risk of an overbought top triggering a more significant correction of the March-April bank crisis-driven rally. Sterling experienced a 0.6% loss, but it remained above Friday’s lows by the 21-DMA. Meanwhile, IMM specs are the most net long EUR/USD since November 2020, expecting Fed rate cuts to begin while the ECB continues to hike later this year.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD pair experienced fluctuations on Monday and closed lower near an intraday low of 1.0963. The US dollar gained support from rising government bond yields and positive macroeconomic figures, including the April ISM Manufacturing PMI improving more than anticipated. Wall Street also saw gains, following news that JP Morgan rescued First Republic Bank assets with approval from the US regulator. Germany will release March Retail Sales and the Eurozone will unveil the preliminary estimate of the April Harmonized Index of Consumer Prices. The week will continue with the Fed and ECB’s monetary policy decisions and end with the US Nonfarm Payrolls report.

Based on the technical analysis, the EUR/USD pair has moved lower and broken below the 1.1000 level. Currently, the price has moved slightly higher after reaching the lower band of the Bollinger band, with expectations of moving higher and targeting the middle band. It is anticipated that the EUR/USD will reach the resistance level at 1.1013. The Relative Strength Index (RSI) is currently at 47, indicating that the market is neutral for the EUR/USD.

Resistance: 1.1013, 1.1068

Support: 1.0962, 1.0913

XAU/USD (4 Hours)

Gold (XAU/USD) prices were volatile on Monday, falling to $1,977 per troy ounce during the Asian session before recovering to $2,005.98 ahead of the US stock market opening. Thin volumes exacerbated movements, with most major financial markets closed for Labour Day. The US Dollar surged during the American session after the US published upbeat data, including March Construction Spending, which rose by 0.3% MoM, and the April ISM Manufacturing PMI, which printed at 47.1, beating expectations despite still signaling contraction. The rising US government bond yields also supported the dollar, with the 10-year Treasury note currently yielding 3.55%.

Meanwhile, the stock markets rose following news that JP Morgan took over the troubled First Republic Bank, which collapsed after customers withdrew over $100 billion in March. The Federal Deposit Insurance Corporation (FDIC) backed the deal, calming fears.

Based on technical analysis, XAU/USD is still moving in consolidation mode reaching the high and low. XAU/USD has the potential to move back higher as the price is moving toward the middle band after getting the lower band of the Bollinger band. The Relative Strength Index (RSI) currently stands at 47, suggesting a neutral trend in XAU/USD.

Resistance: $1,993, $2,005

Support: $1,977, $1,969

Economic Data

This week, market participants await the release of highly awaited economic reports, which will highlight key indicators such as Rate Statements in the US and Australia, as well as Employment Change in the US and Canada. These reports have immense significance as they enable traders and investors to make informed decisions and stay ahead of the market. 

ISM Manufacturing PMI | US (May 1)

The US ISM Manufacturing PMI fell to 46.3 in March 2023, the lowest since May 2020.

Analysts expect a reading of 46.6 for April 2023. 

Reserve Bank of Australia Rate Statement (May 2)

During its April meeting, the RBA held its cash rate steady at 3.6%, in line with market expectations. This marks the first pause in the current hiking cycle, which began in May 2022. 

For April, analysts expect the central bank to keep the rate unchanged at 3.6%. 

ISM Services PMI | US (May 3)

The US ISM Services PMI dropped to 51.2 in March 2023 from 55.1 in February 2023, the slowest growth in three months. 

For April, analysts expect a reading of 50.6.

FOMC Meeting and Funds Rate | US (May 3)

The Fed raised its funds rate by 25bps to 5% in March 2023. 

Despite a slower inflation rate, analysts anticipate that the central bank will continue to raise interest rates, with another 25bps hike to 5.25% in April 2023. 

European Central Bank Main Refinancing Rate (May 4)

Most ECB policymakers agreed to raise key interest rates by 50bps to 3.5% last month, though some members would have preferred not to increase them until the financial market tensions had subsided. 

The ECB is set to deliver a 25bps rate hike in its May meeting, with further increases expected to be implemented in subsequent meetings.

Employment Change | Canada (May 5)

The Canadian economy added 35,000 jobs in March 2023, while the unemployment rate remained unchanged at 5% for the fourth consecutive month. This is near the record low of 4.9% seen in June and July 2022. 

For  April  2023, it is anticipated that job creation numbers will drop slightly to 25,000. The unemployment rate is expected to be at 5.1%.

Employment Change | US (May 5)

The US economy created 236,000 jobs in March, the least since December 2020. Meanwhile, the unemployment rate edged down to 3.5% in March 2023.

Analysts expect the US to create 190,000 jobs in April 2023, while the unemployment rate will be at 3.5%. 

On Thursday, the US stock market closed higher due to solid earnings from Meta Platforms, which boosted tech-related companies. The Dow Jones Industrial Average increased by 1.57% to 33,826.16, the Nasdaq Composite rose 2.43% to 12,142.24, and the S&P 500 climbed 1.96% to 4,135.35. It was the best day since January for the Dow and S&P 500 and since March for the Nasdaq. Meta shares surged by 13.9% following its better-than-expected quarterly revenue report, and several analysts raised their price targets for the company. Other tech-related companies such as Amazon, Alphabet, Microsoft, and Apple also experienced gains.

Despite weaker-than-expected GDP data, which suggested that the Federal Reserve could wrap up its tightening campaign soon, the stock market continued to rise. The US economy grew 1.1% in the first quarter, while economists had predicted an expansion of 2%. Honeywell, an industrial bellwether, rose by more than 4% due to its better-than-expected quarterly report. However, Caterpillar, another barometer of the global economy, fell by around 0.9% as investors feared a build-up in inventory suggested a slowdown in demand. The Dow and S&P 500 were slightly above their flatlines for the week-to-date, while the Nasdaq gained 0.6% over the same period. However, the Nasdaq has lagged month-to-date, shedding 0.7%, while the Dow and S&P 500 rose 1.7% and 0.6%, respectively, since April began. The Fed is expected to announce its latest policy decision next week.

On Thursday, all sectors in the US stock market experienced gains, with the communication services sector leading at 5.53% and the energy sector having the smallest increase at 0.44%. The consumer staples and healthcare sectors had modest gains at 1.04% and 0.51%, respectively, while the information technology sector rose by 2.17%. Overall, the stock market increased by 1.96%.

Major Pair Movement

On Thursday, the US dollar index remained mostly unchanged, increasing by only 0.08%, as the market focused on strong performances by tech companies with better-than-expected earnings reports. Investors are also looking ahead to the end of the week and the end of April and next week’s FOMC meeting, which could provide new direction from the Fed after a slowdown in interest rate hikes.

During the Asian session, the EUR/USD pair rebounded above 1.1030 with support from buying interest at the psychological level of 1.1000, aided by a correction in the US Dollar Index (DXY). The Federal Reserve is expected to raise rates by 25bps next week, followed by two 25bp cuts by the end of the year, while the ECB is fully priced for a 25bp hike in its May 4 meeting, followed by two more 25bp hikes by September, with no real rate cuts until 2024. The UK’s inflation rate of 10.1% presents a challenge for the BoE, but the sterling’s uptrend seems less strong than that of the EUR/USD pair. Late weakness in the equity market and oil prices may increase demand for the yen and dollar, leaving high beta pairs such as AUD/USD vulnerable unless upcoming US data alleviates concerns of a recession.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD is set to close flat on Thursday, hovering above the 1.1000 level, with the Euro facing strong resistance around 1.1060. The undecided market is contributing to the slow moves around the pair, as traders await new data ahead of a busy week with the Federal Reserve (Fed) and the European Central Bank (ECB) meeting, as well as the US official employment report. The ECB is expected to deliver an interest rate hike next week, with the question being how much: 25 or 50 basis points. Data due on Friday, including Eurozone GDP estimates and Consumer Price Index data from Germany, France, and Spain, will be critical ahead of that meeting. The inflation figures will put pressure on the ECB to curb inflation, with interest rate markets showing the expected peak rate at 3.75%.

Based on the technical analysis, the EUR/USD pair has moved lower and broken our support level. Currently, the price has moved below the middle band of the Bollinger band, with expectations of moving lower and targetting the lower band. It is anticipated that the EUR/USD will reach the support level of 1.0987. The Relative Strength Index (RSI) is currently at 50, indicating that the market is neutral for the EUR/USD.

Resistance: 1.1050, 1.1072

Support: 1.1016, 1.0987

XAU/USD (4 Hours)

The US Dollar bulls were supported by the United States’ preliminary Gross Domestic Product (GDP) data for Q1, which capped the upside attempts in XAU/USD price yet again. Although the headline US Q1 GDP number missed estimates, resilient personal consumption, inventories accumulation, and higher inflation component grabbed investors’ attention, ramping up the odds of a 25 basis points (bps) Fed rate hike next week. The details of the report triggered a fresh rally in the US Treasury bond yields across the curve, with the benchmark 10-year US Treasury bond yields recapturing the critical 3.50% level, reducing the demand for the safe-haven US government bonds and XAU/USD price. However, the risk-on flows allowed XAU/USD price to finish the day almost unchanged. Investors now look forward to the US Core PCE Price Index data for a fresh directional move in the XAU/USD price, as well as the end-of-the-week flows and repositioning ahead of next week’s Federal Reserve policy announcements, which could influence the US Dollar valuations and XAU/USD price action.

Based on technical analysis, XAU/USD reached back below the $2,000 level showing that the market is still in consolidation mode. XAU/USD has the potential to move back higher as the price is moving toward the middle band and try to reach the upper band of the Bollinger band. The Relative Strength Index (RSI) currently stands at 54, suggesting a neutral but bullish trend.

Resistance: $1,993, $2,005

Support: $1,985, $1,972

Economic Data

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Investor worries over First Republic Bank overshadowed excitement around Big Tech earnings, causing the Dow Jones Industrial Average to lose more than 200 points. First Republic Bank slid nearly 30%, extending losses after falling almost 50% on Tuesday. The regional bank reported a 40% drop in deposits to $104.5 billion in the first quarter, reigniting concerns about the health of the banking system.

Despite some market participants growing hopeful that e-commerce giant Amazon’s cloud business could show strong revenue growth, Alphabet shares finished down 0.1% after trading up earlier in the day. However, Microsoft climbed more than 7% to trade at its highest point in over a year after beating Wall Street’s expectations on the top and bottom lines in its latest quarter. This earnings week saw the Technology Select Sector SPDR Fund (XLK) add about 1.5% as investors increased their exposure to Big Tech.

Data released Wednesday morning showed that demand for long-lasting goods like appliances and computers was higher than economists expected in March, in a sign that the economy is showing resilience.

On Wednesday, the overall market saw a decline of 0.38%, while the Information Technology sector experienced a price increase of 1.73%. The biggest price declines were seen in the Utilities sector with a drop of 2.37%, followed by Industrials at 1.87% and Health Care at 1.41%. The Financials sector had a decline of 0.96%, while the Consumer Staples and Real Estate sectors both experienced declines of around 0.7%. The Communication Services sector saw a price decline of 0.62%, while the Energy and Materials sectors experienced larger declines at 1.28% and 1.18%, respectively.

Major Pair Movement

The US dollar index dropped by 0.37% on Wednesday, reversing the previous day’s trend of safe-haven flows into the dollar and yen. The focus shifted back to expectations of H2 rate cuts by the Federal Reserve, contrasting with anticipated rate hikes by the European Central Bank (ECB) and the Bank of England (BoE). Market volatility remained high, reflecting uncertainty over global economic conditions, geopolitical tensions, and the regulatory response to the US banking crisis.

The EUR/USD pair rebounded from its early intraweek low of 1.0960 on EBS, reaching a 13-month peak at 1.1096. The Federal Reserve is expected to hike rates by 25bps next week, followed by two 25bp cuts by year-end, while the ECB is fully priced for a 25bp hike in its May 4 meeting, followed by two more 25bp hikes by September, with no real rate cuts until 2024. The UK’s inflation rate of 10.1% presents a challenge for the BoE, but the sterling’s uptrend seems less strong than the EUR/USD pair. Late equity market and oil weakness may trigger renewed demand for the yen and dollar, with high beta pairs such as AUD/USD vulnerable unless upcoming US data alleviates recession concerns.

Technical Analysis

EUR/USD (4 Hours)

Although EUR/USD reached YTD highs on Wednesday, its short-term bullish outlook did not improve. The US Dollar strengthened, causing the pair to pull back from recent highs. This week, important data releases for the Eurozone are due, including consumer confidence data on Thursday, German inflation and EZ GDP growth on Friday, and the ECB meeting next week, where a rate hike is expected, but the extent of the hike is uncertain. While some data favors a 50 basis points hike, there are arguments for a more dovish approach due to renewed banking concerns and slowing inflation. The US Dollar posted mixed results on Wednesday, with the Euro outperforming, but the Dollar ended the day looking stronger as Wall Street slipped again. Important US data releases, including Q1 GDP and Consumer inflation, are expected on Thursday, ahead of next week’s FOMC meeting.

The EUR/USD pair has risen and broken above our resistance level, according to technical analysis. Currently, the price has moved above the middle band of the Bollinger band, with expectations of moving even higher and targeting the upper band. It is anticipated that the EUR/USD will reach the resistance level at 1.1073. The Relative Strength Index (RSI) is currently at 61, indicating a bullish market for the EUR/USD.

Resistance: 1.1073, 1.1131

Support: 1.1042, 1.1000

XAU/USD (4 Hours)

On Wednesday, Spot Gold (XAU/USD) struggled to surpass the $2,000 mark despite the improving market mood, while caution remains. US Dollar demand decreased due to positive earnings reports from large US corporations, but First Republic Bank’s troubles overshadowed it. Most Asian and European stock markets closed in the red, but Wall Street had modest gains. US data showed mixed results, and the US is set to publish Q1 GDP and Personal Consumption Expenditures Prices on Thursday.

Based on technical analysis, XAU/USD reached above the $2,000 level but then moved back below to $1,988 before going back higher and is currently at $2,000. XAU/USD has the potential to move even higher as the price is above the middle band and targeting the upper band of the Bollinger band. The Relative Strength Index (RSI) currently stands at 54, suggesting a neutral but bullish trend.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

Economic Data

Big Tech earnings, led by Alphabet and Microsoft, boosted US stock futures on Tuesday evening. Dow Jones Industrial Average futures gained 0.1%, S&P 500 futures added 0.4%, and Nasdaq 100 futures increased by 1.2%. Microsoft beat Wall Street’s expectations in its latest quarter and posted strong revenue from its Intelligent Cloud business segment, driving shares up by 8%. Meanwhile, Google’s parent company Alphabet reported better-than-expected revenue and a profit in its cloud business for the first time, causing shares to rise by over 2%.

However, regular trading on Tuesday saw the Dow fall by 1%, the S&P 500 finish 1.6% lower, and the Nasdaq Composite dropping nearly 2%. This was partly due to First Republic Bank reporting a 40% decrease in deposits to $104.5 billion in the first quarter, which reignited concerns about the broader banking sector and put pressure on the major averages.

Investors will continue to monitor earnings results from travel companies such as Boeing, Hilton Worldwide, Spirit Airlines, and Travel + Leisure before the bell on Wednesday. Additionally, durable goods and mortgage purchase data will be released on Wednesday morning, followed by the latest GDP update on Thursday and the Personal Consumption Expenditures Price Index – the Fed’s preferred inflation gauge – on Friday.

On Tuesday, all sectors of the stock market experienced a price drop, with the biggest losers being the information technology and materials sectors, down 2.09% and 2.15%, respectively. The consumer discretionary sector also suffered a significant drop of 2.05%, while the utilities and consumer staples sectors fared slightly better with only a 0.10% and 0.12% decline, respectively.

The decline was driven by a combination of economic and geopolitical risks, including concerns about central banks’ inflation fights, as well as uncertainty surrounding the ongoing banking crisis. The financials sector was among the hardest hit, down 1.76%, as investors worried about the potential impact of the crisis on the broader banking sector.

Major Pair Movement

Investors across markets and regions experienced a bleak day as a multitude of economic and geopolitical risks caused them to seek refuge in the US dollar and yen. Central banks’ fights against inflation were seen as contributing to the growing risks that investors were concerned about.

First Republic Bank’s quarterly report, released on Monday, caused alarm in the markets, revealing the precarious state of the bank after March’s banking crisis. Investors are now speculating on the possibility of the acute phase of the banking crisis turning into a chronic issue, with the Federal Reserve nearing the end of its aggressive rate-hiking cycle amid an increased risk of a recession.

This flight to safety was reflected in the 20 basis point drop in the 2-year Treasury yield and a 39 basis point surge in one-month T-bill rates. Investors were pricing in 70 basis points of rate cuts before year-end, with a 25 basis point hike next week slightly less favored. In addition, the 5-year U.S. sovereign CDS soared to its highest level since 2011, now above Spain’s, as the debt ceiling remained unresolved.

EUR/USD decreased by 0.64% as investors moved their funds to the safe-haven dollar causing the currency to dive from its Asia trading peak at 1.1068, reaching Monday’s 1.0966 lows on EBS. It is expected that the ECB will hike by 25bp next week, with a slightly lower Q3 peak, and a 25bp rate cut priced by February.

The USD/JPY fell 0.38%, indicating the unwinding of yen-funded trades, as the BoJ’s easy policies leave no room for added accommodation, unlike other central banks seen to eventually cut rates. The GBP/USD settled near its lows, while the AUD/USD fell 0.88%. The data calendar is set to heat up on Thursday and Friday ahead of the Fed and ECB meetings next week.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD declined significantly on Tuesday, dropping to as low as 1.0963 amid risk aversion and renewed banking concerns. Despite US yields decreasing, the US Dollar Index rose by 0.55%, while German bonds rallied, causing the German 10-year yield to fall by 6.5% to 2.34%. ECB officials continued to hint at more rate hikes, with market participants seeing a 25 bps rate hike as more likely. Positive US housing data exceeded expectations, reflecting resilience in the economy, while Thursday will see the US reporting Q1 GDP and consumer inflation.

According to technical analysis, the EUR/USD pair has fallen and was able to break below our support levels. Currently, the price has moved below the middle band of the Bollinger band, with expectations of moving even lower and targeting the lower band. It is anticipated that the EUR/USD will reach the support level of 1.0949. The Relative Strength Index (RSI) is currently at 44, indicating a bearish market for the EUR/USD.

Resistance: 1.0997, 1.1053

Support: 1.0949, 1.0916

XAU/USD (4 Hours)

On Tuesday, financial markets turned risk-averse, leading to a rise in demand for the US Dollar and gold (XAU/USD). The US Dollar initially gained on the news of major central banks reducing their dollar operations with the Fed from daily to once a week starting May 1, as well as discouraging data from the US. The CB Consumer Confidence Index fell in April, and any reading below 80 is viewed as a sign of a near-term recession. Despite Treasury yields being under pressure, the US Dollar remains strong, preventing XAU/USD from rallying beyond $2,000.

Based on technical analysis, XAU/USD has reached the $2,000 level and has the potential to continue upward toward the upper band of the Bollinger band, indicating a bullish market for today. The Relative Strength Index (RSI) currently stands at 53, suggesting a likelihood for further upward movement.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

On Monday, the Nasdaq Composite dropped as investors awaited corporate earnings reports from major tech companies and new economic data. The tech-heavy index closed at 12,037.20, down 0.29%, while the Dow Jones Industrial Average ended up 0.2% and the S&P 500 closed 0.09% higher. The market is eagerly anticipating earnings reports from high-interest companies like Alphabet, Microsoft, Amazon, and Meta this week, which marks the halfway point of earnings season. However, experts believe it may be difficult for tech stocks to rally on the back of financial reports as they have already significantly advanced this year.

In addition to earnings reports, investors closely monitor new economic data for insights into inflation and whether the Federal Reserve will announce another rate hike at its next meeting in May. GDP numbers for the first quarter and April’s consumer sentiment data are among the data points scheduled for release later in the week. While 76% of S&P 500 companies that have reported quarterly results so far have beaten analysts’ earnings estimates, first-quarter earnings for S&P 500 companies are expected to decline overall by 5.2%.

On Monday, energy saw the largest increase of 1.54%, followed by materials at 0.69% and health care at 0.56%. The overall change in all sectors was an increase of 0.09%. Information technology had the largest decrease at 0.42%, followed by real estate at 0.31% and financials at 0.20%. The communication services and consumer discretionary sectors also saw a slight decrease in stock prices.

Major Pair Movement

On Monday, the dollar index fell by 0.37% due to the euro’s strong gains, despite weakness in the yen. This is ahead of major central bank meetings this week and next, which are expected to confirm market beliefs that the ECB will take over the rate-hiking baton from the Fed this year, while the BoJ will not participate.

The euro was lifted by expectations of further ECB rate hikes of almost a full percentage point before year-end, as well as improving German business sentiment, the Bundesbank’s upwardly revised Q1 GDP expectations and strong euro zone PMI readings. ECB comments largely supported the rate-hike expectations. Meanwhile, the yen weakened due to BoJ Governor Kazuo Ueda’s statement that the policy would not be tightened at Friday’s meeting.

The sterling also rose, trading at its highest since April 14’s 10-month high at 1.2545, with the BoE further behind the inflation curve than the Fed. Investors are waiting for robust US data to further retrace March’s dive, and to see if the Fed will raise rates for the last time next week.

Technical Analysis

EUR/USD (4 Hours)

The EUR/USD started the week strong, reaching the 1.1050 level. However, doubts were raised about the sustainability of the move due to subdued activity and upcoming key data releases. Despite this, the Euro performed well on Monday, while the US Dollar weakened as risk appetite rose and US yields dropped. Wall Street’s equity prices turned positive, and US bonds rose, with the 10-year yield falling to 3.50% and the 2-year yield dropping to 4.14%. On Tuesday, the US will release data on the S&P/Case Shiller Home Price Index, New Home Sales, and Consumer Confidence, with Thursday’s Q1 GDP report being the most important.

The Euro was supported by expectations of more rate hikes from the European Central Bank (ECB), with ECB Governing Council member Pierre Wunsch stating that he would only agree to halt interest rate hikes once wage growth slows. The next ECB meeting is on May 4th, the day after the Fed’s meeting. Meanwhile, the German IFO survey showed mixed numbers, with the Expectations indicator improving from 91 to 92.2. Eurozone GDP data and German inflation will be released on Friday.

According to technical analysis, the EUR/USD pair has been exhibiting an upward trend, successfully surpassing previous resistance levels. At present, the price has climbed to the upper band of the Bollinger band, and it appears that the pair is making efforts to sustain its upward momentum. It is expected that the EUR/USD will reach a resistance level of 1.1073. The Relative Strength Index (RSI) currently stands at 71, indicating a bullish market for the EUR/USD.

Resistance: 1.1073, 1.1131

Support: 1.1042, 1.1000

XAU/USD (4 Hours)

On Monday, financial markets were cautious and spot gold (XAU/USD) consolidated at around $1,986 per troy ounce, with the safe-haven US dollar out of investors’ radar amid recession-related concerns. United States data, specifically the first estimate of the Q1 Gross Domestic Product (GDP) due to be published this week, could fuel, or cool such fears. The economy is expected to have grown at an annualized pace of 2% in the first quarter, lower than the previous quarterly reading of 2.6%. Meanwhile, European, and American stock markets struggled to attract speculative interest, trading a handful of points below their opening levels. The Nasdaq Composite was the worst performer, down 102 points. Government bond yields ticked lower, with the 10-year Treasury note yielding 3.52% and the 2-year note offering 4.15%.

According to technical analysis, the XAU/USD pair is approaching the $2,000 level, with its target set on the upper band of the Bollinger band after surpassing the middle band. This indicates the possibility of a higher movement today. The Relative Strength Index (RSI) currently stands at 53, having moved up from below, suggesting a potential for further upward movement.

Resistance: $2,005, $2,018

Support: $1,988, $1,974

Economic Data

On Friday, the Dow Jones Industrial Average saw little change and ended the week in the red as investors analyzed earnings reports and concerns about underwhelming profits. The Dow rose 22.34 points, or 0.07%, to close at 33,808.96, while the S&P 500 increased 0.09% to settle at 4,133.52. The Nasdaq Composite climbed 0.11% to end at 12,072.46. However, all major indices closed the week lower, with the Dow falling 0.23%, the S&P slipping 0.1%, and the Nasdaq declining the most at 0.42%, breaking its winning streak.

The earnings season continued on Friday, and Procter & Gamble posted better-than-expected results and lifted its sales forecast, causing its stock to surge by 3.5%. According to FactSet, 76% of S&P 500 companies that reported earnings so far have surpassed analyst EPS estimates. Nevertheless, despite the companies’ overall strong earnings reports, stocks failed to gain traction, and some investors are worried about the possibility of a recession and an impending decline in earnings. In the upcoming week, earnings reports are expected from Big Tech companies Amazon, Alphabet, Meta Platforms, and Microsoft.

On Friday, the stock market experienced an overall increase of 0.09%. The Consumer Discretionary, Consumer Staples, and Health Care sectors saw the largest gains, increasing by 1.20%, 0.75%, and 0.68%, respectively. However, the Materials sector saw the biggest decline of 0.90%, followed by Energy and Financials, which were down by 0.59% and 0.39%, respectively. The Information Technology and Industrials sectors also experienced small declines, decreasing by 0.37% and 0.24%, respectively. The Communication Services and Utilities sectors had moderate gains, increasing by 0.32% and 0.30%, respectively, while Real Estate had a small gain of 0.17%. These data indicate a mixed performance across different sectors in the latest trading session, with some sectors seeing gains while others experienced losses.

Major Pair Movement

On Friday, the US dollar index initially weakened but later surged when unexpected US PMI strength was reported. However, the dollar was unable to maintain the data boost and lost those gains by the afternoon, as investors became skeptical of the PMI’s strength. The dollar was further weighed down by broader indications of a cooling economy and rapidly tightening lending standards. Despite the PMI beat, Treasury yields and Fed policy expectations only increased modestly.

The EUR/USD initially took the lead after the euro zone April PMI rose to an 11-month high, but retreated when US PMI posted a similar peak. ECB rate hike pricing was only marginally increased by the eurozone PMI beat, as there are already more than 80bp of additional hikes priced in by September with less than one 25bp cut before year-end. Sterling recovered from a 0.9% drop in UK retail sales, unaided by the best PMI reading in a year but bolstered by the failure of the US PMI beat to crack Tuesday’s lows. The USD/JPY rebounded but settled down 0.08%, boosted by Japan’s core-core CPI at its highest since 1981 ahead of next week’s BoJ. However, the BoJ is not expected to tighten the policy yet. Investors are now looking forward to the release of more US data, including April ISM reports, as they prepare for the May 3 Fed and May 4 ECB meeting conclusions.

Technical Analysis

EUR/USD (4 Hours)

On Friday, The EUR/USD pair had an indecisive week as the market searched for a catalyst. The outlook suggests a bearish tilt and the pair struggled to continue moving higher due to a risk-averse market environment. The US saw an improvement in the S&P Global Composite PMI to 53.9 in April, while the Eurozone saw a decline in manufacturing PMI to 45.5 but an increase in services PMI to 56.6. A disappointing reading in the upcoming S&P Global Composite PMI could revive fears of a US recession and weigh on the USD.

Based on technical analysis, the EUR/USD pair has been experiencing a slight upward movement and has successfully broken our previous resistance level. The current price is now situated at the upper band of the Bollinger band and appears to be making efforts to continue its upward trend. It is anticipated that the EUR/USD will reach our resistance level at 1.0999. The Relative Strength Index (RSI) is currently at 57, which indicates that the EUR/USD is in a bullish mode.

Resistance: 1.0999, 1.1026

Support: 1.0970, 1.0942

XAU/USD (4 Hours)

On Friday, the price of gold (XAU/USD) broke below the rangebound structure formed around $2,005 and fell below the psychological support level of $2,000. This was due to a recovery in the US Dollar Index (DXY) after a period of consolidation, as investors shifted their funds into the index. The Federal Reserve (Fed) has been advocating for more rate hikes despite signs of an easing labor market, as evidenced by the increase in weekly jobless claims to 245K. The upcoming release of the preliminary US S&P PMI data (April) is expected to be significant, with lower figures anticipated for both Manufacturing and Services PMIs. While a 25-basis point (bp) interest rate hike by the Fed in May seems expected, a further slowdown in US economic activities could increase the likelihood of no further rate hikes beyond May.

Based on technical analysis, XAU/USD has fallen below the $2,000 mark and is currently in slight consolidation. However, it is targeting the middle band of the Bollinger band from below, suggesting a potential for a higher movement today. The Relative Strength Index (RSI) is currently at 41 from below, indicating the potential for a higher move.

Resistance: $1,990, $2,005

Support: $1,974, $1,966