. Fundamental Analysis Report With Charting Trends- 3-May-2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS- 3 MAY 2023

FUNDAMENTAL ANALYSIS REPORT WITH CHARTING TRENDS- 3 MAY 2023

03 May 2023

FUNDAMENTAL REPORT FORECAST 

MARKET UPDATE:

Indexes decline 1% as regional banks decline and investors worry ahead of the Fed

On Tuesday, the major U.S. stock indices all lost more than 1% of their value as regional bank shares plummeted due to fresh financial system concerns as investors tried to determine how long the Federal Reserve might need to raise interest rates.

Investors are looking for any indications from the Fed about whether this rate hike would be the last one for the time being or if more hikes are likely if inflation remains high. The Fed is anticipated to announce Wednesday that it will increase rates by 25 basis points.

Regional banks in the United States continued to experience losses following Monday’s seizure and auction of First Republic Bank. In a deal mediated by the Federal Deposit Insurance Corp., JPMorgan Chase & Co.  acquired most of its assets.

In March, two other regional American banks failed.

Wednesday saw a dip in Asian stock markets

which followed losses on Wall Street as shares of troubled banks fell once more and economic concerns increased. Investors exercised caution ahead of the Federal Reserve’s decision on interest rates, which is generally anticipated to increase its benchmark rate by a quarter percentage point to 5%-5.25% to ultimately rein in inflation.

The U.S. banking sector’s slide, which has been closely watched as the banking system collapses under the weight of significantly higher interest rates, was the primary cause of the sell-off in Asian markets. Since March, three of the four largest U.S. bank failures in history have occurred, and investors are now speculating about who will purchase the next regional institution if it fails.

What happened in the Asia Session?

In comparison to the predicted and previous readings of 0.5%, the Employment Change q/q for NZD is now at 0.8%. The NZD unemployment rate is currently 3.4%, which is less than the 3.5% and 3.4% early predictions, respectively. The NZD may appreciate relative to other currencies because of these promising developments in the labour and job sectors. 

The Retail Sales m/m for AUD, on the other hand, are at 0.4%, which is higher than the expected and prior figures of 0.2%. This means that rising consumer spending, economic expansion, and inflation will cause the AUD to appreciate.

What does it mean for the Europe & US Session?

The USD is probably going to consolidate even more before the FOMC decision. The weakening of the Antipodeans vs the US dollar is more pronounced than that of their European equivalents. The release of the US interest rate data set can in fact be expected to cause spikes in volatility.

The Dollar Index (DXY)

Key news events today

ADP Non-Farm Employment Change

ISM Services PMI

FOMC Statement

Federal Funds Rate

FOMC Press Conference

What can we expect from DXY today?

It is anticipated that the ADP Non-Farm Employment Change would rise from 145K to 148K, possibly improving the labour market. The ISM Services PMI, which indicates a growth in the service sector, is also expected to rise from 51.2 to 51.8.  

It is anticipated that the Federal Funds Rate will rise from 5.00% to 5.25%, which could draw in foreign investors looking for greater profits and strengthen the USD. The FOMC Statement and Press Conference will offer more information about the future for the Federal Reserve’s monetary and economic policies.  

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

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

No substantial news is anticipated from Japan over the next three days due to bank holidays.

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

Mixed

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

No significant news event is anticipated to have an impact on the Swiss Franc today. As a result, the direction of the currency will probably be dictated by the economic data that was previously released. The SECO Consumer Climate index for Switzerland is currently at -30, which is lower than the expected value of -22 and the same as the prior reading. Furthermore, Switzerland’s Manufacturing PMI is 45.3, which is lower than both the forecasted value of 47.2 and the previous reading of 47.0. These weaker-than-expected numbers could have a negative effect on the CHF and lower its value.

Central Bank Notes:

  • Raised policy rate to 1.5% to counter inflationary pressure and ensure price stability. The SNB may need to raise the policy rate further in the future
  • The SNB is providing liquidity assistance to Credit Suisse, and the crisis has been halted
  • The new inflation forecast assumes a policy rate of 1.5% and puts average annual inflation at 2.6% for 2023 and 2.0% for 2024 and 2025.
  • Mortgage and real estate market vulnerabilities persist
  • Next meeting on 22 June 2023

Next 24 Hours Bias

Mixed

Global Markets:

Asian Stock Markets: Nikkei up 0.12%, Shanghai Composite up 1.14%, Hang Seng down 1.18%, ASX down 0.96%

European equities, the DAX futures up 0.60%, CAC 40 up 0.72%, FTSE up 0.31%.

US Stock Market: Dow jones down 1.08%, S&P 500 down at 1.16%, Nasdaq 100 down at 1.08%.   

Commodities: Gold at $2027.35 (+0.20%), Silver at $25.61 (-0.04%), Brent Oil at $75.42 (+0.13%), WTI Oil at $71.64 (-0.03%)

News & Data

  • (NZD) Unemployment Rate (Q1) Actual 3.4%, Forecast 3.5%, Previous 3.4% at 04:15
  • (NZD) Employment Change (QoQ) (Q1) Actual 0.8%, Forecast 0.4%, Previous 0.2% at 04:15
  • (AUD) Retail Sales (MoM) (Mar) Actual 0.4%, Forecast 0.3%, Previous 0.2% at 07:00
  • (USD) Fed Interest Rate Decision Forecast 5.25%, Previous 5.00% at 23:30
  • (USD) ADP Nonfarm Employment Change (Apr) Forecast 148K, Previous 145K at 17:45

Technical Outlook

GBPUSD

The general trend on the GBP/USD chart is bearish, and a bearish response off the first resistance level and a decline towards the first support level are both possible outcomes.

The first support level, which is a multi-swing low support level, is located at 1.2396. This level is important to watch because it has historically served as support.

The second support level at 1.2342 would be the level to watch if the price were to drop below the first support level. This level’s significance is further accentuated by the fact that it is an overlap support level.

The first resistance level on the resistance side is located at 1.2509. This level is a powerful level of resistance to observe because it is an overlap resistance level and coincides with a 50% Fibonacci retracement.

Price might move up towards the second resistance level at 1.2581 if it were to break through the first resistance level. This level has historically served as a strong opposition level and is a swing high level.

EURUSD

With a likely negative reaction off the first resistance level and a following drop to the first support level, the EUR/USD chart is currently trending downward. The first support level is at 1.0946, a multi-swing low support level that has historically served as a solid support level. The second support level, an overlap level that adds additional confluence to the support zone, is situated at 1.0911 as well.

On the resistance side, the overlap resistance level at 1.1037, which also happens to be a 61.80% Fibonacci retracement, is the first resistance level. A powerful resistance level for the EUR/USD chart, this level has also been tried numerous times in the past. Price might move up towards the second resistance level at 1.1098 if it were to break through this resistance level. This level has historically served as a strong resistance level and is a swing high resistance level.

It’s important to note that the chart’s general momentum is currently bearish, suggesting the possibility of future price declines. In addition, if the price dropped below the first support level, it might reach the second support level at 1.0911. On the other hand, if the price were to surpass the first resistance level, it might lead to a bullish acceleration in the direction of the second barrier level at 1.1098.

AUDUSD

Given that the price is currently below a significant descending trend line on the AUD/USD chart, further downward volatility may be anticipated. The first support level at 0.6593, a pullback support level that also happens to be a 61.80% Fibonacci retracement, is a crucial level to keep an eye on as there is a chance for a bearish continuation there. The second support at 0.6567, which is also a multi-swing low support level, would be the next support to watch if the price were to drop below this level.

The overlap resistance level at 0.6694 serves as the first resistance level on the resistance side. Price might potentially advance towards the second resistance level at 0.6753, a swing high resistance level, if it were to break through this level.

USDJPY

Overall bearish momentum is currently seen on the USD/JPY chart. For the USD/JPY pair, there is a chance of a negative continuation in the direction of the first support level. The first support level, which is a pullback support level at 135.23, lines up with a 38.20% Fibonacci retracement.

The second support level at 133.52 may be reached if the price drops below this level of support. This level of support is a multi-swing low support level that also happens to be a strong level of support because it falls on a 61.80% Fibonacci retracement.

The first resistance level, which is a multi-swing high resistance level, is located at 137.89 on the resistance side. For the USD/JPY chart, it continues to act as a solid resistance level.

DAX 40

The price may make a bullish bounce off the overlap support level at 15656.00, which also happens to be the 23.60% Fibonacci retracement, as the GER30 chart is showing bullish momentum. The first resistance level at 15953.02, a multi-swing high resistance level, may be reached if the price reverses course from this level.

If the first support level is broken, the price might fall towards the overlap support level at 15484.05, which also corresponds to the 38.20% Fibonacci retracement.

Additionally, there is a multi-swing low support level intermediate support level at 15656.00. If the price breaches the first support level, this level can serve as support.

If the price can pass through the first resistance level, it may operate as a resistance level at the second barrier level at 16101.08 on the upside.

WTI CRUDE OIL

The first support level at 68.76 may be approached given the present bearish momentum on the WTI chart. This support level is a strong level of support because it is a pullback support and matches up with the 78.60% Fibonacci retracement. A pullback support level that might serve as support if the price were to decline even more is the intermediate support level at 71.18.

If the price were to rise, it might run into opposition at the first resistance level, which is an overlap resistance level at 72.63. An overlap resistance level is the second resistance level, which is located at 73.87.

The overall trend of the WTI chart is negative, with the possibility of a further down towards the first support level at 68.66. If the price declines much more, the first and intermediate support levels at 68.76 and 71.18, respectively, may function as support levels. If the price manages to climb, the first and second resistance levels at 72.60 and 73.87, respectively, may operate as resistance levels.

GOLD

The bullish momentum on the XAU/USD chart suggests the possibility of a bullish continuation approaching the first resistance level at 2030.55. If the price bounces off the first support level at 2007.51, it will act as a strong retreat support level and could spark a bullish advance in the direction of the first resistance level. The second support level, which is located at 1970.91, is also a multi-swing low support level, enhancing its capacity to function as a support level.

On the upside, the first resistance level at 2030.55 acts as a pullback resistance level that, if the price fails to break through, might result in a reversal in bullish momentum. If the price is successful in breaking through, it can move on to the swing high second resistance level at 2048.17.

In conclusion, the XAU/USD chart is showing bullish momentum and could continue bullishly approaching the first resistance level at 2031.48. If the price declines, the first and second support levels at 2007.51 and 1970.91, respectively, may serve as support levels. If the price manages to break through the first resistance level, the first and second resistance levels at 2031.55 and 2048.17, respectively, may operate as resistance levels.

BITCOIN

A crucial resistance level around 28771, which coincides with the 50% Fibonacci retracement and is also an overlap resistance level, is being tested at the present as the BTC/USD chart indicates a strong bearish trend. The first support at 27811, an overlap support level, may be reached if the price reacts negatively off this level. The second support level at 27224, which is also a multi-swing low support level, may become the next target for the price if it breaches the first support level.

On the other hand, if the price is successful in breaking past the first resistance level at 28771, it may continue to go upward in a bullish direction towards the multi-swing high barrier level at the second resistance level at 30052. This possibility looks less likely, though, given the chart’s general bearish trend.

In conclusion, there is potential for a bearish response off the first resistance level at 28771, with the first support level at 27811 being the likely target.