What are we looking at today:
- USD gains continue: Yet another boost to USD strength has come this morning with the Bank of Japan strongly reiterating a dovish positioning. This is sending USD/JPY shooting higher.
- Indices rally into a second day: After yesterday’s tick higher, indices are continuing to rally this morning. As ever the question will be for how long this move can continue before selling pressure resumes.
- Data trading: Q1 US Advance GDP will certainly take the focus today for cross-asset traders but especially focusing on the USD. Elsewhere, the EUR may also be impacted by Eurozone sentiment gauges and German inflation.
With a strong reaction after-hours on Wall Street to results from Meta Platforms, NASDAQ is set for a day of strong recovery. This positive outlook for a higher risk index is feeding through into other markets. With US futures strongly higher, European indices show a risk-positive bias with the outperformance of the DAX this morning.
The big news in forex is that the Bank of Japan has clearly disappointed someone in the market. The most dovish of central banks remains dovish (big shock), but has also reiterated a commitment to potential further easing of monetary policy if required. Subsequently, there has been a considerable response of selling JPY, reflected most acutely with USD/JPY above 130 for the first time in 20 years. This simply adds further fuel to the ongoing trend of dollar strength.
US Advance GDP is the big focus on the economic calendar today. Analysts are looking for growth in Q1 of just over 1%. However, with the final Atlanta Fed GDPNow cast looking for +0.4% this could open for a negative surprise. Elsewhere, Eurozone sentiment data looks set for a slight reduction in April, whilst German inflation will be watched for any readthrough to the crucial Eurozone inflation tomorrow.
Market sentiment looks more positive today: With a strong look to NASDAQ futures, European indices are feeling the benefit. There is massive JPY underperformance following the dovish BoJ.
Treasury yields are steady to slightly lower today: Having rebounded yesterday, there is a more settled feel to US yields today. This will help the near-term recovery of risk appetite.
Results help a Wall Street rebound: NASDAQ futures are significantly outperforming this morning as Meta Platforms (AKA Facebook) shares rose +18% in after-hours trading following positive results.
Bank of Japan still hugely dovish: The BoJ reiterates a dovish stance on monetary policy. The rate remains at -0.10% with the 10year JGB yield target at 0% and bond purchases will be conducted every working day. Policy rates will remain at present or lower levels and the BoJ will ease policy “without hesitation” if required.
Cryptocurrency rebounds with risk appetite: Once more we find cryptos recovering amid an improvement in risk appetite. Bitcoin is around +1% this morning and is looking to move back towards $40,000.
Central Bank speaks: The Bank of England’s Governor Bailey speaks at 1000BST. GBP positions will be reactive.
- Eurozone Sentiment (at 1000BST). Economic Sentiment is expected to decline to 108.0 in April (from 108.5 in March). Industrial Sentiment is expected to reduce to +9.5 (from +10.4); with Services Sentiment expected to decline slightly to +14.2 (from +14.4)
- German inflation (at 1300BST). Analysts expect that German harmonized inflation (HICP) will be steady year on year at 7.6% in April (no change from 7.6% in March)
- US Advance GDP (at 1330BST). Consensus expects annualized growth to be +1.1% in Q1 (following 6.9% in Q4).
- US Weekly Jobless Claims (at 1330BST). Claims are expected to reduce slightly to 180,000 (from 184,000 last week).
Major markets outlook
Broad outlook: Market sentiment has built on yesterday’s recovery and is again looking more positive today. We continue to be cautious as risk rallies have tended to be short-lived in recent weeks.
Forex: AUD is a shade higher again, with considerable JPY underperformance.
- EUR/USD remained weak overnight but has just managed to pick up from 1.0480 into the European session. Intraday and near-term rallies have consistently been used as a chance to sell in recent weeks, so we are cautious for now. However, daily and 4-hour momentum is deeply oversold and a technical rally is due. Initial resistance is 1.0570 and then 1.0655. The next support of significant note is at 1.0325, the massive low from 2016.
- GBP/USD has picked up from 1.2490 in the past few hours and this move needs to be watched. The selling pressure has been huge of late but momentum is deeply oversold and a technical rally is due. Reaction to the resistance around 1.2600 will be the first test. A move above there leaves the next resistance around 1.2675/1.2770. The next support of any significance is at 1.2250.
- AUD/USD has been looking to steady the sell-off in the past 24 hours. Although lower daily highs continue to be posted, another tick higher this morning suggests there is a growing appetite to support the Aussie. There is room for a technical rally as the RSI picks up from 30. A small positive divergence on the 4-hour RSI adds to this sense of improvement. We are watching resistance at 0.7190/0.7230 as a near-term trigger. Support initially at 0.7075.
Commodities: Precious metals are hinting at a technical rally within their downtrends. Oil has rolled over around near-term resistance again.
- Gold has been sliding below important support in recent days and an intraday breach of $1877 adds to this threat. A minor rebound coming into the European session hints at a potential rally, but if this move quickly fails and a close below $1877 is seen, this would be a confirmed corrective move that could drag the market back towards the primary uptrend (dating back to May 2019) which is currently around $1820. Initial resistance is growing around $1910/$1915 a new sharp downtrend forming a further barrier around $1909.
- Silver has been falling sharply in recent sessions, but there is a hint of support forming around $23.00 (in the support band around $22.80/$23.08). Initial resistance is at $23.69 to trigger some sort of near-term recovery.
- Brent Crude oil has shied away from the test of the top of the old pivot area around $105/$107 which is a basis of resistance. However, there is a choppy near-term feel to oil as it holds on to $103.90 as support. A move above $107 would open $110.70 as an initial test. The uncertainty is in keeping with the outlook of a market that swings between support at $98/$100 up toward resistance at $116.
Indices: The second day of recovery is engaging near-term rallies on indices. However, rallies have been seen as a chance to sell previously.
- S&P 500 futures picked up from the crucial support at 4101/4138 (initial reaction lows after the Russian invasion) to hold what is increasingly a broad range between 4101/4630. Another tick higher this morning is improving near-term momentum and is leaving little higher lows in place, with the first one at 4172. This will also bring the initial resistance at 4303 back into play.
- DAX is ticking strongly higher this morning and is testing the top of the 13,855/14,030 band of initial overhead supply resistance. The next test will be a lower high at 14,167 which is a barrier to testing the four-month downtrend (currently at 14,475). Initial support is now at 13,855.
- FTSE 100 has pulled higher this morning and is into the resistance band between 7475/7530. Moving back above this band would be a positive signal of a more sustainable improvement outlook once more. Initial support is at 7418/7442.
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