On Friday, the Dow Jones Industrial Average saw little change and ended the week in the red as investors analyzed earnings reports and concerns about underwhelming profits. The Dow rose 22.34 points, or 0.07%, to close at 33,808.96, while the S&P 500 increased 0.09% to settle at 4,133.52. The Nasdaq Composite climbed 0.11% to end at 12,072.46. However, all major indices closed the week lower, with the Dow falling 0.23%, the S&P slipping 0.1%, and the Nasdaq declining the most at 0.42%, breaking its winning streak.
The earnings season continued on Friday, and Procter & Gamble posted better-than-expected results and lifted its sales forecast, causing its stock to surge by 3.5%. According to FactSet, 76% of S&P 500 companies that reported earnings so far have surpassed analyst EPS estimates. Nevertheless, despite the companies’ overall strong earnings reports, stocks failed to gain traction, and some investors are worried about the possibility of a recession and an impending decline in earnings. In the upcoming week, earnings reports are expected from Big Tech companies Amazon, Alphabet, Meta Platforms, and Microsoft.
On Friday, the stock market experienced an overall increase of 0.09%. The Consumer Discretionary, Consumer Staples, and Health Care sectors saw the largest gains, increasing by 1.20%, 0.75%, and 0.68%, respectively. However, the Materials sector saw the biggest decline of 0.90%, followed by Energy and Financials, which were down by 0.59% and 0.39%, respectively. The Information Technology and Industrials sectors also experienced small declines, decreasing by 0.37% and 0.24%, respectively. The Communication Services and Utilities sectors had moderate gains, increasing by 0.32% and 0.30%, respectively, while Real Estate had a small gain of 0.17%. These data indicate a mixed performance across different sectors in the latest trading session, with some sectors seeing gains while others experienced losses.
Major Pair Movement
On Friday, the US dollar index initially weakened but later surged when unexpected US PMI strength was reported. However, the dollar was unable to maintain the data boost and lost those gains by the afternoon, as investors became skeptical of the PMI’s strength. The dollar was further weighed down by broader indications of a cooling economy and rapidly tightening lending standards. Despite the PMI beat, Treasury yields and Fed policy expectations only increased modestly.
The EUR/USD initially took the lead after the euro zone April PMI rose to an 11-month high, but retreated when US PMI posted a similar peak. ECB rate hike pricing was only marginally increased by the eurozone PMI beat, as there are already more than 80bp of additional hikes priced in by September with less than one 25bp cut before year-end. Sterling recovered from a 0.9% drop in UK retail sales, unaided by the best PMI reading in a year but bolstered by the failure of the US PMI beat to crack Tuesday’s lows. The USD/JPY rebounded but settled down 0.08%, boosted by Japan’s core-core CPI at its highest since 1981 ahead of next week’s BoJ. However, the BoJ is not expected to tighten the policy yet. Investors are now looking forward to the release of more US data, including April ISM reports, as they prepare for the May 3 Fed and May 4 ECB meeting conclusions.
Technical Analysis
EUR/USD (4 Hours)
On Friday, The EUR/USD pair had an indecisive week as the market searched for a catalyst. The outlook suggests a bearish tilt and the pair struggled to continue moving higher due to a risk-averse market environment. The US saw an improvement in the S&P Global Composite PMI to 53.9 in April, while the Eurozone saw a decline in manufacturing PMI to 45.5 but an increase in services PMI to 56.6. A disappointing reading in the upcoming S&P Global Composite PMI could revive fears of a US recession and weigh on the USD.
Based on technical analysis, the EUR/USD pair has been experiencing a slight upward movement and has successfully broken our previous resistance level. The current price is now situated at the upper band of the Bollinger band and appears to be making efforts to continue its upward trend. It is anticipated that the EUR/USD will reach our resistance level at 1.0999. The Relative Strength Index (RSI) is currently at 57, which indicates that the EUR/USD is in a bullish mode.
Resistance: 1.0999, 1.1026
Support: 1.0970, 1.0942
XAU/USD (4 Hours)
On Friday, the price of gold (XAU/USD) broke below the rangebound structure formed around $2,005 and fell below the psychological support level of $2,000. This was due to a recovery in the US Dollar Index (DXY) after a period of consolidation, as investors shifted their funds into the index. The Federal Reserve (Fed) has been advocating for more rate hikes despite signs of an easing labor market, as evidenced by the increase in weekly jobless claims to 245K. The upcoming release of the preliminary US S&P PMI data (April) is expected to be significant, with lower figures anticipated for both Manufacturing and Services PMIs. While a 25-basis point (bp) interest rate hike by the Fed in May seems expected, a further slowdown in US economic activities could increase the likelihood of no further rate hikes beyond May.
Based on technical analysis, XAU/USD has fallen below the $2,000 mark and is currently in slight consolidation. However, it is targeting the middle band of the Bollinger band from below, suggesting a potential for a higher movement today. The Relative Strength Index (RSI) is currently at 41 from below, indicating the potential for a higher move.
Resistance: $1,990, $2,005
Support: $1,974, $1,966
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