Daily market analysis

US Treasury yields pointed to higher interest rates, Nasdaq closed lower

February 13, 2023

The Dow Jones Industrial Average closed 0.5% higher at 33,869.4; the S&P 500 rose 0.22% to 4,090.48; the Nasdaq fell 0.61% to 11,718.12.

The NASDAQ on Friday closed lower as mega-cap growth stocks came under pressure after US Treasury yields pointed to higher interest rates and shares of ride-hailing firm Lyft plummeted 36 percent to US$10.31 as it lowered prices, raising concerns it was falling behind bigger rival Uber Technologies Inc. Uber shares also dropped 4.43 percent to US$34.30.

Yields on the benchmark 10-year Treasury note rose to their highest in more than a month following an auction on Thursday of 30-year bonds that drew weak demand.

Higher bond yields are going to adversely affect higher-growth technology companies.

A rally in energy stocks as oil prices climbed on Russia’s plans to cut crude supplies helped push up the Dow Jones Industrial Average and the S&P 500 Index.

After US equities were rattled over the week by strong jobs data, investors are waiting for last month’s consumer inflation data this week for clarity on the Fed’s rate-hike path.

Main Pairs Movement

The dollar rose on Friday as investors grew increasingly concerned that U.S. inflation data due out next week could be higher than market expectations, with earlier data showing that consumers expect prices to continue to rise next year. DXY reverses Thursday’s decline to weekly lows and regains the area well north of the 103.00 barriers on Friday. At the time of writing, the price is trading at 103.578.

Oil prices rose more than 2% on Friday and more than 8% weekly as Russia announced plans to reduce oil production next month after the West imposed price caps on Russian crude and fuel. The decision to cut production suggests that capping the price of its oil products has had an impact. However, two OPEC+ representatives told Reuters that OPEC+ plans to take no action after Russia announced production cuts. Goldman Sachs lowered its 2023 price forecast for Brent crude futures to $92 from $98 a barrel and its 2024 price forecast to $100 from $105.

Gold rose slightly on Friday as the market awaits next week’s U.S. inflation data, which could affect the Fed’s monetary policy trajectory. Spot gold rose 0.2% to $1,864.10 per ounce. At the time of writing, the price traded at $1,865.30.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD dropped dramatically on Friday, as US Dollar regained strength amid investors’ worries about higher interest rates by the Federal Reserve. Currently, the spotlight has entirely shifted to the United States Consumer Price Index (CPI) data, which will release on Tuesday. As per the consensus, the headline inflation could soften to 5.8% on an annual basis vs. the prior release of 6.5%. Moreover, the core inflation that excludes the impact of oil and food prices is seen lower at 5.3% against the former release of 5.8%. In the Eurozone, the Eurozone inflation rate has shown a meaningful decline after easing energy prices and higher interest rates by the European Central Bank (ECB). However, the inflation rate is still hovering at extremely elevated levels, which needs a monetary policy sufficiently restrictive to tame inflation.

From the technical perspective, the four-hour scale RSI indicator slid to 35 figures as of writing, suggesting that the pair are surrounded by negative traction. As for the Bollinger Bands, the pair dropped below the lower band and the size between the upper and lower bands got larger, showing that the pair is more favored to the downside path shortly.

Resistance: 1.0930, 1.1022

Support: 1.0662, 1.0508

GBPUSD (4-Hour Chart)

The GBPUSD dropped below the 1.2100 level during the American trading session, as upbeat US Consumer Confidence data supported the US Dollar. The pair’s upside is limited by the mixed macroeconomic data released from the UK. The UK GDP report concentrated by 0.5% monthly in December and stagnated in the fourth quarter. On a positive note, Industrial Production expanded by 0.3% in December, surpassing the market expectation for a decrease of 0.2%. Nevertheless, investors currently keep their eyes on next week’s key inflation data from the US. Market participants could refrain from committing to large positions ahead of the key figures.

From the technical perspective, the four-hour scale RSI indicator remained at the neutral level, 45 figured as of writing, which shows that the pair now have no clear path to go and any signal might attract critical transactions to the pounds. As for the Bollinger Bands, the pair has just fallen below the 20-period moving average and no clear change in the gap size, suggesting that the market participants are waiting for further signals.

Resistance: 1.2264, 1.2391, 1.2492

Support: 1.1927, 1.1859

XAUUSD (4-Hour Chart)

Gold prices were struggling to hold near the $1860 mark as of writing, as the benchmark 10-year US Treasury bond yield is up more than 1% on the day above 3.7%, undermining the Dollar-denominated gold. Investors from worldwide are putting their focus on the Federal Reserve rate hike path, triggering additional legs to the US Dollar pullback come this Friday. The higher interest rate for longer weighs on the corporate sector, hurting global stocks. Apart from this, the end-of-the-week repositioning could also come into play, exacerbating the pain in the yellow metal price, as market participants gear up for next Tuesday’s key United States event release.

For the technical aspect, the four-hour scale RSI indicator 39 figures as of writing, continuing to hover in the neutral level. As for the Bollinger Bands, the price is trading below the 20-period moving average, showing that the pair is staying on the back foot. In conclusion, the price is capped in a narrow range so far this week, and it needs a decisive breakthrough to confirm the path in the near term. At the moment of writing, the price is currently struggling to hold above support at $1,860, and the pair continued to bear downside traction. If the price drops below the current support, it may trigger some technical selling and drag the price deeper.

Resistance: 1898, 1913, 1956

Support: 1860, 1832, 1800

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