The US stock market experienced its worst week since September. Silicon Valley Bank’s financial troubles sparked concerns about further distress in the banking industry amid the Federal Reserve’s most-aggressive tightening campaign in a generation. Despite reassurances from experts that a systemic financial crisis is unlikely, investors remained anxious, leading to widespread de-risking. The S&P 500 lost 1.45%, erasing most of its 2023 gains, with all eleven sectors falling into negative territory.
The Real Estate and Material sectors were hit hardest, plummeting by 3.25% and 2.15%, respectively. In addition, the Nasdaq 100, Dow Jones Industrial Average, and MSCI world index all suffered losses on Friday. Market anxiety is also high ahead of next week’s consumer price index report.
Main Pairs Movement
On Friday, the US dollar weakened due to slower wage growth in the US labor data for February. This suggests that inflation pressures may ease, leading to the Federal Reserve’s interest rate hikes being modest, and making the dollar less attractive. The DXY index dropped below the 104.20 level before the US trading hour, but then saw a modest recovery to close around the 104.60 level.
Due to the general weakness of the US dollar, the GBPUSD rallied 0.88% daily. The pair reached the daily high of 1.2112 level during the opening of the American trading hour but lost momentum and closed at the 1.2020 level at the end of the day. Meanwhile, the EURUSD gained 0.59% during the day and closed at 1.064.
Gold prices rose sharply by 2.03% on Friday due to the US dollar selling off after a mixed labor market report and the risk aversion flow triggered by SVB’s turmoil. The XAUUSD continued to move upwards during the late European trading hour to the end of the US trading session, earning around 2% before closing at $1867 on Friday.
Technical Analysis
EURUSD (4-Hour Chart)
On Friday, the EUR/USD pair experienced a significant increase in buying, climbing to a daily high above the 1.0670 level as market participants continued to analyze the mixed US jobs report for February. The pair is currently trading at 1.0676, with a daily gain of 0.93%. The EUR/USD remains in positive territory due to renewed US Dollar weakness, with US yields decreasing further after the US jobs report, causing the greenback to lose further ground and break below the key 105.00 barrier. The US Nonfarm Payrolls data for February showed an increase of 311,000, surpassing the market expectation of 205,000 and following January’s print of 504,000. However, the Unemployment Rate also increased to 3.6%, removing optimism from the NFP report. The CME Group FedWatch Tool’s probability of a 50 bps hike at the next policy meeting declined to 40%. In the Eurozone, the focus now shifts to the ECB’s next moves after the bank has already anticipated another 50 bps rate raise at the March event.
In terms of technical analysis, the RSI indicator is at 68, suggesting that the bulls are in control as the RSI rises toward the overbought zone. As for the Bollinger Bands, the price has maintained its upside momentum and moved out of the upper band, indicating that a strong continuation of the upside trend can be expected. In conclusion, the market will likely be bullish as the pair heads towards testing the 1.0685 resistance line.
Resistance: 1.0685, 1.0750, 1.0790
Support: 1.0580, 1.0531
XAUUSD (4-Hour Chart)
On Friday, the XAU/USD pair climbed above $1,850 as market participants analyzed the mixed US jobs report for February, with gold rising by 1.4% to trade at $1,856. Despite the healthy growth in Nonfarm Payrolls, the increase in the Unemployment Rate led to the 10-year US T-bond yield dropping below 3.8%, contributing to XAU/USD’s gains. Federal Reserve chair Jerome Powell’s hawkish speech warning that a 50 basis point hike was possible had initially increased the likelihood of a 50bp hike by the Fed in March to 75%. However, after investors reevaluated the US jobs report, the probability of a 50bp hike declined to 56%.
In terms of technical analysis, the RSI indicator is at 76, which suggests the possibility of short-term corrections as the RSI remains above 70. The price moved out of the upper Bollinger Band, indicating that the upward trend should continue. We predict that the market will be slightly bearish as long as the resistance level of $1,856 holds. However, if buyers continue to dominate and exceed the $1,856 level, there is a possibility of an upward move toward the $1,924 level.
