2023/05/07 (224.087) Technical Analysis

EURUSD Breathes Heaviliy At These Altitudes
– That`s Why I Decided To Hedge Our Profits At 1.10 EURUSD

The Reasons Are Running Out To Stay Still Long In The EURUSD – And (Not Yet) In The Stock Markets Either

The Dax has risen in the past four weeks. But the upward momentum is declining. In the new week, two events could point the way forward. The German stock market survived the week of the central banks well: the leading index Dax ended trading on Friday at 15,961 points. It was the fourth straight week of gains and the highest weekly close in almost a year and a half. The broad market rose last week despite both the US Federal Reserve and the European Central Bank raising interest rates. The latter has even given a clear signal that interest rates will continue to rise, and the Fed may also be forced to hike further, as Friday’s stronger-than-expected jobs report shows. At the same time, the regional bank crisis in the USA continues to smolder and in Germany the decline in industrial orders is sending a signal of recession.

The euro has come under pressure after a robust US job market report.
The common currency last traded at $1.1001 on Friday afternoon, after having dropped to $1.0967 at one point. Before the job market data was released, the euro was still trading comfortably above $1.10. The European Central Bank set the reference rate at 1.1014 (Thursday: 1.1074) US dollars. The dollar thus cost 0.9079 (0.9030) euros. The US labor market was stronger than expected in April. Surprisingly, the unemployment rate fell. Wages rose much more than expected. In addition, noticeably more jobs were created than forecast by analysts. However, the previously reported employment growth in the two previous months was revised significantly downwards.

“The labor market in the US is amazingly resilient,” commented Ulrich Wortberg, an economist at Landesbank Hessen-Thüringen.
The US Federal Reserve signaled the possibility of an interest rate pause this week. However, the strong labor market and wage developments are making the fight against high inflation more difficult. “As long as there are no clear signs of a slowdown, the Fed will probably avoid clearly declaring the end of the rate hike cycle or even the prospect of the first rate cuts.” Higher interest rates tend to make a currency more attractive to investors. Meanwhile, the Swiss franc came under pressure against all other major currencies. Inflation in the country fell more sharply than expected year-on-year in April. On the one hand, the interest rate hikes by the National Bank are clearly having an effect, and on the other hand, the situation in the supply chains and in energy prices is easing.Anyway, Let`s Ta A Quick, Detailed Overview
At The Price Action Of The DXY, The USD10Y, And/Or WalLStreet

DXY Rebounds After Jobs Report
The dollar index rose to 101.7 on Friday after the US jobs report showed the labor market remained strong throwing cold water into expectations that the Federal Reserve rate-hike cycle was over. The US economy unexpectedly added 253K jobs in April, well above forecasts of 180K while wages grew the most in 9 months.

US Treasury Yields Rise Sharply Following Payrolls Data
The yield on the US 10-year Treasury note rose to above the 3.45% level, rebounding sharply from the one-month low of 3.35% touched on May 4th after strong labor market figures for April ramped up hawkish bets for the Federal Reserve’s policy outlook. More than 250 thousand jobs were added to the US economy, while the unemployment rate fell to 3.4% and wages grew by 0.5%, all tighter than expected, to momentarily reverse the trend of data that pointed to a softening job market. The data added leeway for the Federal Reserve to leave its funds rate elevated for a prolonged period. In its last meeting, the central bank raised its rate by 25bps and refrained from signaling any future rate hikes.

US Stocks Rally
The Dow rose 500 points Friday afternoon, while the S&P 500 and Nasdaq 100 were up 2% and 2.4%, respectively, as regional banks rebounded sharply and strong jobs report tempered fears of a recession. Regional banks, such as PacWest and Western Alliance, rebounded by 70% and 37%, respectively, easing concerns about stress in the financial sector. Also, investors welcomed positive earnings from Apple that showed iPhone sales rose, pushing its stock up over 3%. On the data front, the US nonfarm payrolls rose more than anticipated in April while wage growth had unexpectedly accelerated on one side showing that the US economy remains strong but on the other side challenging the expectation that the Federal Reserve rate-hike cycle was ending. As of Thursday’s close, the Dow, S&P 500, and Nasdaq were down 2.8%, 2.6%, and 2.1% this week, the worst performance since early March.

$5 Trillion Wiped Out – But Dominance Of The Tech Giants Still Unbroken (Yet)
– And Just That Is The Current Solution And/Or Maybe The Problem In The Future! Ins`t It?

I don’t want to fool you; as you know if you know me; if you read my DEVISE 2 DAY Affiliate Financial Market Online Newspaper daily.
I prefer an honest NO – than a false and/or unrealizable YES in the future. Even if I often catch myself talking my mouth full – to have been up-to-date, too optimistic about tomorrow, too fantastic looking back. You can twist and turn it as you will: the Fed and the ECB continue to have the markets firmly in their grip. With their interest rate hikes and, above all, their suggested further course of action, they determine the course of the stock exchanges.Uncertainty About Further Fed Action
Unexpectedly, the US Federal Reserve raised interest rates by 0.25 percentage points to between 5.00 and 5.25 percent – the highest rate since 2007. However, the statement that further interest rate hikes might be appropriate was removed from the press release. The market took this change in statement as the end of the most aggressive rate cycle since the 1980s. However, Fed Chair Jerome Powell underlined in the press conference that further interest rate hikes are possible depending on further events. There would be no resolution for a pause in the interest rate cycle, although the Fed expects a mild recession in the second half of the year. However, Powell emphasized that he thinks it is possible that a recession will be avoided. He answered the question about rate cuts later in the year – which the market is pricing in – with his expectation that inflation will be with us for a while longer. Therefore, the Fed is currently not planning any rate cuts in the near future. As a result, the S&P 500 plummeted. That wasn’t what the markets wanted to hear.

ECB: Interest Rates Will Continue To Rise
And the ECB? It also raised interest rates by 25 basis points. ECB President Christine Lagarde seemed a bit tense when she announced the decisions of the Governing Council. Apparently there were different opinions on how to proceed. There were Council members who would have liked to have raised interest rates more, i.e. by 0.5 percentage points. At the same time, however, the ECB has announced that it intends to reduce its trillion-dollar bond holdings more than previously planned, starting in July. But the ECB “still has some ground to make up” in the fight against inflation, as Lagarde emphasized, and will not “pause”. That also didn’t sound in the interest of the stock exchanges.

BigTech Is Back
What now? In order not to get depressed, there are a few other facts to keep in mind. Since the beginning of the year, the large technology groups have caught up on a lot of what they had previously given up. One reason is the good quarterly figures. The portfolio values from the Frankfurt equity fund for foundations and our Frankfurt UCITS ETF – Modern Value such as Microsoft, Amazon.com, Meta Platforms or Alphabet also benefited from this. All of them were able to convince with good numbers. You can see what a difference half a year can make. A few months ago, the world of big tech threatened to collapse. Their stocks fell massively. At its peak, Apple, Alphabet & Co. wiped out a stock market value of a whopping $5 trillion last year. Shares from Apple to Meta Platforms lost between 29 and an incredible 65 percent in the 2022 stock market year. But those who are said to be dead live longer, as is well known. Meta papers have more than doubled since the beginning of the year. At Microsoft and Apple, the increase is over 20 percent.

Pricing Power: Microsoft Shows How It’s Done
The corporations have the advantage that they can use their market power and raise prices. For example, Microsoft recently increased the prices for its cloud products by eleven percent. That is well above the current rate of inflation. It was also announced that the prices would be “adjusted” every six months. But theRedmond-based company has now expanded its dominance with subscription products such as Microsoft 365 to such an extent that there is hardly any real competition today. According to calculations by the analysis company Avispador, 30 to 40 percent of cloud customers have now switched to Office subscriptions. Further price increases are only a matter of time. This is pure pricing power!

What Mean All This For Our Long 4XSetUp In The EURUSD Trading Capability?
The Reasons Are Running Out To Stay Still Long In The EURUSD – And (Not Yet) In The Stock Markets Either
– As I Wrote At The Start Of This Technical Analysis 4XSetUp. That`s Why We Raise Up Our Stop Price At 1.10 EURUSD!

RURUSD seems to be running out of steam above 1.10 EURUSD – after trading as low as 1.00 EURUSD last year.
At that time I assumed that the USD would recover after it had peaked again, as it did at the time of the 9/11 attacks – from the year 2001 !!! – was traded.
And that GBPUSD is also repeating itself from historic lows at the same time. What has happened so far! But I no longer believe that the recovery continues! Because in retrospect it seemed to have turned out faster and higher; than expected. At least not from my humble personality. And so I think it’s time to take profits in EURUSD. Because I don’t assume that the ECB will continue to raise interest rates significantly compared to the FED. So that the USD, as a liquidity haven that is too expensive, should not be omitted in the future – as many Bitcoin enthusiasts, as well as gold enthusiasts (a generation, the last two decades, before) claim. But on the contrary! The USD index seems to be recovering around the 100 point mark in Chicago, on the futures market, maybe even!? Yes, maybe even form a short-term trend reversal formation?! But that is going too far today, at this point. First tighten the stop price to 1.10 EURUSD.
And if he should recover in the course of the week? I wouldn’t want to get in anyway! That`s it; form my side about the EURUSD today…