Ending The Trading Week – 43

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Since our mid-week outlook, the ECB executed their rate hike of 75bps to 2.00%, matching expectations. 

The concerns for investors include

  • Removal of forward guidance
  • Quantitative tightening wasn’t discussed in the meeting

These tilted ECB stances towards the dovish side, and let’s see what happened to EURUSD since then-

EURUSD

eur-usd-daily

EURUSD Daily

EURUSD declined amidst the ECB rate decision, undoing gains from the previous day. The pair is in an awkward spot now, being sandwiched between the broken trendline, the 50 daily SMA and also the parity. Market participants seem to be clueless about its future direction, while FOMC Meeting remains on top of the watchlist for all.

Our preference is a rather directionless Fiber for today and next Monday. It is safer to wait for rate decisions from the Fed. Furthermore, the parity level seems to be losing its significance as a key level. A rebound is on the table if the Fed is not anymore hawkish than it already is.

BOJ Meeting

BOJ has decided to keep its ultra-low rate steady at -0.1% and this is expected to continue well into next year.

usd-jpy-chart

USDJPY H4

The dollar rose against the Yen as a result and is attempting a recovery after a suspected intervention from Japan sent the pair down by more than 570 pips last Friday.

Again, we are waiting for a firmer direction on the dollar after the FOMC meeting next Wednesday. If you are trading, 147.60 seems to the next resistance level. The broken trendline and 50 SMA is further limiting upside for the time being. 

US Stocks

The tech sector struggled for grip this week as some of the biggest names in the industry posted downbeat quarterly earnings reports, leading to a gloomy outlook in the equity market. 

It was a rough week for the technology stocks. Meta took the biggest hit after its numbers fell far short of expectations. The forecast of a weak holiday quarter ahead and an increase in future costs are pulling the share prices down. 

meta-chart

META Daily

Facebook’s Parent company, Meta, is now down over 70% for 2022 following a horrendous price gap during after-hours trading. 

While we are on this topic, Alphabet also posted an undelightful Q3 report, with the major focus being put on their sluggish YouTube ads revenue. Most top and bottom-line performances have been missed big times as well. Last but not least, Microsoft had its slowest revenue growth in five years, thanks to dwindling demand for personal computers and the dollar being significantly stronger against other currencies, leading to higher export prices. 

USTEC

ustec-daily-chart

USTEC Daily

From a technical standpoint, the higher timeframe chart foreshadowed the downfall with bearish trendlines being solidified. Death cross took place around the end of February. Furthermore, the slope has been tilted more towards the downside, indicating a build-up of bearish momentum. 

Our preference for USTEC is leaning towards the bearish side in the short term. Confluences include

  • Technical bearish trendlines coupled with sustained death cross on the daily timeframe
  • 11680 proved to be strong short-term resistance, coinciding with the newly-formed bearish trendline
  • Poor numbers from major companies including Meta, Alphabet, Microsoft, and more weighing on the index
  • Raising rates environment is generally inconducive for stocks performance

USTEC has been testing 11050 key support for almost a month now and the chance of it holding is pretty slim considering the factors above. If it breaks, we are targeting 11450 most recent low and a further decline could lead the index to its key psychological level of 10000.

Twitter

Elon Musk is now in charge of Twitter. This marks an end to the months-long lawsuit between Musk and Twitter. Both the former CEO and CFO have been fired as the deal is being closed. More executives are expected to leave the company as well. 

With that being said, TWTR stocks will not be available for trading on Friday, 28th October 2022, according to New York Stock Exchange. We are expecting a lot of volatility for next week when trading resumes. Get ready for more meme trades.

Ru Yi 
Financial Market Analyst


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