Weekly market report – 30 May 2022

Last week, markets bounced back after several weeks of decline. As we learned, a few key variables like inflation and the US dollar influenced this outcome.

Forex

Source: Bloomberg. Click to see full size

For the second week in a row, EUR/USD closed above $1.07 in a rally fueled by the broad US dollar’s weakness. As seen in the chart above, the price stayed above the 5 and 10 SMA’s (now acting as the support levels) towards the end of the week, maintaining an upward momentum.

The Euro recently benefited from rising European Central Bank (ECB) interest rate expectations. Markets are now anticipating a tightening of over 100bps through the end of the year, starting with the first hike in July.

Meanwhile, GBP/USD extended its recovery from two-year lows of $1.2155 in the preceding week, finishing the week at around $1.2631. The widespread US dollar selling pressure fueled the rise in GBP/USD in the second half of the week. This factor led to the currency pair reaching its highest level in a month, at around $1.27.

Currently, it is far too early to forecast if the US dollar will remain weak for much longer. However, persistent inflation is keeping the Federal Reserve (Fed) on track, allowing them to re-evaluate the effectiveness of its current policy on inflation.

This week the focus will be on inflation, with the EU publishing its preliminary estimates of the May Consumer Price Index. To add to that, the US will release the May non-farm payrolls (NFP) report.

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Commodities

Source: Bloomberg. Click to see full size

Last week, gold juggled between gains and losses before completing the week with a solid comeback. On the road to recovery, gold is aiming to retest its two-week highs while the US dollar struggles to gain ground as market sentiment remains mixed and Treasury yields remain low. 

Moreover, the dismal US GDP and the Pending Home Sales report also contributed to the slowing down of the US economy, making traders reposition themselves ahead of the minutes of the May Fed meeting. Therefore, last week’s rally in global stocks also weighed down on the US dollar’s safe-haven appeal, benefiting gold.

As per the chart for the week, gold is around the 38.2% retracement level at around $1,853. If gold continues to go down, its next support level would be at the 23.6% retracement level near $1,850. However, on the upside, its next resistance level would be at the 50% retracement level at around $1,856.

On the other hand, oil prices increased by 3% on Thursday, May 26 2022 – the most in 2 weeks. This increase is due to a long bet on surging gasoline consumption ahead of the Memorial Day holiday, which marks the start of America’s peak driving season on Monday (May 30 2022). The price also increased due to the European government considering whether or not to ban Russian crude oil completely.

Cryptocurrencies

Source: Bloomberg. Click to see full size

The global crypto market cap has recovered after yet another round of crashes in recent days. Bitcoin currently holds 45.25% of the crypto asset market and has seen an overall price increase of 0.04% in the last seven days.

During this period, ETH’s price dropped by around 10%. This dip is visible in the chart above, along with a sharp drop on Thursday, 26 May 2022, and then it continued to trade sideways for the rest of the week. 

Furthermore, Altcoins too underperformed over the weekend. Last week, the price of SOL (Solana) dropped by 10.54%, while the price of ADA (Cardano) dropped by 4.78%. 

However, Terra’s new blockchain was launched over the weekend. With this new development, the old token would become Luna Classic (LUNC), while the new token would be Luna 2.0 (LUNA). The elaborate proposal involved airdropping new tokens to LUNA and UST tokens holders before the crash. Unfortunately, in the wake of the UST de-pegging debacle, traders appear sceptical about LUNA Classic and LUNA 2.0.

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US Indices

Source: Bloomberg

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

Wall Street saw its first positive week in nearly 2 months. All 3 major US indexes were in the green as they ended a losing streak that some feared was a prelude to a recession. The Dow climbed by 4.18%, the S&P 500 gained 4.64%, and the Nasdaq gained 5.38%. 

US markets have mostly had a lousy year as soaring inflation, rising interest rates, the war in Ukraine and the coronavirus pandemic rattled traders and weighed on corporate profits. Until Friday’s close, the Dow had fallen for eight consecutive weeks, while the broader S&P 500 index and Nasdaq had declined for seven straight weeks.

This jump occurred because the yield on benchmark US Treasuries fell after data showed that US consumer spending rose in April and the uptick in inflation slowed. Both factors are signs that the world’s largest economy could be on track to grow this quarter.

In the coming week, key updates in the labour market are expected, with the release of Jobs Openings and Labor Turnover Survey (JOLTS) openings, hires, and separations, ADP private payrolls, and the official May non-farm payrolls report. It will be a shorter trading week as markets are closed for the Memorial Day holiday in the US on Monday, 30 May 2022.

Now that you’re up-to-date on how the financial markets performed last week, you can improve your strategy and trade CFDs on Deriv MT5 Financial and Financial STP accounts.

Disclaimer:

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Luna classic (LUNC) and Luna 2.0 (Luna) are not available for trading on our platforms.

This content is not intended for clients residing in the UK.