First Republic Bank shares dived 49%

Yesterday, major equity indexes declined over 1.0%, as disappointing earnings from companies such as First Republic Bank (FRC) and United Parcel Service, led to a decline in stocks and an increase in investor concerns about the economy. Following the release of first-quarter results that indicated a deposit loss in March worse than anticipated, FRC stock collapsed dropping by around 49%. This is a new low for the stock. Trading in the stock was suspended several times in the New York afternoon trading due to the significant decline.

The S&P 500 and Dow Jones Industrial Average experienced their largest single-day declines since March 22, (-1.6% and -1% respectively). The Nasdaq, which has a significant concentration of technology stocks, was hit particularly hard, with a drop of almost 2.0%, despite a decrease in Treasury yields. Volatility, which had been relatively low in recent weeks, increased strongly. The VIX volatility index, commonly known as the Wall Street fear gauge surged 16%.

Australian CPI y/y dropped to 6.3% from 6.8% a month ago. Analysts had expected the number to fall only by 0.3% to 6.5%. The RBA predicted a decrease in inflation while acknowledging that monetary policy changes take time to affect economic activity and indicators. This prompted the RBA to maintain the cash rate during its April meeting, The reported decline in inflation indicates RBA might not hike rates at the May 2 meeting, so the AUDUSD continued to drift lower. This helped EURAUD to rally.

EURAUD

EURAUD is bullish above 1.6534. Below the level, the market could move to 1.6488. As long as the market doesn’t break key support levels, it might well trade to 1.6700 and to 1.6800 on extension. The pair continued to trade higher after the Australian CPI y/y dropped to 6.3% from 6.8% a month ago. Analysts had expected the number to fall only by 0.3% to 6.5%.

USDCAD

USDCAD practically reached the 1.3650 level we referred to yesterday. Yesterday’s high was 1.36475. The nearest key support level is at 1.3546 so the uptrend is a little extended now which increases a risk of a retracement. The market is now trading near a topping formation created in March this year but this doesn't mean it can’t move any higher.

Typically resistance levels like this slow the advance down or could create a retracement in the uptrend but as always we don’t place bets on anticipation. Instead, we take trades when we see evidence (price action) for our thesis. For instance, if the market starts to retrace it makes sense to wait until the upside momentum resumes before going long again. Provided there has been no news that would have given reasons to stay away from the market.

GBPUSD

GBPUSD is bullish above 1.2386. Below the level, look for a move to 1.2360. Above 1.2386 the market is likely to move to 1.2480. The market is ranging sideways which means the mean revertive characteristics are stronger in the market now and we should therefore trade accordingly and not expect sizeable moves. The market will eventually break out of this range (1.2344 - 1.246) and the recent higher swing lows in the 4h chart suggest it could be to the upside but we don’t know that yet.

The Next Main Risk Events

• 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 m/m
• 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

DISCLAIMER: TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

Janne Muta

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