US Banking sector worries resurface

The USD found support from fresh safe haven inflows yesterday as market worries for the US banking sector were revived after First Republic reported greater-than-expected withdrawals for the first quarter of the year. Also on a fundamental level, US Treasury Secretary Janet Yellen’s warning about a possible default of the US government, intensified the risk-averse market sentiment, yet that may also have been a political move given the wide discussion for the US debt ceiling in Congress. First Republic’s share price plunged reportedly by 49% and the negativity created in the market sentiment caused US stock markets to tumble despite both Alphabet (#GOOG) and Microsoft (#MSFT) having some solid figures in their earnings reports for Q1. We maintain our focus on the tech sector today as Meta (#FB) is to release its earnings reports as is also eBay (#EBAY) and we also note GlaxoSmithKline (#GSK), Glencore and Boeing (#BA). Back in the FX market besides the USD, also JPY tended to receive safe haven inflows, maybe even more than the USD, while BoJ Governor Ueda, seems to keep setting the stage for a rate hike in the future. Commodity currencies AUD and CAD tended to be on the losing side of the market yesterday as they are perceived to be riskier assets, while the Aussie may have been weakened by the slowing inflation metrics for Q1 reported during today’s Asian session, which in turn could solidify RBA’s stance to pause its rate hiking path. Also, we note the widening of New Zealand’s trade deficit, implying that the country’s economy suffered more from its international trading transactions yet the release failed to deter Kiwi traders extensively. In Europe’s monetary front, we note from Sweden, Riksbank’s interest rate decision and the bank is expected to hike rates, while should such a hike also be accompanied by a hawkish statement we may see the Krona gaining. As for commodities, we note the drop in oil prices yesterday, yet the wide drawdown reported by API for the past week, implying that the US oil market was tight, may stabilise black gold’s price somewhat given also the release of the EIA figure later today.

USD/JPY edged lower yesterday yet stayed within the boundaries set by the 132.85 (S1) and the 135.15 (R1) levels. Given that the pair’s price action was able to break the upward trendline guiding it since the 5^th of April we switch our bullish outlook in favour of a bias for a sideways motion, while we note that the RSI indicator is nearing the reading of 30, implying some bearish tendencies. Should the selling interest be maintained we may see USD/JPY breaking the 132.85 (S1) support line which would pave the way for the 130.50 (S2) support barrier. Should the pair find fresh buying orders along its path, we may see USD/JPY breaking the 135.15 (R1) resistance line and take aim at the 137.55 (R2) resistance hurdle.

AUD/USD had a steep drop breaking the 0.6630 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair as it seems to be escaping its past sideways motion downwards and a downward trendline starts to form. Also note, that the RSI indicator is near the reading of 30 underscoring the bearish sentiment of the market, yet also implying that a correction higher and a stabilisation are also possible, given that the pair seems to be nearing oversold levels. Should the bears maintain control over the pair we may see it aiming if not breaking the 0.6565 (S1) support line and should the S1 be broken we set the 0.6490 (S2) as the next possible target for the bears. Should the bulls take over, we may see AUD/USD reversing course breaking the prementioned downward trendline, the 0.6630 (R1) resistance line and aim for the 0.6700 (R2) level.    

Other highlights for the day:

During today’s European session, we note Germany’s forward-looking GfK Consumer sentiment for May, France’s consumer confidence for April and UK’s CBI distributive trades for April, while a bit later ECB Vice President De Guindos is scheduled to speak. In the American session, we note the release of the US durable goods orders growth rates for March while oil traders may be more interested in the release of the weekly US EIA Crude oil inventories figure. On the monetary front, we note that BoC is to release its monetary policy deliberations held before its April 12 rate decision.

USD/JPY H4 Chart

Support: 132.85 (S1), 130.50 (S2), 127.55 (S3)

Resistance: 135.15 (R1), 137.55 (R2), 140.65 (R3)

AUD/USD H4 Chart

Support: 0.6565 (S1), 0.6490 (S2), 0.6400 (S3)

Resistance: 0.6630 (R1), 0.6700 (R2), 0.6760 (R3)

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