Welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of May 5, 2022. 12:00 GMT
In case you missed it….
The Fed hiked rates by 0.5%. This was the biggest hike in 22 years. The Fed also kicked off quantitative tightening to reach $95 billion in 3 months. But USD fell & stocks jumped as Powell calmed fears of the Fed turning more hawkish.
EU turns away from Russian energy. The EU unveiled plans to phase in a Russian oil embargo, a proposal that still needs the agreement of all 27 members. Natural gas prices jumped to a record high.
BP & Shell report record quarterly profits. The ride energy giants benefited from a 30% jump in oil prices & surging gas prices in Q1. Calls for a windfall tax are rising.
RBA raised rates by 0.25%. This was above the market expectations of 0.1% and boosted AUDUSD over 0.72 to a 10-day high
Lyft sank 25%. The ride-hailing app fell after weak guidance and concerns over driver incentives. Uber’s earnings were strong & guidance topped Wall Street estimates, but the stock also fell.
BoE raised interest rates by 0.25%. And the pound tanked 1.4%, amid concerns over the cautious outlook & despite 3 members voting for a 50 bp hike.
EUR/USD recovers from a 23-month low. The EUR/USD rebounded from last week’s 1.0470, boosted by talk of a July rate hike and thanks to a less hawkish outlook from Fed Powell
China’s PMIs raise concerns. China’s services PMI falls at the 2nd sharpest rate on record, and manufacturing drops to the lowest level in 2 years as COVID lockdowns continue.
OPEC+ doesn’t deviate. The oil cartel didn’t deviate from its previously agreed 430k increase in output for June, despite oil prices remaining well over $100 pb.
Musk considers fees for Twitter. Elon Musk is weighing up the idea of a “slight” Twitter fee for commercial and government users of the platform.
The chart shows how the S&P performed in 2010-2011 and heading into 2021-2022.
Looking at these charts and if history is anything to go by then the adage “sell in May and go away” possibly the most cited stock market cliché should be ignored this year.
With the Fed hiking rates by 50 basis points and signalling to tighter monetary policy to come, a strong fall in stocks might have been expected. Yet after April’s selloff and the Fed calming fears of more hawkishness, maybe the outlook isn’t so bad?
It’s also worth pointing out that the S&P has risen in 8 of the past 9 months of May. Although past performance does not indicate or guarantee future performance.
Datta from Germany has been steadily deteriorating amid rising energy prices from the fallout from the Russian war and as COVID lockdowns in China also weigh on supply chains. Sentiment fell in April to -41 and is expected to fall further in May to -48
US inflation rose to 8.5% in March, its highest level in 40 years. Meanwhile, core CPI rose a less than expected 6.5% YoY, raising hopes that consumer prices could soon start easing. Core CPI in April could dash those hopes amid expectations of a 6.6% YoY or 0.4% rise in MoM. The data comes after the Fed hiked rates 0.5% last week.
Disney is due to report quarterly results some weeks after the horror show on Netflix. Disney is more diversified than Netflix, but streaming numbers will be under the spotlight regardless. Expectations are for EPS of $1.06 on lower revenue of $18.64 billion. Subscriber numbers blew past forecasts in fiscal Q1; is a repeat possible? Theme parks are open and bring in around a third of revenue.
Peloton was a pandemic winner and post-pandemic faller. The share price has tumbled 90% from its January 21 all-time high and trades around 50% lower so far this year. However, with activist investor Blackwells Capital piling pressure on the new CEO Barry McCarthy the focus will be on the outlook and plans to cut prices and raise subscription fees.
The UK economy is expected to grow 0.7% QoQ in Q1 after 1.3% growth recorded in the final three months of last year. However, on a monthly basis, a GDP of just 0.1% is forecast for March, raising concerns over the UK economy falling into recession in the coming months as the cost of living crisis deepens.
Source: FX Street
In this technical analysis we will cover the major asset classes (FX – Commodities – Indices…), and we are going to predict how most probably they will move in the coming hours.
This fx pair has been in a downward movement since the end of March where a series of lower lows and highs has been posted. The market currently is trying to reverse however this might turn to be a bearish flag which is considered as a continuation pattern. So, most likely we will see a downward movement in case this pattern is breached to the downside.
Since both pairs (fibre and cable) have USD as a quote currency, they move most of the time in the same direction. So, the Pound is in clear downward movement after breaking the 1.3000 USD level, and currently, it is bouncing inside a bearish flag where it is trying to break it to the downside. If the 4-hr bar closed under the lower end of the flag, then the cable most probably will continue its move to the downside for the next few hours.
USD/JPY is trending to the upside aggressively where it succeeded to break a strong resistance level around the 125.830 JPY mark. We have noticed that the price succeeded to break the bullish flag to the upside showing that the buyers are still in control of the market. In addition, the market now is traded inside a new bullish flag pattern where most probably it will breach it to the upside if the buyers continue their dominance over the sellers.
The Aussie managed to break the bearish channel to the upside and also succeeded to break the resistance level around the 0.71822 mark. A deep correction could be noticed now toward the support level (previously resistance) where most likely new buyers will jump back again to push the price furthermore to the upside.
Loonie failed to break the resistance level around the 1.28705 CAD mark where it posted a double top formation. This led to a reversal and obviously the sellers are in control of the market where they succeeded to break the bullish trendline to the downside. Most probably further downside movement could be seen toward the 1.26700 CAD level.
Gold was in a clear downward movement however, the price could not continue its move lower. It posted a double bottom formation and reversed higher leaving a fake out behind. The commodity succeeded to break the bearish trendline which is a good sign for sellers which shows that they are now overwhelming the sellers and could push the price to the upside toward the 1920 USD mark.
UK Brent oil is ranging between two key levels which are 102.74 & 111.44. The market now is trying to test the upper bound of this channel to see if more buyers will join. If this scenario occurs, then we can see the UK Brent oil moving again to the upside all the way up toward the 119.75 USD mark.
After a huge move to the downside starting at the end of March, the US500 found some buyers near the 4147 USD mark, where an inverse head and shoulders has been posted. The market moved to the upside with a strong positive momentum which is represented by the big bullish bodied bars. So, most likely, a rally could be seen toward the next resistance level which is the 4389 USD mark.
Thank you very much for reading – and have a great week trading!
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