Daily Market Report

04/08/2023
06:53

U.S. stocks retreated on Thursday as the recent U.S. downgrade continue to weigh on market sentiment. The rise in the 10-year bond yields is putting more pressure on the market in the near term after yields approached their highest level since November 2022.
All major U.S. stock indexes closed in the negative territory with the Dow losing 0.19%. In the meantime, the S&P500 dropped 0.25% posting the third consecutive day of losses while the Nasdaq composite fell 0.1%. On the back of the recent downside correction in U.S. stocks, the CBOE volatility index known as the “Fear Index” has jumped to its highest level in two months.

Looking at today’s important economic releases, the focus will be on the U.S. Non-Farm payrolls which are expected to come at 205K compared to 209K registered previously. In the meantime, the average hourly earnings are due to fall from 0.4% to 0.3% while the unemployment rate is likely to remain unchanged at 3.6%.

Technically, a correction was expected by market participants after the latest rally reached overbought levels, meanwhile, the Dow remains in an uptrend as the daily chart is still showing a series of higher highs and higher lows. The key support for today is located at the 35100 level and if prices continue to trade above it, the index is expected to retest the 35385 resistance which represents yesterday’s high, while a break above it can lead to another rally toward the next resistance level which stands at 35450. On the flip side, a close below the 35,100 support should lead to a larger correction that can extend to the 34950 level.

In the FX Market, the U.S. Dollar rally has stalled after registering five consecutive days of advance. Later today, all eyes will be on the latest jobs report which is likely to determine the next direction for the Greenback in the short-term. The USDJPY currency pair failed to overtake a key resistance located at the 143.50 level as mentioned in our previous report, therefore, the pair is expected to trade sideways to lower in the coming hours as the corrective move can unfold. However, the trend has turned positive following the breakout above the 142.00 handle earlier this week which should keep the downside potential limited. In the near term, a break above the 143.50 barrier is needed to clear the path toward the next resistance level located at 144.25. On the flip side, 142.30-141.90 is considered the key support zone for this pair, and the trend is expected to remain bullish while prices continue to hold above it.

Moreover, the GBPUSD pair trend has turned negative as prices faced additional selling pressure yesterday after the Bank of England decided to raise interest rates by 25bps. In the near term, we can see a bounce in the coming hours due to oversold conditions and potential profit-taking ahead of the weekly close. The pair has reached an important support zone which is located between the 1.2680 and 1.2590 levels as per the chart below. Therefore, a move back toward the 1.2765-1.2800 resistance zone cannot be ruled out before seeing another decline in this pair. Meanwhile, it is important to note that prices broke below the lower band of the rising channel in addition to the 50-exponential moving average.

In the commodity market, gold extended its downside correction as sellers are testing a key support located at the 1935 level. The short-term trend has turned negative, and the bearish momentum is likely to persist while the yellow metal keeps trading below the 1970 resistance. As of today, a break below the 1930 support can lead to a continuation lower in the direction of 1920, on the flip side, if this support holds, a move back higher toward the 1955 barrier will be highly anticipated. Moreover, despite the bearish momentum, gold is trading at a critical support zone from where we might see increased demand. Therefore, we will be waiting to see how the market will behave around the current levels before determining the next possible direction.

Finally, WTI crude managed to recover from early losses as expected after seeing strong buyers from the support zone located between the 79.10 and 78.30 levels. In the coming days, we will be looking for a potential upside continuation after breaking successfully above the $80.00 psychological barrier. The WTI crude short-term trend remains positive, and buyers are expected to challenge the 82.45 resistance while a break above it will likely trigger another rally that can target the 83.30 barrier. On the other hand, any decline is likely to be short-lived as long as prices continue to hold above the 79.10-78.30 support zone.

Economic Analyst
Amine Hiani