Daily Market Report
All three major averages extended weekly gains with the DOW rising 0.66% after snapping a series of a 13-day winning streak not seen since 1987. The 30-stock index was only one close away from matching its best series of consecutive advances ever, registered in 1897. In the meantime, the S&P500 added 1.01% and the Nasdaq composite index climbed 2.02%.
On the other side, the ECB raised rates by 25bps to fight higher inflation in the Eurozone while the Bank of Japan decided to leave interest rates unchanged at -0.1%, however, the Japanese central bank will now allow 10-year yields to rise by up to 1.0% compared to 0.5% previously.
In the FX market, the U.S. Dollar registered its second positive weekly close as investors remain cautious about the future rates path in the U.S., the EURUSD fell sharply after finding strong sellers from the 1.1150 barrier and prices extended lower testing a major support located at the 1.0950 level. For this week, we will be watching this key support carefully and if prices manage to continue trading above it, the Euro is likely to stabilize before edging higher in the coming days looking for a re-test of the 1.1100 resistance. On the flip side, a breakdown of the 1.0950 can lead to a larger decline in the direction of the 1.0830 weekly support. From a wider angle, the Euro remains positive, and the current decline is likely to be temporary.
In addition, USDJPY saw increased volatility following the Bank of Japan’s latest monetary policy meeting. The pair is following a neutral trend and is expected to trade sideways in the near term, and we will be waiting for either a break above the 142.00 resistance or below the 137.50 support before confirming the next direction. A successful breakout above the resistance mentioned above should expose the 143.00 followed by the 143.65 levels, while a close below the support is likely to trigger another wave of decline in the direction of the 135.65 level.