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Daily market analysis

Microsoft shares increased after earnings exceeded expectations

January 25, 2023

U.S. equities struggled to maintain their recent rally throughout Tuesday’s trading. The Dow Jones Industrial Average gained 0.31% to close at 33733.96. The S&P 500 slipped 0.07% to close at 4016.95. The tech-heavy Nasdaq Composite lost 0.27% to close at 11334.27. The recent bear market rally has been aided by better-than-expected earnings results and signs of cooling inflation.

After the bell of the 24th, Microsoft Corp. released F2022 Q4 earnings. The software giant delivered better-than-expected earnings and shares rose 4% in late trading. Microsoft announced $2.32 earnings per share, while sales rose 2% over the quarter to $52.7 billion.  Microsoft’s Azure cloud computing proved resilience by gaining 38% in sales, beating estimates of a 37% growth. Recent developments of ChatGPT and OpenAI have injected excitement for the tech giant.

The benchmark U.S. 10-year treasury yield continued to drift lower and was last seen trading at around the 3.455% mark. The policy-sensitive short-term 2-year treasury yield currently sits at 4.148%.

Main Pairs Movement

The Dollar index, which tracks the U.S. Greenback against a basket of major foreign currencies, traded mostly sideways throughout Tuesday and lost 0.09% by the end of the day. The Dollar has been trading extremely range bound between the 101 to 103 level over the past week as market participants await crucial earnings results from major U.S. corporations.

EURUSD gained 0.13% throughout yesterday’s trading. The Euro continued to gain against the Dollar as the Dollar recedes around the 101 level. The EURUSD has notched its fifth consecutive winning session.

GBPUSD lost 0.32% throughout Tuesday’s trading. The British Pound traded lower against the Greenback as the U.K. PMI came in at 47, lower than the market consensus of 47.9. The lower British PMI sparked a weakening of the Sterling.

XAUUSD rose 0.31% throughout yesterday’s trading. The Dollar denominated Gold continues to gain as the Dollar weakens.

Technical Analysis

EURUSD (4-Hour Chart)

EUR/USD regains lost territory on the weak US dollar. Earlier, EUR/USD declined toward 1.0830 with the initial reaction to US PMI data. After the markets priced in the data, EUR/USD rebounded above 1.0870. The US Dollar struggles to maintain upside traction as Wall Street’s main indices recover from session lows.

For the technical aspect, RSI indicator 56 figures as of writing. The RSI indicator maintains neutral in the near term, signaling that the pair lose clear direction. As for the Bolling  Bands, the price is hovering around the moving average. Though the moving average is slightly upward, the upward momentum seems weak as the price edges lower. In conclusion, we think EUR/USD is in consolidation mode based on the technical analysis. The price is lack clear traction. A decisive breakthrough is needed to trigger the follow-through buy or sell interest. For the uptrend scenario, the pair is now trading slightly below the resistance at 1.0912. The price needs a breakthrough above the current resistance to meet the higher-high pattern of an uptrend. For the downtrend scenario, if the price drop below the support at 1.0780, it may lose its upward momentum and head to test the next support at 1.0710.

Resistance:  1.0912, 1.1048, 1.1131

Support: 1.0780, 1.0710, 1.0582

GBPUSD (4-Hour Chart)

GBP/USD fell on soft PMIs. Both the Services and Manufacturing PMIs came in below the 50 levels, indicating contraction. The Manufacturing PMI rose slightly to 46.7, up from 45.3 in November and above the forecast of 45.4 points. The Services PMI fell to 48.0, down from 49.9 in November and below the forecast of 49.6 points. On the other hand, the composite PMI fell to 47.8, down from 49.0 in November and below the forecast of 49.3 points. GBP/USD fell after PMIs released and kept going South in the early US session. After the US PMIs released, the US dollar went weak and therefore lifted GBP/USD. The pair regained some lost territory from the earlier trading session. At the time of writing, GBP/USD is trading at 1.2320.

For the technical aspect, RSI indicator 45 figures as of writing, sliding to a bearish region from the mid-line, suggesting that the downward correction could persist as the RSI indicator crossed below the mid-line. As for the Bolling  Bands, the price hovering around the lower band, signaling downside traction in the near term. In conclusion, we think GBP/USD may continue on correction based on the technical analysis. For the uptrend scenario, the pair has to establish itself above the current support at 1.2273 to regather upward strength. For the downtrend scenario, if the price drop below the support at 1.2273, it may trigger some follow-through selling and head to test the next support at 1.2161.

Resistance: 1.2430, 1.2600

Support: 1.2273,  1.2161, 1.2021

XAUUSD (4-Hour Chart)

Gold price touches a nine-month high on Tuesday amid renewed US Dollar selling. Bets for smaller FED rate hikes keep the US dollar index under pressure. The markets have been pricing in a modest 25 bps rate hike at the upcoming FOMC policy meeting next week. This resulted in a continued decline in the US Treasury bond yields and the US dollar index, which in turn benefit Gold bullish traders. On the other hand, recession fears also favor safe-haven Gold.

For the technical aspect, RSI indicator 63 figures as of writing, staying in a bullish region and rising from mid-line, suggesting that the uptrend should persist. For the Bollinger Bands, the price is moving up between the upper band and the upward average, which is a typical pattern for an uptrend. In conclusion, we think the market is in bullish mode as technical analysis shows bullish potential. For the uptrend scenario, the next resistance is at $1,952. If the price breakthrough the resistance, it may head to test the next resistance at $1,977. For the downtrend scenario, if the price drop below $1,920, it may change the current trend and head to test the pivotal round figure mark at $1,900.

Resistance: 1952, 1977

Support: 1920, 1900, 1873

Economic Data

CurrencyDataTime (GMT + 8)Forecast
AUDCPI (QoQ) (Q4)08:301.6%
EURGerman Ifo Business Climate Index (Jan)17:0090.2
CADBoC Monetary Policy Report23:00 
CADBoC Interest Rate Decision23:004.5%
USDCrude Oil Inventories23:300.971M