Strong earnings send US equities higher

US equities rallied yesterday, driven by strong corporate earnings. The S&P 500 rose 2%, the Dow Jones Industrial Average gained 1.6%, and the Nasdaq Composite surged by 2.4%. Meta led the way with a 14% jump higher after reporting its first sales increase in nearly a year. Tech giants like Microsoft and Alphabet also posted better-than-expected results. Despite weaker U.S. growth in Q1, the Federal Reserve's inflation measure exceeded expectations at an annual rate of 4.9%. Investors anticipate an interest-rate hike at the upcoming Federal Reserve meeting sending bond yields higher.

The initial assessment of first-quarter GDP showed a slower growth rate of 1.1% compared to economists' expectations of 1.9%. However, a closer look at the report reveals positive underlying momentum beyond the headline number. The growth slowdown was primarily influenced by a significant decline in inventories, while consumer spending, a key driver of the U.S. economy, maintained a strong pace of 3.7%.

BOJ's new governor Ueda opted to maintain the current policy and adjust forward guidance, despite shifting inflation dynamics. Core-core CPI has been rising rapidly, indicating persistent inflation. Despite low interest rates and a weakened yen, Ueda's decision suggests greater concern about weak economic growth. Doubts about the sustainability of Japan's monetary stance are growing. Following Ueda's policy press conference, the JPY slumped, as his reaffirmation of the BOJ's commitment to an easy monetary policy increased pressure on the currency. This is likely to keep the USDJPY in an uptrend for the time being. Heads up for the next week’s Fed meeting though. If the Fed decided to pass the widely expected rate hike the dollar bids would not remain so firm.

Gold

XAUUSD is trading in a range between 1969.30 and 2012.44. The oscillating price between these two levels can provide mean reversal trading opportunities on both sides. Once the market breaks out convincingly in either direction the game changes and instead of trying to identify mean reversion trades, we should look to participate in the breakout move. If the 1969 support level breaks, look for move to 1962 and then possibly to 1945 on extension. On the other hand, if there’s a breakout above the 2012 level a move to 2030 looks likely.

Silver

Silver is bullish above 24.54. This support is created by the resistance that turned the market lower in January but was since penetrated. The price has found support at the level recently. If the support keeps on holding though look for a move to 25.80. Below 24.54 the market could move to 24.20

USDJPY

USDJPY is surging higher and remains bullish above 133.90. JPY slumped after the newly appointed BOJ governor, Kazuo Ueda, in his first policy press conference reiterated the BOJ's commitment to an easy monetary policy. This stance puts continued pressure on the currency and is likely to keep the USDJPY in an uptrend for now. Note however that the market is trading near to the bull channel high now. If there’s a retracement pay attention to price action at 134.73 and 135.13. The nearest key resistance level is at 138. Below 133.90 the market could trade down to 133.60.

DJ

DJ rallied to 33 860 after it penetrated the 33 700 resistance level with some force. Now the market is losing momentum in the 4h chart and if the intraday weakness continues we might see a retracement to 33 640. Above yesterday’s high though the market would be likely to continue the rally and reach 34 100.

The Next Main Risk Events

• 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

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

Related Posts

Analysis

NFP +339K beats analyst consensus prediction

Today's NFP report (+339K) delivered excellent news, surpassing analysts' expectations and signalling strong growth in the labour market. Contrary to predictions of 193K new jobs created in M...

Analysis

Strong jobs market but slowing wage growth

Based on the recent employment-related data it seems likely that today’s NFP number comes in higher than the consensus expectation of 193K jobs. At the same time, ADP reports slowing wage gro...

Analysis

Stocks lower on rate hike concerns

Stocks traded lower yesterday as concerns about the economy and potential Fed rate hikes weighed on investor sentiment. Nasdaq, Dow, FTSE and DAX all traded lower. The increase in job opening...

Analysis

China’s recovery is losing steam

China's manufacturing Purchasing Managers' Index (PMI) fell to a five-month low of 48.8, pressuring commodities and commodity currencies in the Asian session today. Yesterday the US equity ma...