US Stock Markets Make Gains as Tech and Financial Shares Rally

March 30, 2023

US stock markets experienced gains on Wednesday, with tech and financial shares leading the way, as investor risk appetite recovered from recent banking sector turmoil. The financial sector was hit hard by the collapse of three US banks this month but managed to rally on Wednesday, despite reports that the Federal Deposit Insurance Corp. was considering tightening the squeeze on larger banks to help cover the almost $23bn in costs from the bank failures.

In the benchmark, the tech-heavy Nasdaq 100 entered a bull market, rising 20% from a December low. This was an impressive feat, given the recent banking sector turmoil. The S&P500 climbed back above 4,000 with 1.42% daily gain on Wednesday, and all eleven sectors stayed in positive territory, showing that the market regained recovery strength.

The Real Estate and Information Technology sectors performed the best among all groups, rallying with more than a 2% gain daily. This is a significant development, as Wall Street analysts have found it challenging to predict how the stock market will react in the coming months, given the uncertainties surrounding the Fed’s future actions. Their average year-end goal for the S&P 500 has remained constant at 4,050 for three straight months, a phenomenon not seen since 2005.

The Dow Jones Industrial Average rose 1%, and the MSCI world index edged higher with a 0.2% gain for the day. This indicates that investor sentiment is gradually recovering, despite the recent banking sector turmoil.

Main Pairs Movement

On Wednesday, the US dollar showed some signs of recovery as it gained ground against most of its major counterparts. The DXY index rose 0.22% to 102.67, rebounding from a near seven-week low of 101.91 seen last week. Meanwhile, the Japanese yen was particularly volatile as Japan’s fiscal year-end drew near.

The EURUSD was little changed on Wednesday, as ECB rate-setters continued to talk about the need to raise interest rates further, offering support to the Euro. However, the pair slid sharply following touching the daily high of 1.0872 level during the UK trading session, and closed at 1.0844 for the day. On the other hand, the GBPUSD lost upside traction after reaching the daily high of 1.2361 level, and closed at 1.2312 level, experiencing a 0.23% daily loss.

The Gold traded slightly lower at $1,965 per troy ounce as financial markets remained optimistic despite concerns about the banking sector. Additionally, the macroeconomic calendar remained quiet for the third consecutive day, leaving little to motivate speculative interest and making room for some appreciation of the US Dollar. The XAUUSD dropped dramatically during Asian trading session but then hovered in a range from $1961 to $1969 marks during US trading hours.

Technical Analysis

EURUSD (4-Hour Chart)

Based on the early trading session on Wednesday, the EURUSD price has been fluctuating within a narrow range of around 1.0850. However, after the release of the unexpected rising of US data Pending Home Sales (MoM) in February, the EURUSD dropped to 1.0830, which is close to the previous low on Tuesday at 1.08177. The macroeconomic calendar has been sparse in terms of data releases. The European Central Bank had a non-monetary policy meeting, which ended without any statement as usual. ECB officials have been supporting the case of further rate hikes, but there are different views on the banking situation.

Looking at the 4-hour chart, it appears that the bulls are still in control. Technical indicators are above their midlines with modest upward slopes, and the pair is comfortably consolidating above its moving averages, with the 20 Simple Moving Average (SMA) around 1.0800. A test of the Fibonacci support level is possible if there is a definite downward extension below the 20 SMA, although further losses are unlikely in the immediate future.

Resistance levels: 1.0903, 1.0990

Support levels: 1.0748, 1.0669

XAUUSD (4-Hour Chart)

The precious metals market has seen some consolidation this week after significant gains since the start of March. The price of gold (XAU/USD) rose above $1,950 and peaked around the $2,000 resistance level, while the silver price (XAG/USD) has been showing a steady uptrend and is currently trading above $23 with more room for growth before reaching its year-to-date high in January. As of typing this, the gold price is trading at $1,963 with an RSI of 59.83. Gold trading has been volatile in the past two weeks due to events such as banking bankruptcies and high-stakes central bank meetings. However, investors are now looking forward to the next Federal Reserve meeting in May and keeping an eye on the upcoming US Personal Consumption Expenditures Price Index release on Friday and the Chinese Purchasing Managers Index releases.

Although gold is still below its record highs, it has started a short-term consolidation period. According to economists at Credit Suisse, a sustained move above $2,000 is necessary to reinvigorate upward pressure. If gold fails to defend its 55-day moving average, there could be further weakness toward the recent range low at $1,805 before reaching the crucial 200-day moving average.

Resistance: 1980, 2003

Support: 1934, 1914

Economic Data