FUNDAMENTAL REPORT FORECAST

MARKET UPDATE:

US Markets Fall After Fed’s 25bps

The Dow closed 0.78%, the S&P down 0.67%, and the Nasdaq sank 0.46% in volatile trade after the FOMC lifted rates as predicted by 25bps. As the Fed signalled that it might pause rate hikes at the next meeting, US Treasury yields and the dollar also suffered. Both WTI and Brent fell 4% on the day as oil prices continued to suffer from falling demand. The biggest movement was probably in gold, which reached new all-time highs following market news of additional regional financial turbulence in the US.

Gold Soars on Recession Worries

Early today trade saw gold reach fresh all-time highs as recession worries engulfed the market and the Fed announced another 25 basis points. The price of the commodity increased due to investors seeking safe havens due to the US banking crisis and decreasing economic growth. In the early Asian day, stop losses above the previous high proved to be too alluring for the low liquidity, and we witnessed the bright metal reach a high of 2,072/oz. Since then, it has fallen back below the $2,050 threshold, but investors are anticipating more volatility throughout the day as they evaluate the most recent influx of new information to reach the market.

The Market’s Next Stop is the ECB

Before the next significant central bank announcement, the market will have a quiet data calendar Asian session to evaluate the effects of the most recent Fed announcement and US banking issues. Later in the London session, the European Central Bank is scheduled to make its most recent rate announcement, make a statement, and hold a press conference. Around this time, more volatility is anticipated. During the US session, the Canadian Ivey PMI statistics and the US weekly unemployment claims data will also be released.

What happened in the Asia Session?

Building consents for the previous month in New Zealand increased positively by 7.0%, pointing to expansion in the building industry. The ANZ Commodity Prices m/m, however, fell by -1.7%. The two data sets might affect the NZD in different ways. 

The AUD Trade Balance increased from 14.15 billion to 15.27 billion in the preceding month, indicating an improvement in the nation’s economic performance.

The Caixin Manufacturing PMI in China was 49.5, which was lower than the anticipated value of 50.0 and pointed to a contraction in the manufacturing sector that might have a negative influence on the currencies of China’s trading partners, notably New Zealand and Australia.

What does it mean for the Europe & US Session?

The antipodeans will probably keep underperforming their European rivals in relation to the US currency. The publication of the ECB rate decision may cause the Euro to give back some of its recent gains and move away from the imperturbable round number of 1.1100.

Gold (XAU)

Key news events today

No major news events.

What can we expect from gold today?

Chairman Powell stated that further rate hikes may be necessary, and cuts are unlikely at the end of the year. This statement implies a bearish undertone for the non-yielding precious metal.

Next 24 Hours Bias

Weak bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

A further drop in building permits (down from the previous -9.0%) would indicate a downturn in the building sector, which might be detrimental to the NZD. By enhancing export revenues and the trade balance, a further rise in commodity prices (the last 1.3%), on the other hand, would have a favourable effect on the currency.  

Central Bank Notes:

• OCR increased by 50bps from 4.75% to 5.25%
• Recent severe weather events in the North Island have led to higher prices, increasing the risk of inflation expectations exceeding the target range.
• New Zealand’s economic growth is expected to slow through 2023 due to the slowing global economy, reduced residential building activity, and the ongoing effects of monetary policy tightening.
• Next meeting is on 25 May 2023

Next 24 Hours Bias

Mixed

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

In comparison to the prior readings of 0.4B and 58.2, the predicted values for the Trade Balance and Ivey PMI are 0.3B and 59.0, respectively. The CAD currency may benefit if the actual data releases reach or surpass the expected levels, however a negative impact may result if the forecasted values are not met.

Central Bank Notes:

• Bank of Canada holds its target for the overnight rate at 4.5%
• Labour markets remain tight with persistent price pressures, especially for services
• Economic growth in Q1 looks to be stronger than projected; to be weak through the remainder of this year before strengthening gradually next year
• Prepared to increase the policy rate further to return inflation to the 2% target.
• Next meeting on 7 June 2023

Next 24 Hours Bias

Mixed

Global Markets:

Asian Stock Markets: Nikkei up 0.12%, Shanghai Composite up 0.82%, Hang Seng Up 1.27%, ASX down 0.06%

European equities, the DAX futures down 0.54%, CAC 40 down 0.65%, FTSE down 0.60%.

US Stock Market: Dow jones down 0.80%, S&P 500 down at 0.70%, Nasdaq 100 down at 0.46%.   

Commodities: Gold at $2037.51 (-0.25%), Silver at $25.60 (+0.01%), Brent Oil at $72.99 (+0.90%), WTI Oil at $68.98 (+0.55%)

News & Data

• (USD) Initial Jobless Claims Forecast 240K, Previous 230K at 18:00
• (NZD) RBNZ Gov Orr Speaks at 04:30
• (EUR) ECB Interest Rate Decision (May) Forecast 3.75%, Previous 3.50% at 17:45
• (EUR) ECB Monetary Policy Statement at 17:45
• (CAD) Ivey PMI (Apr) Forecast 59.0, Previous 58.2 at 19:30

Technical Outlook

GBPUSD

With potential for a negative reaction off the first resistance level at 1.2583 and a decline towards the first support level at 1.2540, the GBP/USD chart is moving downward. The first support level is an overlap support, which means that if price reaches it, it might rebound from it. The second support level, which is also an overlap support and can offer additional support for the price, is at 1.2498.

The initial resistance level on the downside is around 1.2583, a swing high barrier that also happens to be a Fibonacci projection at 78.60%. Price may move higher towards the second resistance level at 1.2623 if it can break past this level. A potential area of significant resistance for the price exists at this level, which is a swing high resistance and coincides with a -27% Fibonacci expansion and a 127.20% Fibonacci extension.

EURUSD

A bullish breakthrough of the first resistance level at 1.1095 and a rise towards the second resistance level at 1.1158 are both possible according to the EUR/USD chart’s positive bias. The first level of support is at 1.1095, which is a pullback level and might offer some level of support for the price if it declines towards there. The second level of support is at 1.1034, which is another level of pullback support and might offer more support if the price declines any lower.

On the side of resistance, the first resistance level, which is a swing high resistance, is at 1.1095. The price may move higher towards the second resistance level at 1.1158 if it succeeds in breaking through this barrier. Additionally, a swing high resistance level, this level also corresponds to a 138.20% Fibonacci extension.

AUDUSD

The price is currently below a significant declining trend line on the AUD/USD chart, indicating a negative momentum. The first resistance level at 0.6694 may trigger a negative reaction, which could lead to a decline towards the first support level at 0.6622.

The first support level is an overlap support, meaning that if the price hits it, it might find support. If the price falls below the first support level, it may find additional support at the second support level, which is a multi-swing low support at 0.6574.

The overlap resistance at 0.6694 serves as the first resistance level on the resistance side. If the price manages to break through this level, it may rise towards the second resistance level at 0.6753. This level is a swing high resistance and might offer significant price resistance.

USDJPY

Although there is some bearish momentum visible on the USD/JPY chart, the overall picture is still somewhat unclear because the price is currently above a significant ascending trend line. The price would have to close below the trend line for the bearish momentum to take control. Currently, a bearish break off the first support level at 134.51 could lead to a decline towards the second support level at 133.53. The first support level is a pullback support, indicating that if the price hits there, it can find support. If the price falls below the first support level, the intermediate support level at 133.53, a multi-swing low support, may offer additional support.

On the resistance side, a pullback barrier at 135.11 is the initial resistance level. The second resistance level at 137.89 may be reached if the price can go past this one. This level is a swing high resistance and might offer significant price resistance.

DOW JONES

Current bullish momentum on the DJ30 chart suggests that it may continue towards the first resistance level at 33598.11. If the price drops to the first support level at 33255.01, which is an overlap support, it might offer some measure of protection.

The price may find greater support at the second support level, which is likewise an overlap support at 32764.87 but also coincides with a 61.80% Fibonacci retracement level.

On the resistance side, the price may encounter severe opposition at the first resistance level, which is at 33598.11. This level is a pullback resistance. This resistance level’s capacity as a resistance level is further increased by the fact that it falls within a 38.20% Fibonacci retracement level.

A 61.80% Fibonacci retracement level and an overlap resistance are located at the second resistance level, which is located at 33867.51. This level can offer the price even more powerful resistance, possibly leading to a reversal.

WTI CRUDE OIL

WTI: Bearish Momentum Persists as Price Remains Under Major Declining Trend Line

The WTI chart’s general momentum is still bearish, and a price below a significant descending trend line suggests further possible loss. Price may respond negatively and fall to the first support level after encountering the first obstacle.

The first support level, which is at 64.40 and a multi-swing low support, is one to keep an eye on for potential reversals. The idea of potential downside is further supported by the second support level, which is a swing low support at 61.88.

On the resistance side, the first resistance is an overlap resistance at 71.56 that also happens to be a 38.20% Fibonacci retracement. As a result, it is an excellent level to keep an eye on for future pullbacks. Additionally, there is an overlap resistance and intermediate resistance at 68.75, which coincides with a 23.60% Fibonacci retracement.

SILVER

The bullish momentum on the silver chart suggests the possibility of a bullish continuation approaching the first resistance level at 25.805. If the price bounces off the first support level at 25.075, 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 24.466, 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 25.805 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 26.170.

In conclusion, silver chart is showing bullish momentum. 

LITECOIN

A key resistance level near 88.94, which is being tested now as the LTC/USD chart shows a strong bearish trend, corresponds with the 50% Fibonacci retracement and is also an overlap resistance level. If the stock responds badly off this level, the initial support at 85.12, an overlap support level, can be achieved. If the price breaks through the first support level, it can go on to the second support level at 81.05, which is also a multi-swing low support level.

The price could continue to go upward in a positive manner towards the multi-swing high barrier level at the second resistance level at 93.49, however, if it is able to successfully break through the first resistance level at 88.94. However, considering the overall bearish trend on the chart, this possibility appears to be less likely.