Markets to watch this week: USD/JPY, Gold, NASDAQ and Westpac

The global market has entered a new phase of volatility with a particularly strong focus on the central bank’s position. The uncertainty about how aggressive the Fed’s next move would be, as shown by the surging US ten-year yield, has trigged fear for the economic outlook.

Apart from a successive 50-point rate hike for FOMC’s next meeting, investors are being urged to prepare for the new era of quantitative tightening to start as soon as next month. In addition to that, the upcoming Q1 earnings are anticipated to see S&P 500 companies report their slowest earnings growth since the early days of the pandemic.

USD/JPY

USD/JPY has been moving on an upward trajectory since March. It has just made a breakthrough to the 125 handle, a level that hasn’t been seen for nearly seven years.

The pair is in a position to challenge its next high, which brought the price of 126.565 in view and was last recorded in May 2002. The catalyst behind the move was the prospect of tightening by the Federal Reserve, thus fuelling the soaring demand for the greenback.

Gold

The market for the precious metal has been caught in a consolidation phase as the price moved within the narrow band formed between $1916 to $1988, over the past four weeks.

While it’s notable that the price is coming to the top of the range, it still faces growing risks as inflation data is to be revealed this week. This may leave the Fed no other choice but to gear the interest rate hike much harder than expected and in that case, the price of gold, which has often been viewed as 'inflation heaven', will be under more pressure.

NASDAQ

The NASDAQ Index has dropped more than 8% from last week. The deepening losses were triggered by the fear of a fast-approaching tightening monetary business environment that has spurred investors to drop more risky assets, such as tech stocks.

From a technical viewpoint, the index has been following the descending trendline for the past seven trading sessions. In the event of a breakout under the next support level, 13844, it would end the near-term uptrend and bring the February low back into view. Otherwise, pushing above 14241, where the current 50-day moving average is, will help the index to reunite with its 20-day MA around 14500.

However, the near-term momentum, as indicated by the descending RSI curve has suggested the market is moving towards bear-biased.

Westpac Banking Corp (WBC)

The Westpac share price led the rally within the Australian banking sector in March, packed with a nearly 14% gain - the highest level of the year.

The momentum was ignited by the December quarter earnings, which shows the group’s unaudited cash earnings rose at an enviable rate of 74%.

Not to mention that a $3.5 billion off-market buyback made its shares even more favourable. The outlook for the banks will be the key watch for Westpac’s shareholders as investors may get some hints from the US bank’s Q1 earnings due this week.

The share price of Westpac has been wandering around the level of $24 for the past two weeks with support from the 20-day MA. The previous trend line, which is turning to a pressure bar, for now, will see the next resistance level at $24.58. Overall, the momentum for the first bank in Australia stays bull-biased as all three moving averages point north.

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