. Fundamental Analysis Report With Charting Trends- 05 April 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 05 APRIL 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS – 05 APRIL 2023

05 Apr 2023

MARKET UPDATE:

The global stock rally pauses.

During yesterday’s trading session, there was some consolidation in the international stock markets as investors tried to process all the recent market shocks. The Dow, the S&P, and the Nasdaq all ended the day close to 0.5% lower, indicating that the major American indices all failed to maintain the prior few days’ push higher. The US dollar index dropped 0.5% again as the US data started to cool off, while the Euro kept gaining ground and is currently trading at around 1.0960. The Australian dollar plummeted because of the RBA’s tightening cycle coming to an end for the first time in 11 meetings and another decline in US treasury rates, with the benchmark 2-year note trading at 3.84%.

Oil Rally Declines After 6% Increase

The supply reduction from OPEC+ countries and the ensuing increase in oil prices had clearly been the primary narrative for markets at the beginning of this trading week. Both Brent crude and WTI increased by more than 6% on Monday, but the increase has since levelled off as traders consider the possibility that demand may decline because of the US and Chinese economies slowing. This added yet another layer of complexity to the dilemma that central bankers have been dealing with over the past few weeks, leaving them shaking their heads as they were beginning to see some light at the end of their inflationary tunnels. Given all that has happened over the last few weeks, the market is currently pricing in a 40% likelihood of a Fed raise in May, but considering what has happened expect further volatility everywhere until we have any meaningful clarity for the path forward.

Data and Central Banks to Reach Market

As investors brace themselves for additional potential market movements as fresh data and central bank announcements hit the market, volatility is destined to stay in the markets during the lengthy Easter weekend. The RBNZ surprised us by raising rates by 50 basis points rather than the more frequently anticipated 25. Later in the day, data may increase volatility. There is a tonne of Service PMI statistics scheduled for release in the European session, but as usual, US data will be the major focus. The ADP Non-Farms report is scheduled for release, and the ISM Service PMI will follow later in the afternoon.

What happened in the Asian session?

Rather than the 25 bps increase anticipated, the RBNZ shocked the market with a 50-bps boost. The OCR is currently 5.25%. The recent severe weather events in the North Island raised the price of some products and services, increasing the risk that inflation expectations will continue to rise above the target range, according to the Rate Statement.

What does it mean for the Europe & US Sessions?

The RBNZ has shown that central banks are committed to lowering inflation to the 2% goal range. This unexpected increase will probably push the NZD/USD combination to the round number at 0.6400. The expected NZD strength against the USD would be strengthened by a bearish confirmation from the forthcoming US ADP Non-Farm Employment Change for the dismal JOLTS Job Openings.

The Dollar Index (DXY)

Key news events today

ADP Non-Farm Employment Change

ISM Services PMI

What can we expect from DXY today?

A potential weakness in the US labour market is indicated by the ADP Non-Farm Employment Change forecast, which is lower than the prior reading of 242K and stands at 208K. The ISM Services PMI, however, is anticipated to fall from 55.1 to 54.3, signalling sluggish US service sector development. The Dollar could suffer as a result.

Central Bank Notes:

  • The US banking system is sound and resilient, but recent developments may result in tighter credit conditions for households and businesses.
  • The Federal Reserve has raised the target range for the federal funds rate to 4-3/4 to 5 per cent, committed to returning inflation to its 2 per cent objective.
  • In determining the extent of future increases in the target range, the Committee will consider various factors, including the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and economic and financial developments.
  • Next meeting is on 3 May 2023

Next 24 Hours Bias

Bearish

The Kiwi Dollar (NZD)

Key news events today

Official Cash Rate

RBNZ Rate Statement

What can we expect from NZD today?

The RBNZ is anticipated to raise the OCR by 25 basis points, to 5.00% from 4.75%. Any indication that the accompanying Rate statement will maintain its hawkish attitude will support the NZD.

Central Bank Notes:

  • Monetary Policy Committee increased the OCR from 4.25% to 4.75%
  • Higher interest rates are needed to reduce inflation and support employment sustainably
  • Severe storms in North Island will increase inflation and disrupt production.
  • Next meeting is on 5 April 2023

Next 24 Hours Bias

Mixed

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

The currency’s effect from the upcoming Final Services PMI for the UK is predicted to be minimal at 52.8, while that of MPC Member Tenreiro’s speech is uncertain. Investors may be heavily influenced by the BOE Quarterly Bulletin as they keep an eye out for possible currency movements based on the BoE’s outlook.

Central Bank Notes:

  • The BoE’s MPC increased the Bank Rate by 25bps to 4.25%, with a majority of 7-2 in favour of the hike
  • The UK banking system is judged to be robust and resilient.
  • CPI inflation increased unexpectedly but is expected to fall sharply over the rest of the year due to lower energy prices.
  • The MPC will continue to monitor inflationary pressures and adjust Bank Rate as necessary.
  • Next meeting on 11 May 2023 

Next 24 Hours Bias

Mixed

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The recently released statistics will probably determine the direction of the JPY price because there have been no noteworthy news events. The yield on the 10-year bond auction was 0.46%, and the bid-to-cover ratio was 3.8 instead of 3.8. The Monetary Base YoY shift was -1.0%, which was an improvement from -1.6%.

Central Bank Notes:

  • The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2% 
  • Japan’s economy is expected to recover gradually
  • The bank will not hesitate to take additional easing measures if necessary
  • Next meeting is on 27 April 2023 

Next 24 Hours Bias

Weak Bullish

Global Markets:

Asian Stock Markets: Nikkei is down 1.68%, Shanghai Composite up 0.49%, Hang Seng down 0.66%, ASX up 0.17%

European equities, the DAX futures down 0.24%, CAC 40 down 0.22%, FTSE up 0.19%.

US Stock Market: Dow Jones down 0.59%, S&P 500 is down at 0.58%, and Nasdaq 100 is down at 0.52%.                    

Commodities: Gold at $2042.95 (+0.23%), Silver at $25.06 (-0.17%), Brent Oil at $85.19 (+0.29%), WTI Oil at $80.86 (+0.19%)

News & Data

  • (USD) ADP Nonfarm Employment Change (Mar) Forecast 200K, Previous 242K at 17:45
  • (USD) ISM Non-Manufacturing PMI (Mar) Forecast 54.5, Previous 55.1 at 19:30
  • (NZD) RBNZ Interest Rate Decision Actual 5.25%, Forecast 5.00%, Previous 4.75% at 07:30
  • (NZD) RBNZ Rate Statement at 07:30
  • (GBP) Service PMI (Mar) Actual 52.9, Forecast 52.8, Previous 53.5 at 14:00

Technical Outlook

GBPUSD

A bullish momentum is presently visible on the GBP/USD chart, and this momentum may continue bullishly towards the first resistance level.

The first support level, which is pullback support and a strong level of support, is at 1.2432, as we can see from the support levels. The second level of support is at 1.2342 and it overlaps the first level, making it a very powerful level of support.

The first resistance level, which is a swing high resistance and a strong level of resistance, is at 1.2588 in terms of resistance levels. In addition, there is a powerful level of intermediate resistance at 1.2506, which is also a swing high level of resistance.

EURUSD

There is presently bullish momentum on the EUR/USD chart, and this momentum may continue bullishly towards the first resistance level.

When we look at the support levels, we can see that the first level of support is at 1.0927, which is a good amount of overlap support. At 1.0803, the second support level is also overlap support, making it a potent degree of support.

The first resistance level, which is a swing high resistance and a decent level of resistance, is at 1.1022, according to the resistance levels. In addition, there is an intermediate resistance level at 1.0967, which is a swing high resistance and a powerful level of resistance due to the alignment of the 138.20% Fibonacci extension with it.

AUDUSD

Strong bullish momentum can be seen on the AUD/USD chart, and prices may climb further in the direction of the first resistance. With the price above the Ichi Moku cloud and little major resistance standing in the way of a possible uptrend, the overall bias is bullish.

The first support level is currently at 0.6722, which coincides with a 50% Fibonacci decline and is also an overlap support level. This level has previously undergone several tests and could offer sturdy support if the price were to fall.

Price could move upward towards the first barrier at 0.6791 if it were to retrace its steps from the first support. This level is an overlap level as well, but it also occurs at a 38.20% Fibonacci reversal this time. If this resistance is broken, there is a chance that the market will move bullishly towards the second resistance level at 0.6859, which is also overlap resistance and a 50% Fibonacci retracement level.

Another overlap support level, the second support level at 0.6640 might offer extra support if the price were to fall even lower.

USDJPY

The first resistance level at 133.79, a multi-swing high resistance level that also falls within a 50% Fibonacci retracement, may be reached by the price if the positive momentum persists.

The first support level, which is an overlap level and a strong potential area for prices to rebound back up, is at 131.49 in terms of support levels. The second support level, which also overlaps with the 78.60% Fibonacci retracement level and is a strong level to monitor, is located at 130.39.

At 134.84, there is a second support level that overlaps the first one and corresponds to the 61.80% Fibonacci retracement level. This price level might serve as a roadblock to further upward price movement.

It’s important to keep in mind that the second support level at 130.39 would need to be watched for if the price were to breach the first support level. The second opposition level at 134.84 may be reached if the price were to break through the first resistance level.

DAX 40

Strong bearish momentum is presently visible on the GER30 chart, and a bearish continuation in that direction towards the first support level is possible.

The first support level, heavy overlap support, is situated at 15487.7. The second support level’s potential as a powerful support level is further increased by the fact that it overlaps the 38.20% Fibonacci retracement and is located at 15270.7.

The first resistance level, on the other hand, is a multi-swing high resistance and is situated at 15735.7. The second resistance level, which is a swing high resistance, is found higher up at 16014.55. These resistance levels show possible spots where the bearish trend might be able to plateau.

WTI CRUDE OIL

Strong positive momentum is evident on the WTI chart, and there is a chance that the first resistance level will be broken, and the second resistance level will be reached.

The 23.60% Fibonacci retracement is also at 77.18, which is the first support mark. The second support level’s potential as a powerful support level is further enhanced by the fact that it is a retreat support at 73.18.

The first resistance level, on the other hand, is a multi-swing high resistance and is situated at 82.42. Going upward, the second resistance level, which is a swing high resistance, is situated at 86.70. Due to their potential to serve as obstacles to further price increases, these levels are important.

GOLD

With the possibility of a bullish breakthrough of the first resistance level and ascent towards the second resistance level, gold has been displaying powerful bullish momentum. The price is above an ascending trend line, suggesting that further bullish momentum is likely, and the general bias is bullish.

2002.59 is the first support level, which is decline support. This level is important because it has historically helped and is probably going to do so again.

As we move higher, the first resistance mark, which is a swing high resistance, is situated at 2022.34. This level could act as a resistance level because it falls within the 138.20% Fibonacci extension. A breach here might lead to a climb towards the second resistance level, which is at 2067.77.

The second resistance level, which also happens to be the 78.60% Fibonacci extension, is a swing high resistance. This mark has historically been important and is probably going to offer resistance once more.

LITECOIN

The first level of support is at 89.36, which also happens to be a powerful overlap support level and a 78.60% Fibonacci retracement. In the event of a further downward trend, this level may serve as a support level and offer a bounce for the price.

The next support level to look for is at 84.11, which is another overlap support level and lines up with a 38.20% Fibonacci retracement if the price were to drop below the first support level. This level has frequently served as a support level in the past and might do so again in the future.

On the resistance side, the first level to keep an eye out for is at 96.13, which is a strong resistance level with multiple swings. The price could possibly signal a bullish reversal and move even higher if it were to break through this level.

At 1775.92, which is another overlap support level and coincides with a 50% Fibonacci retracement, there is an intermediary support level to keep an eye out for. In the event of a slight decline, this level might serve as support.