FUNDAMENTAL REPORT FORECAST
MARKET UPDATE:
Wall Street declines as concerns about a worse financial crisis are stoked by PacWest
Wall Street finished Thursday’s trading day lower because of PacWest’s decision to investigate strategic options, which increased concerns about the health of American lenders and hurt the shares of regional banks, big financial players like JPMorgan Chase (JPM.N), Wells Fargo & Co. (WFC.N), and other large institutions.
Following the announcement that it was considering strategic options, including a sale, PacWest Bancorp (PACW.O) saw a 51% decline. On worries that the banking crisis would get worse, shares of the local institution and other banks have recently taken a beating.
According to Zhe Shen, managing director of diversifying strategies at TIFF Investment Management, “regional banks and tightening credit conditions are weighing on the market as investors try to recalibrate on where we are in terms of credit cycles and bank lending standards, and when a potential recession may hit.”
The worst U.S. bank collapse since the 2008 financial crisis occurred on Sunday when regulators seized the ailing First Republic Bank and JPMorgan Chase (JPM.N) agreed to purchase most of its assets.
U.S. interest rate futures prices currently suggest that traders mostly expect the U.S. Federal Reserve to lower rates by the central bank’s July meeting, according to CME Group’s Fed Watch Tool, as investors grow more concerned about a widening banking crisis and an economic downturn.
On Wednesday, the Fed increased interest rates by 25 basis points, but Chair Jerome Powell cautioned that it was still too early to declare the rate-hike cycle to be finished because inflation remained the main worry.
The Nasdaq declined 0.49% to 11,966.40 points, while Dow Jones Industrial Average declined 0.86% to 33,127.74 points.
What happened in the Asia Session?
The RBA has stated that additional monetary policy tightening may be needed to achieve their employment and inflation targets in a reasonable amount of time. The RBA anticipates the peak interest rate to be 3.75% and to decline to 3% by the middle of 2025. Despite a lower Caixin Services PMI from China, the potential tightening led to an increase in the Australian dollar.
What does it mean for the Europe & US Session?
If the British pound’s CPI exceeds the anticipated 0.2% m/m, the Swiss franc might overtake it as the dominant currency when compared to the US dollar. The USD/CHF pair may experience a spike lower that heads towards the lows from November 2022 at 0.8760. In the alternative, if the NFP results are positive, US dollar bulls may retaliate. In this case, the pair might get close to the round number at 0.8900.
The Dollar Index (DXY)
Key news events today
Average Hourly Earnings m/m
Non-Farm Employment Change
Unemployment Rate
What can we expect from DXY today?
The average hourly wage is predicted to stay constant at 0.3% based on historical data and forecasts. The Non-Farm Employment Change is anticipated to drop from the previous estimate of 236K to 180K. And last, from the most recent figure of 3.5%, the unemployment rate is expected to slightly rise to 3.6%. If market predictions are realised, the USD will be negatively impacted since a decline in the Non-Farm Employment Change could signal a downturn in the US economy.
Central Bank Notes:
- The committee raised the target range for the federal funds rate to 5 to 5-1/4 per cent. The U.S. banking system is sound and resilient.
- Tighter credit conditions for households and businesses may weigh on economic activity, hiring, and inflation.
- The committee is committed to returning inflation to its 2% objective
- The committee will adjust monetary policy as appropriate if risks emerge that could impede the attainment of goals
- Next meeting is on 14 June 2023
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
CPI m/m
What can we expect from CHF today?
If the anticipated Swiss CPI m/m data is higher than the actual data (both at 0.2%), inflation is rising and the SNB may raise interest rates to combat this. This might therefore cause the CHF’s value to increase.
The Swiss Franc’s value might decrease if the anticipated CPI m/m data is lower than the prior data since it might point to lower inflation and possible interest rate cuts.
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
The Canadian Dollar (CAD)
Key news events today
Employment Change,
Unemployment Rate
What can we expect from CAD today?
It is anticipated that the next data releases for Canada’s Employment Change and Unemployment Rate will be negative for the CAD.
Employment Change is expected to increase by 22.6K, which is less than the prior estimate of 34.7K and suggests that employment growth may be slowing down.
The anticipated Unemployment Rate is 5.1%, which is a tiny bit higher than the previous estimate of 5.0% and points to a modest rise in unemployment.
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
Weak Bearish
Global Markets:
Asian Stock Markets: Nikkei up 0.12%, Shanghai Composite down 0.48%, Hang Seng Up 0.50%, ASX up 0.37%
European equities, the DAX futures up 0.77%, CAC 40 up 0.33%, FTSE up 0.33%.
US Stock Market: Dow jones down 0.86%, S&P 500 down at 0.72%, Nasdaq 100 down at 0.49%.
Commodities: Gold at $2037.19 (-0.61%), Silver at $25.86 (-0.58%), Brent Oil at $74.07 (+2.15%), WTI Oil at $70.07 (+2.10%)
News & Data
- (USD) Unemployment Rate (Apr) Forecast 3.6%, Previous 3.5% at 18:00
- (USD) Nonfarm Payrolls (Apr) Forecast 180K, Previous 236K at 18:00
- (CAD) Employment Change (Apr) Forecast 20.0K, Previous 34.7K at 18:00
- (CAD) Unemployment Rate (Apr) Forecast 5.1%, Previous 5.0% at 18:00
- (GBP) Construction PMI (Apr) Actual 51.1, Forecast 51.1, Previous 50.7 at 14:00
Technical Outlook
GBPUSD
The GBP/USD pair appears to be experiencing significant bearish momentum and great confidence on the chart. A negative reaction off the first resistance level with a decline towards the first support is possible.
The GBP/USD pair’s first support level is located at 1.2493. This level overlaps with the 61.80% Fibonacci retracement and is a support level; therefore, it may be a strong support level.
Additionally, there is an overlap support level at the intermediate level of 1.2545. This level has served as a support level in the past and may do so in the future.
The first resistance level, however, is located at 1.2623. It is important to note that this level, which is a swing high resistance, also falls on the 127.20% Fibonacci extension and the 100% Fibonacci projection. Fibonacci confluence is represented here, indicating that this might be a powerful resistance level.
EURUSD
According to the general momentum of the chart, the EUR/USD pair is now suffering poor momentum and low confidence. There is, nevertheless, a chance for a bullish continuation in the direction of the first resistance.
The EUR/USD pair’s first support level is located at 1.0942. This level is a multi-swing low support, indicating that the price has already bounced off it several times, giving it a potent level of support.
Additionally, there is an overlap support level at the intermediate level of 1.0984. As a result, this level may act as a strong support level going forward because it signals that the price has previously stopped or turned around there.
The first resistance level, however, is located at 1.1095. This level has multiple swing high resistance, indicating that the price has previously had difficulty breaking through it, giving it a potent barrier to entry.
Additionally, there is an overlap resistance level at the intermediate resistance level of 1.1034. This shows that the level has served as resistance for the price in the past, making it a possible strong resistance level going forward.
AUDUSD
The AUD/USD pair appears to be experiencing positive momentum on the chart because of breaking over a falling resistance line, which could result in a bullish advance.
The AUD/USD pair’s first support level is located at 0.6693. This level is an overlap support, meaning it has served as a level of support in the past and may do so in the future.
A second support level, which is likewise an overlap support, is present at 0.6641. This level is notable because it served as a level of support in the past and because it might do so again in the future.
The first resistance level, however, is located at 0.6737. The retreat resistance level at this price is also the 78.60% Fibonacci retracement. This shows that it could be a very effective resistance level.
Another resistance level, a swing high resistance, is located at 0.6770. This level is notable because it served as barrier in the past and because it might do so again in the future.
USDJPY
The price is in a bullish ascending channel and within a bullish ascending channel on the USD/JPY chart, which means that the price might continue to rise because of its bullish momentum.
The first support level, which is a multi-swing low support level and is at 133.53, has the potential for a bullish bounce. Price might move towards the first resistance level at 135.11 if it were to retrace its steps from this point. With an overlap resistance and a 38.20% Fibonacci retracement, this resistance level has the potential to be very strong.
Additionally, there is a second resistance level at 137.89, a high resistance level with multiple swings. Price might move in this direction if it were to break through the first resistance level.
There may be a sharp rise in price, as the RSI is also showing hidden positive divergence versus price. This is additional evidence that a bullish move may be on the horizon.
S&P 500
The US500 chart is currently showing a significant positive momentum, with the possibility that the price will rise further approaching resistance levels. There is a strong bullish bias and a high level of confidence.
The price is above a significant ascending trend line, indicating that more positive momentum is likely to develop soon. Further evidence that price may rise due to its bullish momentum comes from the fact that it is now inside a bullish ascending channel.
Price may move in the direction of the first resistance level at 4115 if it were to retrace its steps off the first support level at 4061. This resistance level is an overlap resistance and a 50% Fibonacci retracement at the same time. The second resistance level at 4175, which is a multi-swing high resistance, could be reached if this level is broken.
However, if price were to breach the first support level, it might fall to the second support level at 4009, which serves as a retreat support.
WTI CRUDE OIL
With the price below the negative Ichi Moku cloud, the WTI chart is displaying a bearish momentum. The price may carry on moving downward approaching the first support level at 64.95. This level has historically served as an overlap support, making it a powerful support. Price may potentially drop to the second support at 61.75, which is a swing low support, if it were to fall below this level.
On the other side, if the price rose from its present level, it might move in the direction of the first resistance, which is at 71.60. Along with being an overlap resistance level, this one also corresponds to the 38.20% Fibonacci retracement level. If the price can surpass this level, it can then move in the direction of the second resistance, a pullback resistance at 74.31.
At 69.19, which is an overlap resistance and the level of the 23.60% Fibonacci retracement, an intermediate resistance is also visible. It may serve as support and drive the price higher if the price is able to move above this level.
GOLD
As the overall momentum of the chart is bullish, gold’s bullish momentum has been strong and is still present. Price is presently moving in an ascending bullish channel, which means that more bullish momentum may be on the horizon.
A second support level, which is a 61.80% Fibonacci retracement level, is located at 2008.16, which is an overlap support level when looking at the support and resistance levels. However, the first resistance level, which is a swing high resistance level, is at 2068.32.
Given the bullish momentum in play right now, it is likely that gold will carry on up to the first resistance level at 2068.32. But it’s also crucial to pay attention to the support levels. The price may indicate a bearish downturn or reversal if it breaks through the second support level at 2009.18.
BITCOIN
BTC/USD is currently in a bullish ascending channel, which is a sign of strong bullish momentum. The price is within a bullish ascending channel, which shows that price might continue to increase due to the chart’s overall bullish momentum. This is further supported by the fact that the chart’s overall momentum is positive.
Price may break upward through the first resistance at 29173 and go towards the second resistance at 29992. For the price of BTC/USD, this is a crucial level because it denotes an overlap resistance that might lead to a major bullish acceleration towards the second resistance level.
The first support level, which is an overlap support, is at 28623 in terms of structure. This level is significant because it can serve as a basis for the price to retrace and perhaps resume its upward trend.
