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Analysis, Education | April 29, 2022

The Week Ahead 📈 2nd – 6th may: Musk buys Twitter and the dollar rises to a 5-year high

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

If you have any questions about this information, please contact your KTM Account Manager who will be happy to assist.

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 28, 2022. 14:00 GMT

Source: finviz.com


10 Big Stories Last Week

In case you missed it….

Twitter & Musk agree on a deal. The Twitter board agrees on a deal for Elon Musk to take Twitter private for $54.20 per share or $44 billion.

Russia halts gas supplies to Poland & Bulgaria. Gazprom cut gas supplies as Russia-EU tensions escalate, and Russia insists on payment in rubles. EURUSD fell to 1.05.

USD hits a 5-year high. The US Dollar index rose to 103.70, its highest level since January 2017, on safe-haven flows and hawkish Federal Reserve bets.

The yen is collapsing. USD/JPY rose over 130.00 to a fresh 20-year high after the BoJ doubled down on easy monetary policy, vowing to buy unlimited bonds every business day.

Tesla tumbles 12%. The EV maker drops to a 6-week low, wiping out $126 billion in one day, on concerns that Musk will sell shares to complete his $44 billion takeover of Twitter.

Lloyds Q1 profits beat forecasts. The UK domestically focused bank posted Q1 pre-tax profits of £1.6 billion, ahead of the £1.4 billion forecast on strong lending & BoE interest rate hikes.

Facebook returns to user growth. Meta rose almost 20% in after-hours trade after Facebook saw users rise, calming fears after the first-ever decline last quarter.

Microsoft beat quarterly forecasts. The tech giant saw revenue rise 18% to $49.4 billion, and EPS increased to $2.22 above the $16.7 billion & $2.19 forecast by analysts, thanks to the continued boom in cloud services demand.

Barclays suspends its share buyback programme. The bank beat Q1 profit forecasts but has suspended its buyback programme after a costly trading error in the US costing £540 million.

Alphabet lost 4% across the week. Google parent share price fell after earnings declined, and YouTube revenue missed estimates. The stock has booked 17% losses across April.


Chart of the week

Source: TradingView

The above chart shows the natural gas futures price.

Gas prices have risen 12% this week as Russia halted supply to Poland and Bulgaria demanding payment in rubles. The gas price is driven by the fundamentals of supply and demand, the halting of some of that supply to Europe naturally lifts the price. What happens next is unclear as the EC tells firms to not pay in rubles, but some companies already have.

Technically the futures contracts have broken out of the upper band of a falling channel hinting at more upside to come. However, receding volumes suggest that the move could be running out of momentum.


5 Things to Watch This Week

1) Fed meeting

The Fed is widely expected to raise interest rates by 50 basis points on Wednesday next week. Given that the market is almost certain of the move with the CME FedFund pricing in a 96.5% chance of the outsized hike, attention will be on the dot plot and how many more 50 basis point hikes the Fed could be considering. The meeting comes as the USD trades around a five-year high.

2) BoE meeting

With inflation rising to 7% YoY in March, a fresh 30-year high, the BoE is expected to act again on Thursday to rein in runaway prices. Expectations are for the central bank to raise interest rates by 25 basis points. However, with economic data starting to show signs of strain, the BoE may struggle to raise rates much further without pushing the economy into recession.

3) OPEC

Oil prices have steadied around $100 the barrel as Russian supply fears are met with a weakening demand outlook due to lockdowns in China and slower growth expectations. OPEC has shown little interest in increasing supply above the pre-agreed 400k bpd to make up for the absence of Russian oil, insisting it’s a geopolitical problem, not a supply issue.

4) NFP

Non farm payrolls come out on Friday and although unemployment data is playing second fiddle to inflation data – there is still a chance for a strong reaction. The data will come hot on the heels of a likely 50 basis point hike from the Fed -and as the US dollar sits near a 20-year high. Expectations are for 400K new jobs in April after a rise of 431K in March.

5) China Caixin PMIs

COVID cases in China continue to spread, and while there could be signs of lockdown restrictions being eased in Shanghai, mass testing in Beijing is unnerving the markets and fueling concerns over slowing growth. China’s zero-COVID policy comes at a substantial economic cost which is expected to be seen in Tuesday’s Caixin PMI data.


Economic Calendar Highlights

Source: FX Street


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 never made it above the top trendline of the falling wedge and broke down dramatically on the other side, tumbling down to 1.05. If the bottom trendline from the falling wedge is re-tested it could act as resistance alongside the supply area around 1.065.

GBP/USD (H4 Candlestick Chart)

GBP/USD finally broke below key support at 1.30 which opened up a tidal wave of selling, sending the pair down 600 pips in a huge downtrend. The recent consolidation around the 1.25 round number then 1.275 offers potential resistance with 1.23 as possible support.

USD/JPY (H4 Candlestick Chart)

USD/JPY dropped temporarily under the 50 SMA before ralling to continue the long uptrend to a 20-year high over 130 and then to 131. The recent peak at 1.295 is now support with 133 the next possible upside target.

AUD/USD (H4 Candlestick Chart)

AUD/USD tanked to its lowest since February, erasing the sharp up move that started in mid-March. The pair looks on course to test the 2022 low under 0.70. Any relief rally could find resistance above 0.72.

USD/CAD (H4 Candlestick Chart)

USD/CAD is trending higher with a surge above resistance at 1.265. The March 8 YTD high at 1.29 could offer resistance for those looking to fade the dollar rally. Any pullback from the highs could target 1.277 as support.

Gold (H4 Candlestick Chart)

XAU/USD tumbled under support near 1890-1900, and took out an important bit of bullish structure. 1890 is now first resistance with a bigger bounce possibly finding resistance at 1920 from the early April lows, while 1850 is next major support.

Brent Oil (H4 Candlestick Chart)

BRENT has formed a large triangle pattern since peaking in March and recently held the bottom of the triangle as support. A move over 106 could confirm bullish short term momentum and a possible restest of the upper end of the triangle.

US 500 (H4 Candlestick Chart)

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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