The market mood remains fragile after steep falls
Dow Jones => The hovers around the 2022 low
Bitcoin => The crypto struggles around 29k
EUR/USD => The pair rises to 1.05
Dow steadies after heavy losses
The Dow Jones booked its largest daily loss since October 2020 yesterday, falling 3.5% or 1100 points on fears over inflation and the prospect of a recession in the US. The three leading indices on Wall Street plummeted after back-to-back disappointing earing from major retailers Target and Lowe’s. Fears over the Fed and hawkish rate hikes are not new, but now the market is contemplating the impact that rising input prices have on companies’ profits, and suddenly, a recession starts to look more likely. Today the selloff has stabilized, and attention turns to US initial jobless claims and existing home sales.
|US jobless claims
US existing home sales
|Expected: 200k (3k)
Expected: 5.65M (12M)
Where next for the Dow Jones?
After running into resistance at 35500 on April 21, the Dow Jones has been trending steeply lower, hitting support at 31225 on May 12, a level which now acts as the immediate floor. The price trades below the 20 & 50 sma, the 20 SMA crossed below the 50 in a bearish signal, and the RSI supports further losses while it remains out of oversold territory. Sellers need to break below 31225 to continue the bearish trend towards 30600, the March ’21 low. Buyers could look for a move over 32000 round number and 32250, the February low. However, a move over the 20 SMA and yesterday’s high of 32750 is needed to create a higher high.
Bitcoin holds up better than its peers, but the outlook is still bearish
Bitcoin has had a rough ride recently, but it is holding up better than other cryptos, highlighting its ability to remain dominant. Bitcoin is the most well-known and the most liquid crypto, which also means that it is considered the safest one. Even so, technically, the picture is still bearish for bitcoin, but it may be able to weather this rough patch better than its peers. BTC/USD is currently testing a key support level and has been trading in a tight range between 28k and 31k over the past few sessions. It would take a break below 28k to create a lower low and for sellers to gain traction. On the upside, strong resistance can be seen between 33k to 36k.
EUR/USD rises ahead of ECB minutes
EUR/SD is rebounding after heavy losses in the previous session. The pair dropped 0.77% as the USD benefitted from safe-haven demand and the euro struggled in risk off-trade. Eurozone inflation was downwardly revised but is still at a record high in April. Today attention turns to the release of the minutes from the ECB meeting. The minutes could show that a July rate hike is gaining traction within the central bank. ECB’s Klaas Knot even said this week that he would consider a 50-basis point rate hike if the data warranted it. Signs that the ECB is getting more hawkish could lift the euro.
|EZ CPI YoY April (final)||Actual: 7.4% (0.1%)||Previous: 7.5%|
Support can be found at 1.0420 (weekly low) and 1.0350 (2022 low).
Resistance for the pair can be seen at 1.0540 (20 sma) and 1.0650 (May high).