Investors looking at another big week in retail earnings

February 28, 2023

Stocks rose Monday as traders tried to recover some ground following the worst week of the year on Wall Street. Investors also looked ahead to another big week in retail earnings. The Dow closed higher Monday, as dip buying in beaten-down growth stocks helped the broader market recover following its worst week of the year.

The Dow Jones Industrial Average gained 72.17 points, or 0.22%, to close at 32,889.09.

The S&P 500 was up 0.31% at 3,982.24, and the Nasdaq Composite rose 0.63% to 11,466.98.

The moves came as Treasury yields eased, following a jump on Friday after a hotter-than-expected reading from the Federal Reserve’s favorite inflation metric.

Last week, some data frightened investors, and the US bond yield climbed again. People have become a bit numb to rate hikes and understand that the terminal rate may be higher than expected, and the market is not concerned about inflation data for the next month, but for the next 6, 9, or even 12 months.

Main Pairs Movement

USD Index eyes the first monthly gain in five despite week-start retreat from the multi-day top

US Dollar Index holds lower grounds near $104.60 during the mid-Asian session on Tuesday, after posting the biggest daily loss in five. It’s worth noting that the greenback’s previous losses could be linked to mixed US data and a retreat in the US Treasury bond yields. At the time of writing, the price traded at $104.639.

The cable is flat in Asia as markets consolidate the opening range and the US Dollar softness that kicked in at the start of the week. Meanwhile, the Bank of England is seen increasing Bank Rate by a further 25 bps to 4.25% in March. At the time of writing, the price is trading at $1.20666 and has stuck to a $1.2042/67 range so far.

WTI advances towards $76.00 as investors look optimist for Caixin Manufacturing PMI.

WTI futures on NYMEX, have extended their recovery above the immediate resistance of $75.80 in the early Asian session. The oil price is exposed to the critical resistance of $76.00 as investors are optimistic about the release of the Caixin Manufacturing PMI data, which is scheduled for Wednesday.

At the time of writing, the price traded at $75.561.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD is having so far the best day since February 1 on Monday, boosted by a weaker US Dollar across the board on the back of an improvement in risk sentiment and a retreat in Treasury yields. The pair was currently trading at the 1.0590 level and facing some headwinds around the psychological resistance at the 1.0600 level. On the data side, US data showed a larger-than-expected decline in Durable Goods Orders. The headline dropped by 4.5%, against expectations of a 4% slide. Most details of the report were positive. A different report showed Pending Home Sales surged 8.1% in January, surprising market participants that expected an increase of 1%. Compared to a year ago, sales were down 24.1%. The US Dollar further weakened after the economic figures, helping EURUSD move further north.

From the technical perspective, the four-hour scale RSI indicator climbed back to the neutral area, showing the heavy selling pressure has weakened. As for the Bollinger Bands, the pair was trading around a 20-period moving average and the gap between upper and lower bands became smaller, suggesting the market is waiting for more clues for the future path. In our view, Investors should be aware of the downside tendency has not vanished, the pair is still more favored to the south path despite a strong corrective rebound on Monday.

Resistance: 1.0788, 1.0929

Support: 1.0508, 1.0401

XAUUSD (4-Hour Chart)

The XAUUSD regain positive strength and rebound to above the $1815 mark at the moment of writing, as the US dollar lost its upside momentum since the European trading session. This week, a bunch of mid-tier US macroeconomic releases could help shape how much more room gold price can have to the downside ahead of the crucial March 22 Federal Reserve (Fed) meeting. The US Durable Goods Orders data released earlier today came out mixed. The headline figure was worse than expected, showing a bigger decline (-4.5%) than what the consensus had forecast (-4.0%). Gold price reacted modest-but-positively to this release as the US Dollar witnessed heavy selling transactions.

From the technical perspective, the four-hour scale RSI indicator returned to the 45 figures, suggesting the pair were still surrounded by slight bearish traction. As for the Bollinger Bands, the pair was supported by the lower band and capped by the 20-period moving average, showing the pair continued to move in the downside pattern.

Resistance: 1850, 1870, 1900

Support: 1820, 1800

Economic Data