Daily market analysis

Apple and Alphabet to Slow Hiring for a Recession Concerns. European Investors worried about Russia’s Gas Supply.

July 19, 2022

US stock declined on Monday, failing to preserve its bullish momentum after Apple Inc.’s plans to slow hiring added to the market’s concerns that the Federal Reserve’s aggressively monetary tightening against higher inflation will result in a recession. Wall Street was unable to retain its early gains and turned red despite the US encouraging data last Friday temporarily cooled recession-related concerns, as big companies like Apple Inc. and Alphabet Inc. both decided to slow hiring and spending growth next year in some divisions to respond to the potential recession. In the Eurozone, the energy crisis in Europe amid gas supply from Russia continued to weigh on investors’ moods as the Nord Stream 1 pipeline is scheduled to reopen on Thursday following its maintenance. The Russian company Gazprom has also declared to several European natural-gas buyers that it could not guarantee gas supplies to Europe because of extraordinary circumstances.

The benchmarks, S&P 500 and Dow Jones Industrial Average both dropped on Monday as Apple Inc. slid more than 2% on its worst day in almost three weeks amid a worsening mood. The S&P 500 was down 0.8% on a daily basis and the Dow Jones Industrial Average also declined with a 0.7% loss for the day. Eight out of eleven sectors stayed in negative territory as the health care and the utility sectors are the worst performing among all groups, rising 2.15% and 1.40%, respectively. The Nasdaq 100 meanwhile dropped the most with a 0.9% loss on Monday and the MSCI World index was little changed.

Main Pairs Movement

The US dollar kept declining to a weekly low at the beginning of the week, continuing to ease since the US encouraging data announced last Friday temporary cooled the recession-related concern. The DXY index still is in the mood bearish, and spent most of the first day of the week diving, to a weekly low of 106.9 during the late Asia session, but bounced back to 107.4 in the US afternoon.

GBP/USD advanced by 0.83% on Monday, as the improvement in risk sentiment. The cable moved up to a weekly high of 1.2020 during the late Asia session, then lost upbeat momentum and went back to around 1.1947. At the same time, EUR/USD also got a 0.63% growth on the first day of the week, to a weekly high of 1.0201, then fell back a little to around 1.0140 during the US afternoon. Not only the impact of the weak US dollar, but the high possibility of the ECB deciding to step up interest rates for the first time in 11 years make EUR/USD possibly regain bullish energy.

The Gold price remains almost unchanged on Monday. In the first half of Monday, the gold goes up to $1721, then lost momentum and fell to $1708 at the end of the day. Fed’s speak has pushed back against a 100bp hike from some notable hawks, raising the risk of a near-term short-squeeze on the Gold Price prior to the meeting. However, this could create the perfect storm for a downside continuation in gold on a hawkish outcome from the meeting.

Technical Analysis

GBPUSD(4-Hour Chart)

GBPUSD extends to a daily gain near 1.2000 in the American trading session as the US dollar confronts some selling pressure caused by the expectation of the Fed.

From the technical perspective, recently upside momentum has brought GBPUSD out of the negative territory where the bearish channel is; It suggests that the outlook of GBPUSD turns bullish on the four-hour chart in the near- term. At the moment, GBPUSD is clinging to the resistance level of 1.1958; the RSI indicator on the four-hour chart stays below 70, meaning that the pair has more room on the upside. If GBPUSD can stand sustainably above 1.1958, then the next resistance of 1.2081 would be the next target.

Resistance: 1.1958, 1.2081, 1.2180

Support: 1.176

XAUUSD (4-Hour Chart)

Gold trades slightly positive for the day despite a better market mood.

Technical speaking, the outlook of gold skews to the downside; gold’s bulls seem to be unable to overcome the midline of the Bollinger band, staying within the lower bounce. The RSI indicator remains in the negative territory, suggesting that buyers are still on the sideline. To the upside, in order to claim an upside momentum, gold needs to first climb above the midline of the Bollinger band, and then continue to climb toward the resistance level of $1,740.31. On the flip side, failure to stay above the support level of $1,697.66 would resume gold’s decline further south.

Resistance: 1740.31, 1766.70, 1788.03

Support: 1697.66

EURUSD (4-Hour Chart)

EURUSD advances as high as 1.0200 as the US dollar faces a selloff. The selloff of the US dollar comes after the Fed will hike interest rates by 75 bps, rather than the more aggressive option of 100 bps.

From the technical perspective, EURUSD shows an ongoing recovery from 0.9952 to 0.0174 on the four-hour chart at the time of writing. The double-bottom trading pattern has given the euro dollar a boost. The pair remains above the 20 Simple Moving Average and the upper band of the Bollinger Band, suggesting a bullish move in the near- term. At the moment, the resistance level of 1.0146 would be an obstacle for the pair to overcome as the RSI indicator has reached the overbought territory, suggesting a pullback. If the pair can successfully break the level, the recovery can extend towards 1.0266(38.2% of the Fib. Retracement.)

Resistance: 1.0146, 1.0266, 1.0363

Support: 1.0000, 0.9952

Economic Data

CurrencyDataTime (GMT + 8)Forecast
GBPBoE Gov Bailey Speaks01:45N/A
GBPCPI (YoY) (Jun)14:009.3%
CADCore CPI (MoM) (Jun)20:30N/A
USDExisting Home Sales (Jun)22:005.38%
USDCrude Oil Inventories22:30N/A