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Analysis

77% of earnings have exceeded expectations

BY Janne Muta

|April 25, 2023

Equities traded sideways yesterday with the major indices finishing the day near to opening levels. This week, approximately one-third of S&P 500 companies will report their quarterly results. The focus will be on the big names like Google and Microsoft, who report today.

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Their results could give us more short-term volatility in the indices. There could be some upside surprises in earnings but the analysts have set the bar fairly low and the market participants know this. Therefore, the companies better not disappoint the markets. Otherwise, we might see a sudden increase in downside volatility. As of now, 90 S&P 500 companies have released their results. Among them, approximately 77% have exceeded profit expectations.

EUR has been quite strong lately while AUD has been trading sideways. We’ll take a look at EURAUD again in this report as the Australia CPI report is due tomorrow. Analysts have predicted that the annual inflation rate in Australia has decreased to 6.5% from 6.8%. The strong trend in EURAUD emerged due to the differences between expectations on central bank policies.

The ECB assessed in March that risks to inflation were mostly tilted to the upside, and the bank is likely to stay on the hawkish side to combat inflation. Meanwhile, the Reserve Bank of Australia has kept the cash rate steady at 3.6% (in April), citing policy lags and a need to assess the economy and outlook amidst uncertainty.

The RBA Governor Philip Lowe noted at the time that economic growth has slowed and is projected to remain below trend over the next few years. Then yesterday ECB's Makhlouf said that it is too early to plan for a pause in the tightening of monetary policy and that they will be closely monitoring incoming data for the next policy decision.

According to Makhlouf, the rates will need to continue at restrictive levels based on current evidence. Keep an eye on the Australia CPI release tomorrow to see what level the CPI comes in and how the AUD reacts to the news.

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FTSE

FTSE is bullish above 7870. However, the market trades in a tight range after a strong rally that took the market to levels where the sell-off started in March. Profit-taking and uncertainty in US indices as well as weakness in risky assets in general have slowed the rally. If weakness continues and the market starts trading below 7870, the market would probably trade down to 7830 or so. Above 7870, look for a test of the April high at 7937.

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USDCAD

USDCAD is bullish above 1.3520 and is currently heading towards the topping formation created in March this year. Above 1.3520, look for a move to 1.3650. Should the market break below 1.3520, a move to 1.3490 would be likely.

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EURAUD

EURAUD is bullish above 1.6488. Below the level, the market probably trades to 1.6426 and if the bulls stay in charge the market could trade to 1.6700 and to 1.6800 on extension. EURAUD is known as a market with strong trending characteristics and now that the ECB is expected to continue with rate hikes, and the RBA is reluctant to hike further the trend might still continue further.

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EURGBP

EURGBP is bullish above 0.8826 but is currently trading near a key resistance level (0.8864). If there was a decisive break below 0.8826, the market could violate the rising trendline and trade down to 0.8805. If the market can break above the 0.8864 level and attract new demand there, we might see a move to 0.8888 and then to 0.8940 on extension.

The Next Main Risk Events

  • USD CB Consumer Confidence
  • USD New Home Sales
  • USD Richmond Manufacturing Index
  • AUD CPI
  • USD Core Durable Goods Orders
  • USD Durable Goods Orders
  • USD Advance GDP
  • USD Unemployment Claims
  • USD Advance GDP Price Index
  • USD Pending Home Sales
  • JPY Tokyo Core CPI
  • JPY BOJ Outlook Report
  • JPY Monetary Policy Statement
  • EUR German Prelim CPI
  • JPY BOJ Press Conference
  • EUR Spanish Flash CPI
  • CHF SNB Chairman Jordan Speaks
  • CAD GDP
  • USD Core PCE Price Index m/m
  • USD Employment Cost Index
  • USD Chicago PMI
  • USD Revised UoM Consumer Sentiment

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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