Indices Continue Accelerated Correction as Volatility Surges
25 May 2023
Wednesday witnessed highly volatile and technical movements in the market, indicating the end of the waiting period for favorable trading opportunities. As we move into Thursday, the excitement is expected to continue with the release of the preliminary GDP data from the United States. The forecasted reading of 1.1% remains unchanged from the previous report.
Yesterday's market events featured the anticipated interest rate decision from New Zealand, aligning with expectations of a 25 basis point increase. However, the New Zealand Dollar (NZD) experienced a sharp decline primarily due to the Reserve Bank of New Zealand's statement and subsequent press conference. Additionally, the UK's Consumer Price Index (CPI) exceeded expectations but remained significantly lower than the previous figure. While the initial reaction favored the British Pound (GBP), it eventually relinquished most of its gains.
The most significant moves were observed in the indices, which clearly entered and extended the correction stage. Key developments include the DAX breaking a crucial mid-term uptrend line, the CAC breaching a significant horizontal support at 7350, the Dow Jones testing the lower boundary of a symmetrical triangle pattern, and the S&P 500 falling below a critical support level at 4190.
Further noteworthy developments occurred in the currency market, such as the EURUSD breaking a key support level at 1.076, which had been intact since February. The US Dollar also demonstrated strength against the Japanese Yen (USDJPY), reaching the highest levels since the end of November, and the Australian Dollar (AUDUSD), where a crucial support level was breached, leading to trading at yearly lows.
Conversely, commodities have been moving in the opposite direction. Gold and Silver prices are declining, largely influenced by the stronger US Dollar, while Oil continues its gradual ascent. It is worth contemplating the potential impact if the US Dollar were to exhibit weakness amidst this dynamic landscape.