Weekly market report – 11 Apr 2022

EUR/USD Chart on Deriv

Source: Bloomberg. Click to see full size 

The US dollar index advanced to $100 for the first time in nearly 2 years, reaching as high as $100.19 – its best level since May 2020. 

The main driver of the USD’s strength was Fed hawkishness. The Federal Reserve March meeting minutes on Wednesday, 6 April 2022, resulted in an interest rate hike of 25-bps. However, the minutes showed strong support for getting rates back up quickly, supporting market expectations that the Fed will lift rates in 50-bps intervals at upcoming meetings.

During the trading week, the Euro dropped significantly, reaching the $1.0850 level. The main reason for this fall was the interest rate differences between the bond markets of the European Union and the United States, which continue to put downward pressure on the Euro.

However, the pair continues to be one that cannot find a reason to go up, and beyond the interest rate difference, there are a lot of other reasons to think that the Euro is going to struggle. The European Union is almost certainly going to go into a recession, as the energy issues alone are going to cause problems. Moreover, Germany reduced their economic growth forecast for 2022 from 4.6% to 1.8%, due to geopolitical risks in France with the French presidential election, and the war in Ukraine. 

Meanwhile, the ECB President will face a particularly challenging meeting next week as she aims to strike a balance between dampening inflation while supporting a weak growth outlook. This comes at a time when other major central banks are already tightening monetary policies and are prepared to hike interest rates in ever-increasing increments. 

As shown in the chart as well, EUR/USD had a downward trend for the week touching its lowest point on Friday, 8 April 2022, below the $1.085 mark. However, the pair showed a small upward movement and is currently at around $1.0877 just near its 5-day moving average.

During the early session on Friday, 8 April 2022, GBP/USD hit its lowest level since November 2020 at $1.29820, due to the strengthening of the US dollar. However, the currency pair did rebound to the $1.3030 level by the end of the trading day, posting a weekly loss of about 0.6%. The price movement this week was not heavily influenced by UK factors. This is because the upside of GBP is currently being limited by expectations that the Bank of England (BoE) will turn more dovish in its next meeting. In the coming week, GBP/USD traders will be focused on the results of the UK Consumer Price Index, US Consumer Price Index and US Producer Price Index, which are to be published this Tuesday and Wednesday.

USD/JPY ended last week in the green at ¥124.34. Strong US data and the Japanese government bond’s limited upside to defend its 0.25% yield target helped the pair rise. It will be interesting to see how the incoming geopolitical headlines drive risk sentiment and demand for the safe-haven JPY.


Gold Chart on Deriv

Source: Bloomberg. Click to see full size

For most of the week, gold against the US dollar was unable to make a decisive move in either direction. Despite broad-based dollar strength and a sharp increase in US Treasury bond yields, gold managed to hold its ground on safe-haven flows, closing in the upper half of its weekly range above $1,940.

Furthermore, gold against the Euro rose by nearly 1.65% this week (based on the difference between Monday’s close and Friday’s close), indicating that the metal was able to capture some of the capital flowing out of the Euro as well.

As per the hourly chart for the week above, gold against the US dollar rose in the first 2 days of the week and surpassed the $1,940 mark only to fall towards the end of the second day, below the $1,925 mark and stay around it. As days passed by, we noticed an upward trend for the same and it ended the week at around the $1,947 mark which is above the 5-day moving average of $1,944 that is acting as the current support level for the week. 

This week, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data on Tuesday, April 12, 2022. CPI is expected to rise to a new multi-decade high of 8.3% in March, up from 7.9% in February. A stronger-than-expected CPI could increase the likelihood of 2 consecutive 50-basis-point Fed rate hikes, pushing US T-bond yields even higher, and vice versa. On Thursday, April 14, 2022, the European Central Bank (ECB) will announce its monetary policy decisions. The bank is widely expected to maintain its current policy settings, but a hawkish shift in forward guidance could pave the way for a decisive recovery in EUR/USD and weigh on the US dollar. In that case, the XAU/USD pair should be able to rise. On the other hand, the bank could become more cautious, focusing on the potential negative impact of a protracted Russia-Ukraine conflict on economic activity rather than inflation. In such a case, the EUR/USD could face bearish pressure, making it difficult for gold against the US dollar to gain traction.

Oil, on the other hand, fell for the second week in a row as a result of multiple countries announcing their strategic reserve releases. Another reason for oil’s uncertain position is the European allies who rely heavily on Russian oil and are still unsure of how or whether to sanction the Kremlin. Furthermore, the expansion of COVID lockdowns in China, particularly in Shanghai, has also contributed to the bearish trend. However, it remains to be seen how long it will take for disruption fears to resurface.


BTC Chart on Deriv

Source: Bloomberg. Click to see full size 

Last week, cryptocurrencies traded on a downward trend, mirroring the movements of the US equity markets. The price of Bitcoin declined by 8% from Monday through to Friday, reflecting a net change of almost $3,500. 

Some major altcoins also followed suit, with Ether and Binance coin losing 9.3% and 5.8%, respectively. 

The world’s largest cryptocurrency was trading close to $42,815 by Friday’s close, reverting from previous highs that were above $46,000 earlier in the week. At the time of writing, Bitcoin is trading close to $43,135, slightly below its primary resistance level of $43,316 at the 23.6% retracement level. 

Whilst Bitcoin has recovered a portion of its last week’s losses, the digital asset is searching for the momentum to clear its initial resistance level. If the crypto can rally, its new primary resistance will move to the $44,012 level. On the downside, Bitcoin finds initial support at $42,192. 

In other crypto-related news, Facebook’s parent company, Meta is continuing to explore its own version of digital money, internally referred to as “Zuck Bucks”, as reported by The Financial Times.

The company abandoned its efforts to create a global cryptocurrency – first known as Libra and later rebranded as Diem – following a heated backlash from regulators, worldwide. Meta’s digital currency efforts are still in its initial stages and could easily be changed or dropped. However, its plans to integrate NFTs into its apps are coming closer to fruition. 

US Index

Name of the index

Friday’s close *Net Change *Net Change (%)
Dow Jones Industrial (Wall Street 30) 34,721.12 -200.76 -0.57%
Nasdaq (US Tech 100) 14,327.26 -832.32 -5.49%
S&P 500 (US 500) 4,488.28 -94.36 -2.06%

Source: Bloomberg

*Net change and net change % are based on the weekly closing price change from Monday to Friday.

Stocks closed in the red last week as traders weighed up yet another rise in bond yields along with future expectations for the Federal Reserve’s next policy move.

The Dow Jones Industrial Average shed 200 points to close -0.57% lower. Meanwhile, the S&P 500 declined by 94 points, equalling a -2% drop. The tech-heavy Nasdaq Composite took the largest hit, plummeting by 832 points to end -5.5% lower.

Markets struggled as US treasury yields continued to spike late last week. On Friday 8 April 2022, the benchmark US treasury note climbed to its 3-year high of 2.77%. Higher treasury yields helped in pulling down the Nasdaq Composite, as technology stocks, in particular, are sensitive to a rise in yields.

It was a positive week for pharmaceuticals, with Pfizer gaining 8.56%. Traders rushed to reliable revenue stream pharmaceuticals as a safe bet against economic and political turmoil, pushing healthcare stocks to record highs last week. 

Fresh commentary from Federal Reserve officials was also in focus but appeared to offer mixed signals. James Bullard, St. Louis Fed President shared his thoughts on bringing the Fed Funds rate between 3% – 3.25% by the second half of 2022, implying more aggressive short-term hikes. Meanwhile, Atlanta Fed President, Raphael Bostic, stated that it would be better to move the benchmark rate “closer to a neutral position”. 

This week, traders will be eyeing the release of some fresh earnings reports and amongst the big names of the investment banking world Goldman Sachs, J.P Morgan, Citigroup and Morgan Stanely will appear on the list.

The markets are also set for the release of fresh economic data, including the latest US retail sales figures, initial jobless claims, business inventories and the monthly consumer sentiment report from the University of Michigan.

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