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Analysis, Education | April 14, 2022

The Week Ahead 📈 18th – 22th april: IMF Meeting & Tesla Earnings

Welcome to the Key To Markets preview of the Week Ahead.

In markets, EUR/USD has shown some tentative signs of a bottom after the ECB and a massive US inflation print. The big event over the next week is the IMF meeting but a market reaction is only expected in the unlikely event that major decisions are taken

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Contents

  • Currency Pair Performance
  • 10 Big Stories Last Week
  • Chart of the Week
  • Economic Calendar Highlights
  • 5 Things to Watch this Week
  • Technical AnalysisEUR/USD | GBP/USD | USD/JPY | AUD/USD | USD/CAD | Gold | Oil | S&P 500

Currency Pair Performance

5-day performance as of April 14, 2022. 12:00 GMT

Source: finviz.com


10 Big Stories Last Week

In case you missed it….

Macron & Le Pen are through to the runoffs. Macron won the 1st round French election with 27.8% of the votes, Le Pen came in second with 23.1%. The CAC rebounded closing 1.3% higher on the Monday after voting.

Oil climbed back over $100 pb. Supply concerns ramped up, China eased some lockdown restrictions and OPEC remained on the sidelines.

US & UK inflation surged higher than expected. US inflation rose to 8.5% a 4-decade high, and UK inflation rose to 7% a 30-year high piling pressure on the central banks to hike rates. GBPUSD fell to a 2022 low of 1.2975 before rebounding.

BoC hiked rates. BoC raised rates by 50 basis points in its largest one-time hike in 20 years. The key rate is now 1% its highest level since March 2020. QT will begin on April 25th.

JP Morgan’s Q1 earnings disappointed.  The bank saw profits drop 42% as deal-making slowed owing to the Russian war and tough comparisons after an extraordinary 2020.

RBNZ raised rates. The RBNZ raised rates for a 4th consecutive meeting but did so by 50 basis points, its largest hike in 2 decades. The kiwi fell post-meeting.

ECB left monetary policy on hold. The European Central Bank left rates on hold but bets a rising for QT and a rate hike in May.

Elon musk offers to buy Twitter. Tesla has offered $54.20 per share to buy Twitter in a best and final offer. This would be an 18% premium on Wednesday’s close and value the company at $43 billion.

Tesco shares fell to a 6-month low. The supermarket beat quarterly expectations but warned that profits could come under pressure due to rising costs and rampant inflation.

PM Boris Johnson was fined for the lockdown party. He is the first PM to be fined but rejects calls to resign. The UK justice minister quits. GBP/USD trades around 1.30 but domestic politics is not the driving force.


Chart of the Week

Source: Bloomberg

The above chart shows the price of copper.

After all the focus on oil in recent weeks maybe it’s time to look toward copper? Modern technology uses electricity and under the laws of physics and the periodic table, copper is the only material that can conduct electricity at the pace that we require. Demand for copper is likely to continue rising from here out.

In the words of a top commodity strategist at Goldman Sachs:

“Not only is copper incredibly tight, but it is also absolutely essential if we are going to electrify everything and move more energy use off of oil.”

Copper, also referred to as Dr Copper as it is also considered an indicator of how the economy is faring isn’t showing the same fears of a recession as the bond market briefly showed. This will be a good one to watch with China’s GDP release early next week.


Economic Calendar Highlights

Source: FXStreet


5 Things to Watch This Week

  1.   China GDP Q1

China’s Q1 economic growth is expected to slow amid decelerating global growth and amid the resurgence of COVID in China. Activity in March is likely to have been negatively impacted by the use of heavy-handed restrictions imposed to contain the Omicron outbreak. GDP for Q1 is forecast to grow 0.6% QoQ, down from 1.6%. Across 2022 economic growth is expected to slow to 5% after growing 8.1% in 2021.

  1.   Bank of America Q1 earnings

US banks kicked off earnings season this week on a disappointing note. Deal making has slowed considerably owing to uncertainty brought about by the Russian wear and comparisons from last year are tough. Still, BoA could see its consumer and business banking businesses help drive earnings. Wall Street expects BoA to report EPS $0.73 down from $0.82 in Q4

  1.   Netflix

Netflix is due to report Q1 earnings on Wednesday next week. Subscriber numbers will be under the spotlight after the streaming giant pulled out of Russia on March 6 and after the low subscriber forecast last quarter. Whilst Russia’s subscriber count was low, around 1 million, it was an area earmarked for potential growth. Netflix clearly has some work to do but with competition from Warner Bros and Disney+ heating up. Subscriber additions of 1.4 million are expected below the 2.5 million previously estimated.

  1.   Inflation

There is no chance of inflation talk disappearing anytime soon. Canadian and New Zealand inflation data is due to be released, in addition to the Eurozone final CPI print for March. Should oil prices continue to rise, inflation concerns are likely to be exasperated.

  1.   French Presidential election runoff

The second and final round of the French elections will take place on Sunday 24th April. In the latest poll Macron is ahead with 53% and Le Pen 47%. However, a month ago she was around 20% behind, highlighting how quickly the far-right nationalist candidate has closed the gap. The CAC and the EUR are likely to be focused on the polls in the last 5 trading days ahead of the vote.


Technical Analysis

Here you can find an analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.

EUR/USD (H4 Candlestick Chart)

EUR/USD did see some short-covering as we suspected last week. It came just ahead of the March 7 low, with the pair again holding 1.08. The move over the 50 SMA is encouraging but a break of resistance at 1.0940-50 is needed to confirm a bullish change in trend.

GBP/USD (H4 Candlestick Chart)

GBP/USD saw several false breakdowns below the 1.30 level followed by a huge upside candle that went nearly straight up to test the 200 SMA. Near term, momentum has turned more bullish with 1.305 flipping from resistance to support.

USD/JPY (H4 Candlestick Chart)

USD/JPY continues its uptrend with a move back over the 125 level and the high from late March. 125 is now support, with the 50 SMA and 124 level support further down. The trend remains up but bearish RSI divergence is a sign of a possible top.

AUD/USD (H4 Candlestick Chart)

AUD/USD pulled right back to the rising 200 SMA as we suggested last week before twice rebounding. The 0.74 level from the two recent lows is support, which were it to give way would open a drop to the next round level support at 0.73.

USD/CAD (H4 Candlestick Chart)

USD/CAD looks to have ended its corrective move higher off the low at 1.24 with a double top above 1.265. Prior resistance at 1.254 is now support ahead of a drop back to the lows, while 1.258-1.26 is resistance from the neckline of the double top.

Gold (H4 Candlestick Chart)

XAU/USD finally broke out of its trading range with a move up 10 1975 – also the neckline of the head & shoulders top in March. Momentum has turned bullish with the breakout but a drop back under 1950 would undo it.

Brent Oil (H4 Candlestick Chart)

BRENT held onto the 100 level as well as the 50% retracement level of the rally from December through March. The price rebounded over the 50 SMA and stopped at the 200 SMA as rangebound conditions continue.

US 500 (H4 Candlestick Chart)

US500 has triple-bottomed at 4400 and the 200 SMA, which has bullish implications after the drop under support at 4450 that could have brought on a much steeper drop. 4450 has flipped from support to resistance, where a breakout could signal the correction lower is over.


Thank you very much for reading – and have a great week trading!

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