What are you looking at today:
- USD is mixed across major forex: The USD corrected yesterday but is more of a mixed bag this morning. Positive performance versus the commodity currencies is being outweighed by underperformance versus a rallying EUR.
- EUR rallying after Macron performance: The EUR has been rebounding in the past 48 hours. French President Macron appeared to perform relatively well in the debate with Le Pen, helping to fuel something of a relief rally. We expect elevated volatility in EUR moves around Sunday’s election run-off.
- Indices continue to hold recovery momentum: The S&P 500 futures and the German DAX have both broken higher through initial resistance. Can they hold these breakouts?
- Central bank chiefs speak: Traders will be focused on three major central bank chiefs speaking today. The Federal Reserve Chair Powell will be the highlight, but there is also Bank of England Governor Bailey and European Central Bank President Lagarde speaking during the US session.
- Data trading: Eurozone inflation is expected to be unrevised, whilst Eurozone Consumer Confidence is likely to continue to deteriorate. For US data, jobless claims are expected to be low once more, whilst the Philly Fed Manufacturing is expected to decline slightly.
The shift in sentiment seen over the past couple of days is being sustained this morning. The USD sagged yesterday as Treasury yields dipped, but today is more of a story of EUR resurgence. Market fears of the potentially chaotic impact of a Le Pen victory in the French presidential election have been eased slightly as it was seen that incumbent President Macron won the debate last night. According to one poll, Macron was deemed to be more convincing by 59% of the survey. This has allowed the EUR to continue its run higher this morning. We also see the rebound continuing on equity markets this morning, with European indices solidly higher. The French CAC is outperforming. Stateside, we are also seeing US futures higher, with the NASDAQ outperforming, something which reflects a more risk positive outlook.
There are more central bank heads than you can shake a stick at today. The Fed’s Powell is due to speak at a couple of events within a couple of hours, whilst the BoE’s Bailey and ECB’s Lagarde are also on the agenda. It could be a choppy afternoon for traders of USD, GBP and EUR.
On the economic calendar, the data starts with the final Eurozone inflation will be the initial focus, but analysts are not looking for any revision to the flash data. Subsequently, any surprises would be market-moving. There are a couple of US data points early in the US session with jobless claims (expected to improve slightly) and the Philly Fed Manufacturing, forecast to decline slightly as the business conditions component slips. Eurozone Consumer Confidence will also be watched for continued deterioration later in the US session.
Market sentiment still with a glass half full: The positive bias to trading sentiment continues to favor indices rallying and a EUR near-term recovery. Commodities are mixed with precious metals lower and oil higher.
Treasury yields are steady: US yields have stabilized after yesterday’s sharp move lower. The US 10-year yield pulled back from 2.98% to complete a “bearish engulfing” candlestick yesterday, which is a reversal signal. The yield is marginally higher this morning.
New Zealand inflation was slightly lower than expected: Q1 inflation increased to +1.8% (from +1.4% in Q4) which increased the YoY inflation to 6.9%. This was lower than the 7.1% consensus forecast.
50bps Fed hike looks nailed on for the next meeting: FOMC’s Daly (not a voter in 2022, dovish) says the case for a +50bps hike was complete.
ECB’s Wunsch considers a rate hike: Wunsch (Belgian, hawk) has suggested that rates could be positive this year, and is considering a deposit rate hike in July.
Oil supplies: Brazil is looking to increase oil output. The oil minister is looking for prices to stabilize under $100 per barrel.
Cryptocurrency continues a steady recovery: Coins have been moving back higher in a slow but steady fashion in recent days. Bitcoin is above $41,500 and is around +0.5% higher today.
- Eurozone final Inflation (at 1000BST). No revisions to the flash data are expected with headline HICP at 7.5% and core HICP at 3.0% in March.
- US Weekly Jobless Claims (at 1330BST). Claims are expected to reduce once more to 180,000 (from 185,000 last week). Also, watch continuing claims which are expected to reduce by 20,000 to 1.455m (from 1.475m last week).
- US Philly Fed Manufacturing (at 1330BST). A decline to +21 is expected in April (from +27 in March)
- Eurozone Consumer Confidence (at 1500BST). Confidence is expected to deteriorate further to -20 in April (from -18.7 in March).
Major markets outlook
Broad outlook: Market sentiment recovery remains on track. Indices are pulling higher and the USD is struggling amid a strengthening EUR.
Forex: EUR outperformance is the story of the day. NZD is struggling after New Zealand inflation missed estimates.
- EUR/USD has engaged in a decisive recovery in the past 48 hours. A further strong move higher early today is now testing the resistance band between 1.0920/1.0940. This has been where the EUR has struggled in the past couple of weeks, so reaction around this resistance will be an important gauge. Above 1.0960 confirms continued recovery and a test of a ten-week downtrend (currently at 1.1060). Support at 1.0830/1.0865.
- GBP/USD has held on to yesterday’s rally and continues to test the initial resistance band 1.3045/1.3075. The bulls will also be eyeing a test of the seven-week downtrend currently around 1.3100. Key resistance remains around 1.3145/1.3180. Initial resistance is at 1.3020/1.3040.
- AUD/USD has rallied towards a test of the key near to medium term pivot band resistance 0.7460/0.7490. Momentum is improving and there seems to be an appetite to support weakness now. Holding on to support around 0.7410/0.7425 is important for the continuation of the recovery.
Commodities: A sharp pullback correction on precious metals is now testing key support. Oil is also trying to build support after a sharp pull lower.
- Gold has found support above the ten-week uptrend (comes in around $1931) and a band of price support between $1930/$1940. However, the market looks more cautious today and is slipping back slightly. This looks to be a slightly uncertain time for gold, but for now, we are happy to use weakness as a chance to buy. Initial resistance is at $1958/60.
- Silver picked up from $24.88 yesterday which was just above the key support area of the old key highs around $24.55/$24.85. The market looks uncertain in the near term outlook, but whilst the support of a 10-week uptrend (at $24.70) remains intact, we are still looking to use weakness as a chance to buy.
- Brent Crude oil retains a highly uncertain near to medium-term outlook, as characterized by yesterday’s “doji” candlestick. This will make trading with any conviction very difficult. There is a tick higher this morning, but resistance lies overhead between $111.95 and/116.10. Initial support is at $105.60.
Indices: Indices continue to improve, with near-term resistance levels being breached.
- S&P 500 futures have started to move decisively higher, posting three positive candlesticks in a row now on the daily chart. Another move higher is coming this morning after consolidation overnight around the old pivot range 4444/4466. This is coming with improving momentum and opens the next resistance at 4520 and then 4590. We look to use any unwinding moves into 4444/4466 as a chance to buy. Below 4432 would be disappointing now.
- DAX has moved decisively through the pivot resistance at 14,325 and is accelerating higher to test the big three and a half month downtrend (currently around 14,585). A move above resistance at 14,610 would add to conviction in a recovery. Support is building around 14,200/14,325.
- FTSE 100 continues to trade in a completely different manner from other indices. Despite this, the move has been edging higher in recent days. There is a slight slip lower early today, but we are happy to buy intraday weakness. Support is forming above the key band 7485/7526 and the market is building for a test of initial resistance at 7677 and maybe the key high at 7695.
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