Inflation And China Worries Remain, Elon Musk Stays In The Spotlight

6 min readApr 26, 2022

Yesterday, the European indices showed weakness, closing their trading sessions in the red, as concerns over the slowing economic growth continued to worry investors. Initially, the U.S. indices followed the footsteps of their European counterparts yesterday, however, just roughly an hour before the closing bell, they have managed to climb back into positive territory and end their sessions in the green. Twitter Inc. board accepts Elon Musk’s offer.

China Economic Slowdown Remains A Concern

Yesterday, the European indices showed weakness, closing their trading sessions in the red, as concerns over the slowing economic growth continued to worry investors. The bad signals started coming from China, as the country seems to be battling one of its worse cases of covid outbreak. Market participants believe that this issue could cause global supply shortages of certain goods, which might lead to a further acceleration of inflation. Even yesterday’s better-than-expected German Ifo business climate index, which showed up 91.8 against the forecasted 89.1, could not lift the spirit of some investors in Europe. Emanual Macron’s presidential victory, which was supposed to be seen as a positive outcome for the European market, was overshadowed by the Chinese problem.

Equities Stay Mixed And Twitter Purchase

Initially, the U.S. indices followed the footsteps of their European counterparts yesterday, however, just roughly an hour before the closing bell, they have managed to climb back into positive territory and end their sessions in the green. Communication services, technology and consumer cyclicals were best performing sectors in the U.S. yesterday. The worst performing ones were energy, basic materials and utilities.

Twitter Inc (NYSE: TWTR) took center stage, gaining 5.66%, after reports started coming out that a deal between the company and Elon Musk might be reached by the end of Monday. And indeed, before the market close, the Twitter Inc. board accepted Musk’s offer of buying the company for $54.20 per share and eventually taking it private. A lot of speculations are surrounding this deal, as weather it was a hostile take-over or not. Twitter’s board denied this allegation. Twitter Inc. will be releasing their earnings on April 28th and analysts are not expecting great results. If that’s the case, this might have played in favor of selling the company to Mr. Musk. The Tesla inc. CEO is planning to inject billions of USD into Twitter, in order to revive it by, quote: “…enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”

Earnings And Other Economic Data

Yesterday, in the currency world, the U.S. dollar stayed strong against its major counterparts. However, the stronger one was still the Japanese yen, which kept its safe-haven status, as equities took a beating. The worst performers were AUD and NZD.

USD/CHF — Technical Outlook

USD/CHF continues to trade above a short-term tentative upside support line taken from the low of April 12th. At the time of writing, the pair is flirting with one of its key resistance barriers, at 0.9597. Although there is a good chance we might see a further move north, we would still prefer to wait for a breakout above that 0.9597 hurdle first.

If, eventually, that break occurs, this may invite more buyers into the game. USD.CHF could travel to the 0.9650 obstacle, or even all the way towards the 0.9704 level, marked by the inside swing low of May 25th, 2020.

Alternatively, a break of the aforementioned upside line and a rate-drop below the 0.9546 zone, marked by yesterday’s low, may signal a change in the direction of the current short-term trend. More bears could step into the field, potentially dragging USD/CHF to the 0.9514 hurdle, or to the 0.9454 level, marked by the low of April 20th.

Today, market participants will be on the lookout for earnings reports from such tech-giants like Microsoft, Alphabet and Texas Instruments. Those will be followed by earnings of Visa, PepsiCo, UPS General Electric Mondelez, 3M and British American Tobacco.

In terms of economic data releases for today, during the early hours of the Asian morning, Japan delivered its jobs numbers for March. The unemployment figure was expected to remain the same as previous, at 2.7%. The actual number came out at 2.6%

NZD/JPY — Technical Outlook

Overall, NZD/JPY is on a decline, as it continues to form lower lows, after reversing to the downside in the middle of last week. The rate is also trading well below a short-term tentative downside resistance line drawn from the high of April 20th. Yesterday, the pair found strong support near the 200 EMA on our 4-hour chart and near the 84.11 zone, from where it rebounded somewhat. In order to get comfortable with further declines, a break below that zone is needed.

A break below the 84.11 hurdle will confirm a forthcoming lower low, possibly opening the door towards the 83.70 zone, marked by the low of March 23rd. If the slide continues, the next support target could be at 82.52. That area is marked by the high of March 21st.

In order to consider a corrective move higher, we would prefer to wait for a push above the current highest point of today, at 85.14. This way, a few more buyers might get interested and join in the action, potentially driving NZD/JPY towards the 85.86 obstacle, or to the 86.86 level. That level marks the inside swing low of April 20th.

There won’t be any significant data sets from Europe, however, from the U.S. we will receive the core MoM durable goods orders for March, together with the new home sales numbers for March. The core durable goods orders are believed to have improved from -0.6% to +0.6%. However, the new home sales number is expected to decline slightly, from 772k to 765k. Also, the U.S. will release its CB consumer confidence figure for April. That figure is believed to have improved slightly from 107.2 to 108.0.

As For The Rest Of Today’s Events

The U.S. will deliver their house price index for March on a MoM and YoY basis. Currently, there are no available forecasts for those two indicators.

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