US Stocks Get Boost from Financial Shares as Tech Slumps: Banking Sector Continues to be Monitored

March 28, 2023

Financial stocks provided a much-needed boost to US stocks on Monday, with Treasuries retracting due to a decrease in concerns over banking turmoil. However, tech shares took a hit after experiencing a surge in the previous week. The purchase of Silicon Valley Bank by First Citizens BancShares Inc. caused a gauge of regional lenders to increase by approximately 2.5%, which, in turn, led to First Republic Bank experiencing a jump. The Bloomberg report about US authorities considering expanding an emergency lending facility also contributed to this surge. Despite the weekend bringing some relief to the banking sector, it will continue to be closely monitored, as a gauge of regional US banks has lost approximately 30% since early February.

The S&P 500 index saw a rise, with financial firms increasing by over 1%, and energy producers also making gains. On the other hand, the Nasdaq 100 ended 0.7% lower, capping a two-week advance. The two-year Treasury yield surpassed 4%. Eight out of eleven of the S&P500 stayed in positive territory, with the Energy and Financial sectors rallying by 2.1% and 1.4% respectively, on a daily basis.

Main Pairs Movement

On Monday, efforts by authorities to ease concerns about the global banking system helped calm investor nerves, resulting in the dollar reaching a five-day high against the Japanese yen. However, the DXY index remained within a narrow range against most major currencies as investors appeared hesitant to place big wagers in either direction. This hesitation was due to their need for clarity on the fallout from the recent collapse of two U.S. lenders and the rescue of Credit Suisse.

GBPUSD gained 0.44% for the day due to market positioning suggesting a 50% chance the Bank of England (BOE) will hold rates steady, and a 70% chance the US Federal Reserve will do the same at their respective next policy meetings. Meanwhile, EURUSD remained on an upside tendency all day and closed with a 0.35% daily gain on Monday.

Gold experienced a 1.09% daily loss due to investors moving away from safe-haven assets. Despite this, the sentiment was positive at the start of the week amid easing concerns related to a global banking crisis. XAUUSD faced heavy selling pressure during the UK trading session but managed to rebound from a daily low level of the $1944 mark to close at the $1956 mark.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair saw a slight increase on Monday, moving within a tight range and rebounding toward the 1.0780 area. It is currently trading at 1.0782, with a daily gain of 0.22%. The weaker US Dollar across the board and the US government’s additional support to the local financial system helped the market sentiment recover and kept the EUR/USD pair in positive territory. The news related to financial stability also provided some temporary relief to markets on Monday. In the Eurozone, the Business Climate in Germany improved to 93.3 for March, according to the IFO Institute.

From a technical aspect, the RSI indicator is currently at 58, indicating that the bulls are gaining strength as the RSI heads north after bouncing around its midline. As for the Bollinger Bands, the price has witnessed some buying interest and rose towards the moving average, suggesting that some upside movements can be expected. We believe that the market will remain bullish as long as the 1.0748 support line holds, and technical indicators also remain within positive levels.

Resistance: 1.0834, 1.0903

Support: 1.0748, 1.0669

XAUUSD (4-Hour Chart)

On Monday, as easing bank stress lessened Gold’s safe-haven appeal, along with reports of falling demand from India, the XAU/USD pair saw heavy selling pressure and dropped sharply to a daily low below the 1,948 mark during the US trading session. The Gold price is currently trading at 1,958, losing 1.06% daily. The acquisition of Silicon Valley Bank (SVB) by First Citizens Bancshares Inc has limited the damage from SVB’s failure, reducing global banking fears and translating into a rise in US Treasury bond yields. This exerted bearish pressure on the Gold price and lessened demand for safe-haven Gold. This week’s economic calendar highlights await on Friday with Chinese PMIs and the US Personal Consumption Expenditures (PCE) Price Index.

From a technical aspect, the RSI indicator is currently at 48, suggesting the bullish tilt in the short-term technical outlook as the RSI has rebounded sharply towards the mid-line. As for the Bollinger Bands, the price regained some upside traction and rebounded higher, indicating that some upside movements can be expected. We believe that the market will be slightly bullish as long as the $1,934 support line holds. The rising RSI indicator also reflects bull signals.

Resistance: 1980, 2003

Support: 1934, 1914

Economic Data