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Analysis

Pac West reported a deposit drain of 9%

BY Janne Muta

|May 12, 2023

US equities closed with a fairly broad decline as regional bank fears soured the sentiment again. Pac West reported a deposit drain of 9%. Sell-off in Walt Disney (-8.74%) and Peloton Interactive (-8.9%) shares, and certain regional banks dragged down the overall performance leaving eight out of eleven S&P 500 sectors in the red. The weakest sector was energy (-1.20%) while the communication sector posted a gain of 1%. The Dow Jones Industrial index dropped 0.7%, and the S&P 500 and the Nasdaq Composite indices closed the day nearly unchanged.

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The PPI index showed a small monthly gain of 0.2%, surpassing expectations and indicating a gradual slowdown in inflation. Elsewhere, the Bank of England raised rates by 0.25% but this was priced in and GBPUSD sold off. The T-Bond market (+0.65%) continued higher, driven by positive inflation data over the recent two days. Both the 10-year and 2-year treasury yields declined by approximately five basis points.

Lower yields didn’t help gold though and the market traded lower creating a lower swing high (bearish). Today’s key risk event is the release of the Preliminary UoM Consumer Sentiment and inflation expectations. UK GPD (0.1%, 0.1% expected) came in pretty much in line with expectations and thus hardly moved the market at all.

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Gold

Gold is bearish below 2048 after the market created a lower swing high at the level. A break below the 1999.50 support level looks likely now. This could mean the market tests the 1969.30 support fairly soon. Above 1999.50, we might see a move to 2025.

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USDJPY

USDJPY might be turning bullish. Look for a decisive break above 134.84 to justify long. If the bulls don’t let the market slip back below the resistance level, We’ll probably see the market moving to the 135.50 - 135.70 range.

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Silver

Silver bearish below 25.14. The market traded to 25.54 pretty quickly and penetrated it without any hesitation. The level is the last week’s low and as such a key technical level. The market is bearish so potential rallies could be sold at resistance levels. Yesterday’s daily close below 24.54 completes a topping formation that lasted for five weeks. This could lead to further weakness in silver. The nearest key support level is at 23.60.

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FTSE

FTSE could be turning bullish. The index traded down to last week’s low and bounced strongly from the level. The market has lost downside momentum which indicates reversal potential in this market. A decisive break above yesterday’s high would indicate the bulls are in control and would probably take the market to 7820 and then possibly to 7880 on extension.

The Next Main Risk Events

  • USD Prelim UoM Consumer Sentiment
  • USD Prelim UoM Inflation Expectations

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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