Welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of April 21, 2022. 15:00 GMT
In case you missed it….
China’s GDP beat forecast, but concerns rise. China’s GDP was 4.8% YoY in Q1, up from 4% in Q4. However, growth slowed in March, and retail sales tumbled -by 3.5% as the outlook darkens.
Fed Bullard sees a case for a 75 bp hike. The known hawk said that there was a case for a 0.75% rate hike in May. His comments boosted the USD to an almost 2-year high.
USD/JPY hits a 20-year high. Central bank divergence boosted the buck and pulled the Japanese yen lower across the board. The price rose to a high of 129.40.
IMF slashed the global growth forecast. The Washington-based body downwardly revised global GDP to 3.6%, from 4.4%, owing to rising energy and food prices from the fallout of the Russian war.
Netflix tanks 35%. The streaming giant fell sharply after revealing that it lost 200k subscribers in Q1, the first net loss in a decade.
Tesla reports record earnings. The EV maker delivered a record 310,00 vehicles in Q1 and posted earnings of $3.3 billion, despite supply chain disruptions, rising costs, and the Shanghai factory shutting.
Oil holds above $100. Oil prices are set for a weekly loss despite Russian supply concerns and an outage in Libya. Worries over global growth hurt the demand outlook.
Canadian inflation jumps to 31 years high. CPI rose to 6.7% YoY, up from 5.7%, the largest jump in the cost of living in over 30 years, as food and energy prices rose. USD/CAD falls to a 2-week low.
Elon Musk’s criticism of Twitter continues. Musk pledged to reduce the board salary to $0 if his bid succeeds. Twitter adopts a plan to sell shares at a discount to prevent a shareholder from amassing a stake of over 15%
Putin claims control of Mariupol. Russia changed its tactics in the war, focusing efforts on the Donbass region. Putin also test-fired an ICBM as a warning to the West.
Once the darling of Wall Street, Netflix crashed 35% lower, wiping out all its pandemic gains and more. This pandemic play appears to be well and truly over, with or without ads.
With Big tech is in focus ahead of the imminent earnings this week, there are still pockets of opportunity in tech, even amid a higher interest rate outlook which is less favourable for high growth stocks. AI, for example, is expected to play an increasing role in all aspects of businesses as they look to automate. Data firms and cyber security could be other areas of interest.
France is heading to the polls on Sunday to vote for the next President. Macron was the perceived winner in the TV debate and has moved ahead in the polls by almost 12 points, boosting the EUR and the CAC. Still, it is expected to be a tight race, and millions of voters still haven’t decided. The stakes are high, with some warning that a Le Pen victory could be akin to the Brexit shock to the markets.
US GDP is expected to rise 1% QoQ in Q1, down from 6.9% in Q4, despite the Russian war and 4-decade high inflation. As pointed out by the IMF, the US is the least affected in the West by the Ukraine conflict, and the expected hit to GDP this year is just 0.3% compared to over 1% in Europe. Robust economic growth and a strong labour market will help support the idea that the Fed can hike rates aggressively without tipping the US into recession.
UK banks are due to report this week, with HSBC kicking off on the 26th, followed by Lloyds on 27th, Barclays on the 28th, and NatWest on the 29th. If US bank’s earnings are anything to go by, we can expect to see a mixed performance. Investment banking is likely to underperform compared to the previous year as the Russian war creates uncertainty. However, rising interest rates are likely to boost net interest income helping the high street names. Comparison will be challenging given the release of bad loan charges last year.
China’s growth outlook has worsened as the ongoing COVID lockdowns hurt consumption and create more disruptions in supply chains. Beijing and the PBoC have recently announced measures to help support struggling businesses as the growth outlook darkens. Last week, the PBoC stopped short of cutting interest rates, but soft PMI data could unnerve the markets.
The peak US earning season begins with all eyes expected to be on Big Tech. Microsoft and Amazon report on Tuesday 26th, followed by Meta on 27th and Apple and Amazon on 28th. These mega-caps report after the share prices have seen a tough start to the year as the growth outlook comes under pressure due to supply chain issues, rising inflation, and higher interest rate expectations
Source: FX Street
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 is still trending lower under its 200 SMA but may have just completed a falling wedge reversal pattern. While price holds above the top trendline of the wedge near 1.09 there is scope for a move towards 1.105. However a dip under the recent peak near 1.085 would negate the bullish bias.
GBP/USD continues to hold above 1.30. A break above the 200 SMA, as well as a downtrend connecting the late March and April peaks, could complete the trend reversal. 1.322 then 1.33 are resistance. A close back under 1.305 would imply 1.30 is about to give way.
USD/JPY is trending above an uptrend line, which should provide dynamic support before further gains toward 130. A drop under the uptrend line and the 50 SMA would suspend the bullish bias and possibly open up a drop back toward 125.
AUD/USD is still within the corrective downtrend that started at the early April peak. A break above a downtrend line and resistance at 0.747 could signal its end and a rise up to test 0.754. However, a drop under 0.74 would imply another lower low towards 0.73.
USD/CAD is now inside a downwards channel after breaking down from a rising channel. A bounce towards the upper channel line could offer possible resistance within the broader downtrend. A break over 1.265 would be needed to negate the bearish bias.
XAU/USD has dropped back significantly from the 2000 level to back under 1950. The price could find support from the bottom trendline in a rising channel but a drop under the support at 1930 would negate any bullish bias.
BRENT remains broadly directionless but has a bullish bias while above support at 107 with a breakout over the April peak implying another test of 120. A dip back under 102 would flip the bias back to bearish.
US500 looks to have ended its correction from the March peak with a break over the key 4450 level, which if it holds could see the price lift further towards the April peak around 4580. If the April 19 surge gets erased with a move under 4400 then the broader correction lower might not be over.
Thank you very much for reading – and have a great week trading!
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