May 21, 2024
CURRENCIES
EURO (EUR/USD, EUR/GBP) technical analysis:
- Fed speak to dominate today’s scheduled event risks (Williams, Waller)
- EUR/USD drifts lower in search of a catalyst
- EUR/GBP eyes support ahead of UK CPI print
Fed Speak to Dominate Today’s Scheduled Risk Events:
- Quiet day on the economic calendar in a generally quiet week.
- Euro PMI data on Thursday is the next notable event.
- Last few days of the month feature US PCE and EU inflation data.
- Fed speakers continue to promote the idea of maintaining high interest rates to control inflation.
- Afternoon speakers: Fed Governor Christopher Waller and New York Fed President John Williams.
- Williams previously hinted at potential rate hikes if inflation does not improve; current focus shifts to timing rate cuts.
EUR/USD Drifts Lower in Search of a Catalyst:
- EUR/USD shows a slight downward trend after bouncing off channel resistance.
- Quiet week favors higher-yielding currencies like the dollar.
- The pair reversed before reaching overbought conditions, similar to the trend in March.
- Resistance at the upper limit of the ascending channel; support at channel support, 1.0800 psychological level, and 200-day SMA.
- A catalyst may emerge towards the end of next week with US PCE and EU inflation data.
EUR/USD Key Data:
- Mixed Sentiment: Data provided by clients are net short.
- Daily Changes: Longs +15%, Shorts -1%, Open Interest +5%.
- Weekly Changes: Longs -10%, Shorts +8%, Open Interest 0%.
EUR/GBP Eyes Support Ahead of UK CPI Print:
- EUR/GBP started the year within a defined trading range, showing bullish momentum after breaking out.
- Bullish advance struggled, facing resistance at the 200-day SMA.
- Current selling shows fatigue, with potential support from trendline.
- UK CPI data tomorrow could influence the pair’s direction.
- Expectation of a notable move lower from the prior month.
- Disappointment may lift sterling if data fails to meet low expectations.
- April data might surprise the upside with price rises and index-linked increases.
- If CPI meets or falls below consensus, EUR/GBP may rise as markets anticipate a BoE cut sooner.
STOCK MARKET
Expectations for Nvidia’s Earnings:
- Traders are anticipating a significant move in Nvidia’s shares post-earnings on Wednesday.
- Nvidia’s options suggest an 8.7% swing in either direction by Friday.
- This implies a market cap change of $200 billion, exceeding the market cap of about 90% of S&P 500 companies.
Nvidia’s Market Data:
- Current Price: $947.80 +23.01 (2.49%) at close, $951.43 +3.63 (0.38%) pre-market.
Historical Comparison:
- The implied move is less than the 16.4% jump after the last quarterly earnings.
- Also lower than the average 12% move priced in for the last eight quarters.
Analyst Insights:
- Chris Murphy, Susquehanna Financial Group: “Volatility and expectations were higher previously.”
- Nvidia’s stock, up 87% this year, is crucial for the AI industry with a market value of $2.3 trillion.
- Wall Street anticipates a strong quarterly report from Nvidia.
Broader Market Impact:
- AI-related gains are spreading to other sectors like power, commodities, and utilities.
- BofA strategists expect Nvidia to drive 9% of S&P 500 earnings growth in the next 12 months, down from 37% over the last 12 months.
Options Market Sentiment:
- Matt Amberson, ORATS: Implied volatility for out-of-the-money calls and puts is equal, indicating potential for both upside and downside moves.
- Traders expect up moves to be as violent as down moves.
Projected Earnings:
- Expected earnings: $5.59 per share.
- Quarterly revenue: Expected to rise to $24.65 billion from $7.19 billion a year ago (LSEG data).
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