Trading Week Ahead

Last week we saw another solid week from risk majors to the USD. Gains were stable throughout the week and peaked after Friday’s US and Canadian employment data. Central bank meetings maintained the expected rates as the Reserve Bank of Australia and the Bank of England held rates at current levels.

Tensions Escalate Between Australia and China

The current diplomatic tensions between China and Australia continued to grow, with the Australian government saying they may review the lease over the port of Darwin, which’s currently held by a Chinese firm. This is on the back of canceling the belt and road deal signed by the Victorian government. This didn’t go down well, as China suspended all economic dialogue with Australia. The AUD took a hit on this news but recovered by week's end.

Bank of England Governor’s Comments

The Bank of England’s Bailey commented that a slow down in asset purchases doesn’t change current monetary policy. He also noted that the UK has missed two years in production growth. The GBP saw a positive week. The USD traded higher for a second week to the JPY.

The EUR fought back to the JPY and USD but failed to hit new weekly highs. Regardless it was positive performance to the upside after the stall it saw to the USD. The European Central Bank did comment that there’s a possibility bond purchases may slow down in June.

The USD helped drive Gold to a great week, the yellow metal jumped back above $1800 USD. This week’s jump continued the current fightback trend that continues to develop.

Employment Data

Friday’s employment data was a decent factor to close out last week as figures shocked the market on the negative side. The US added 266K jobs in April, sharply below the 990K expected. Canada’s came in at -206K. US unemployment increased to 6.1% breaking the trend declining trend we have seen for some time now. Canada’s unemployment also increased to 8.1%

This was a bit of a nail, as it show’s some cracks in the recovery, and also shows that stimulus will remain the course for now. This should make sense as we saw declines in the USD and gains in US stocks. Rates are another topic and were raised this week, not due to inflation, but they could be used to stop overheating due to US government spending. This did little to worry the Dow and SP500 as they moved into new all-time highs last week.

USDCAD: The Pair to Watch This Week

This week data-wise, traders will be watching US CPI and retail sales. Comments from the Bank of Canada could be interesting if they on last weeks shock in their jobs data. Gold and US indexes will be a focus this week. Will we see further extensions? Gold could be overextended but will the USD continue to fuel demand? The USDCAD has been hit hard. Could we see a move back to 1.2050, or are we getting closer to a technical pullback?

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

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Daily Market View-U.S Stock Market

The Dow Jones Industrial Average ended at a record high yesterday, driven higher by energy and other economically sensitive sectors, while the NASDAQ closed in red as mega-cap growth stocks slipped. Strong gains by Goldman Sachs, Caterpillar, and Chevron sent Dow to the record. Energy and materials continued this week's momentum, leading gains among S&P 500 sectors. Defensive utilities and real estate led sectoral declines. Energy, financial, materials, industrials are all outperforming. They tend to be cyclically oriented sectors and tend to benefit during periods when the economies are reopening and expanding. Strong economic data and earnings pushed the S&P 500 and NASDAQ indexes to record high last week, but markets have wobbled amid concerns about rising inflation and potentially higher U.S interest rates. The Nasdaq Composite gave up its earlier gains and ended 51.08 points or 0.37%.

Dow Jones Industrial Average

 The Dow Jones Industrial Average rose 0.29% to hit a new all-time high. The best performers of the session on the Dow Jones Industrial Average were Dow Inc., which rose 2.81% or 1.86 points to trade at 68.08 at the close. Meanwhile, Chevron Corp added 2.67% or 2.83 points to end at 108.94 and Merck & Company Inc. was up 2.25% or 1.71 points to 77.70 in late trade. The worst performers of the session were Boeing Co, which fell 2.38% or 5.55 points to trade at 228.08 at the close. Walt Disney Company declined 1.49% or 2.74 points to end at 181.51 and Visa Inc. Class A was down 1.14% or 2.65 points to 229.38.

NASDAQ 100 

The NASDAQ index lost 0.37%. The top performers on the NASDAQ Composite were Nemaura Medical Inc. which rose 134.47% to 11.02, Chiasma Inc. which was up 39.79% to settle at 3.97, and Big 5 Sporting Goods Corporation which gained 31.20% to close at 25.02. The worst performers were Cocrystal Pharma Inc. which was down 31.78% to 1.4600 in late trade, Intrusion Inc. which lost 29.31% to settle at 10.18, and Sequential Brands Group Inc. which was down 26.73% to 12.4700 at the close.

Oil

Oil prices edged higher today in the Asian trading session, recouping early losses, as crude stockpiles in the United States, the world’s largest oil consumer, fell more sharply than expected as refining output rose and exports surged. U.S West Texas Intermediate (WTI) crude futures gained by 9 cents, or 0.1%, to $65.72 a barrel. Easing coronavirus restrictions in Europe have led to a pick-up in fuel demand, analysts from Citi said in a note. As the roll-out of vaccines continues and a pent-up summer driving season continues to manifest, this trend should accelerate, keeping demand for motor fuels robust and boosting market confidence in the recovery story. U.S crude stocks fell more than expected last week as refining output rose and exports surged, the Energy Information Administration said yesterday. Crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with expectations in a Reuters poll for a 2.3 million-barrel drop.

Precious and Base Metals

Gold prices rose today as a pullback in the U.S dollar and Treasury yields lifted demand for the safe-haven metal, while investors awaited U.S non-farm payroll data for April due later this week. Spot gold was up 0.4% at $1,794.30 per ounce. U.S gold futures rose 0.6% to $1,794.20 per ounce. The U.S Federal Reserve is continuing to push back here, it is good for gold because it’s keeping yields lower. I think this will eventually lead to a weaker U.S dollar. A test of $1,800 is expected sooner rather than later the way this market is marching on to the beat of a very dovish Fed. Benchmark U.S. 10-year Treasury yields slipped below 1.6% and hovered close to a one-week low hit on Tuesday, reducing the opportunity cost of holding non-interest-bearing gold. The dollar index dipped 0.1%, moving further away from a near two-week high hit yesterday. Focus now shifts to Friday’s U.S monthly jobs report, which is expected to show non-farm-payrolls increased by 978,000 last month. The U.S. economy may be growing more quickly and unemployment falling faster than the core of Fed policymakers projected in March, Fed Governor Michelle Bowman said yesterday. However, Chicago Fed President Charles Evans reiterated his worries about reaching the 2% inflation goal and said he expected monetary policy to stay accommodative for some time. Lower interest rates decrease the opportunity cost of holding non-yielding bullion. Spot gold is expected to retest resistance at $1,802 per ounce, with a good chance of breaking above this level and rising to $1,816. Palladium rose 0.4% to $2,984.97 per ounce, after scaling an all-time high of $3,017.18 on Tuesday on supply shortfalls. Silver was up 1% at $26.77 per ounce, while platinum dipped 0.5% to $1,230.66.

Traditional Agricultures

Corn futures touched their highest price in more than eight years yesterday as concerns over global supplies and strong demand continued to fuel strong gains. A blistering rally in the market has raised costs for global producers of corn-based ethanol and of meat made from livestock that consume the grain as feed. The December contract posted the biggest gains in the latest surge.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

FOREX-Pulse of the Market

Next to Friday’s non-farm payrolls report, today’s Bank of England monetary policy announcement is the second most important event of the week. Like the Reserve Bank of Australia, the BoE is widely expected to leave policy unchanged. There is only a small chance of tapering but there’s a very high chance of upgraded economic projections. The BoE has a lot to be optimistic about. They are leading the developed world in vaccinations with more than half of their population receiving at least one dose of the COVID-19 shot. New daily virus cases have fallen below 2,000 which is a dramatic improvement from the more than 68,000 cases reported on January 8th. Along with low double-digit to single-digit deaths, the U.K economy is ready to reopen fully by ending all lockdown restrictions on June 21st. Restaurants, pubs, and gyms have been open for a few weeks and the economy is already beginning to reap the benefits with the PMI index rising to its highest level in 89 months. When the country fully reopens, we will see an even bigger boost to growth. While the BoE anticipated recovery, the momentum has been stronger than expected because of how fast the government managed to vaccinate more than half of the population. Combined with the robust recovery in the U.S and the inevitable reopening of euro-area nations, the outlook for the U.K is clearer and brighter today than in February when their last economic forecasts were released. In addition to raising their economic projections, we also expect the BoE to lay the groundwork for summer tapering, which should reignite the rally in GBP. It is actually surprising that sterling traded only marginally higher against the U.S dollar and euro on the eve of the BoE meeting but positioning has a lot to do with this. Sterling has been in an uptrend for the past 6 months and these gains are a reflection of investors positioning for a less dovish BoE. There’s little doubt that the central bank will taper before the Fed and there’s a very good chance they will be the first to raise interest rates as well. So unless the central bank’s statement is littered with concerns or they refrain from upgrading their economic assessment, GBP/USD should trade higher following the monetary policy.

Euro

The single currency gained as Eurozone producer prices accelerated in line with expectations in March, driven by increases for energy and intermediate goods, data showed on Wednesday, reinforcing forecasts of higher consumer inflation in the coming months. Prices at factory gates rose 1.1% month-on-month for a year-on-year increase of 4.3%. Overall, the EUR/USD traded with a low of 1.1984 and a high of 1.2025 before closing the day around 1.2003 in the New York session.

Yen

The Japanese Yen fell as the dollar hovered near a two-week high today in the Asian session, consolidating ahead of a key U.S jobs report that may provide clues on when the Federal Reserve will dial back monetary stimulus. The greenback has rebounded from a one-month low over the past week, swung by U.S. economic data. Overall, the USD/JPY traded with a low of 109.12 and a high of 109.46 before closing the day around 109.18 in the U.S session.

British Pound

The British Pound ticked up as a poll showed Scotland’s main pro-independence party was unlikely to win an outright majority in today’s election, undermining its hopes for a referendum on separating from Britain. Policymakers at the Bank of England meet today when it will publish its May Monetary Policy Report. Overall, the GBP/USD traded with a low of 1.3874 and a high of 1.3924 before closing the day at 1.3903 in the New York session.

Canadian Dollar

The Canadian Dollar strengthened to its highest level in more than three years against its U.S counterpart yesterday, supported by improved investor sentiment and the Bank of Canada's recent shift to more hawkish guidance. Risk-on conditions and the recent move higher in commodity prices bolstered the Canadian dollar. Overall, USD/CAD traded with a low of 1.2249 and a high of 1.2312 before closing the day at 1.2264 in the New York session.

Australian Dollar

The Australian Dollar fell after strained relations between China and Australia took a turn for the worse today after Beijing said it has “indefinitely” suspended all activity under a high-level economic dialogue with one if its largest source of imports. The last meeting under the dialogue was in 2017. The first meeting was held in 2015 when the two countries signed a free trade agreement. Overall, AUD/USD traded with a low of 0.7704 and a high of 0.7764 before closing the day at 0.7760 in the New York session.

Euro-Yen

EUR/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 64 and lies above the neutral zone. In general, the pair has lost 0.18%.

Sterling-Yen

Currently, GBP/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 56 reading and lies above the neutral zone. On the whole, the pair has gained 0.01%.

Aussie-Yen

Currently, the cross is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 58 reading and lies above the neutral region. In general, the pair has gained 0.40%.

Euro-Sterling

This cross is currently trading below 14, 50, and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 54 and lies below the neutral region. Overall, the pair has lost 0.21%.

Sterling-Swiss

This cross is trading below 14, 50, and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 45 and lies above the neutral region. In general, the pair has gained 0.10%.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

FOREX-Pulse of the Market

U.S dollar extended gains yesterday, partially unwinding a month-long decline as investors weighed chances that interest rates will be forced higher by a roaring U.S economic recovery and awaited upcoming data and policy speeches for clues. Yesterday’s bounce nearly reversed losses sustained on Monday after a disappointing U.S manufacturing survey report, leaving it 1% above a one-month low struck last week. Though April’s headline survey numbers were lower than March's, the U.S recovery remained firmly on track with price pressures rising, while the Federal Reserve appeared to be in no hurry to tighten. Financial conditions are nowhere near the level where the Fed would consider pulling back its support, New York Fed Bank President John Williams said on Monday, despite the economy being set to grow at the fastest rate in decades this year as it rebounds from the crisis caused by the coronavirus pandemic. Commerzbank strategists said U.S. data due for durable goods orders and non-farm payrolls will provide further evidence of the economic recovery. However, as the market expectations are a bit too optimistic according to our experts it might put pressure on the dollar despite principally positive results. The greenback advanced 0.6% versus the Antipodean currencies and 0.3% against the yen, euro, and pound in trade thinned by holidays in China and Japan. The dollar index which measures the dollar’s value against a basket of major rivals climbed 0.4% to 91.34, just shy of a near two-week high. Elsewhere central bank meetings are in focus. The Australian dollar weakened as the country’s central bank sharply upgraded forecasts for the local economy yet still predicted no tightening in its super-loose policy until at least 2024. Sterling dipped marginally to $1.3870 ahead of a Bank of England meeting on Thursday. Analysts reckon the bank might announce a slowdown in its bond-buying program as vaccinations have bolstered Britain’s economy. The Canadian dollar weakened against its U.S counterpart yesterday as the greenback broadly climbed and data showed Canada's trade balance swinging to a surprise deficit in March, with the loonie pulling back from a recent 3-year high. Canada's trade deficit was C$1.1 billion in March, Statistics Canada said.

Euro

The single currency fell yesterday as the U.S dollar extended gains, partially unwinding a month-long decline as investors weighed chances that interest rates will be forced higher by a roaring U.S economic recovery and awaited upcoming data and policy speeches for clues. The Euro has pulled back significantly to reach towards the 1.20 handle. Overall, the EUR/USD traded with a low of 1.1997 and a high of 1.2042 before closing the day around 1.2033 in the New York session.

Yen

The Japanese Yen fell in yesterday’s session as the dollar nursed losses as U.S data showed shortages of basic materials and transport snarls depressed the Institute for Supply Management manufacturing survey by 4.7 points to 64.7, toppling the dollar from a three-week peak on the yen and a two-week high on the euro. Overall, the USD/JPY traded with a low of 107.85 and a high of 108.26 before closing the day around 108.04 in the U.S session.

British Pound

The British Pound dipped against the dollar yesterday with potential volatility expected by analysts ahead of Thursday’s Bank of England meeting and the Scottish parliamentary elections. The BoE is expected by some analysts to announce tapering or a reduction in the pace of its bond purchases at its meeting. Overall, the GBP/USD traded with a low of 1.3883 and a high of 1.3947 before closing the day at 1.3926 in the New York session.

Canadian Dollar

The Canadian Dollar weakened as the greenback broadly climbed and data showed Canada's trade balance swinging to a surprise deficit in March, with the loonie pulling back from a recent 3-year high. Canada's trade deficit was C$1.1 billion in March, Statistics Canada said. Separate data showed that building permits rose by 5.7% in March. Overall, USD/CAD traded with a low of 1.2456 and a high of 1.2650 before closing the day at 1.2494 in the New York session.

Australian Dollar

The Australian Dollar regained some altitude today as surprising strength in local economic data suggested the United States was not the only country where upward pressure on interest rates was mounting. In Australia, the surprise came in approvals to build new homes which blew away forecasts with a rise of 17.4% in March, confirming a major boom was underway Overall, AUD/USD traded with a low of 0.7704 and a high of 0.7764 before closing the day at 0.7760 in the New York session.

Euro-Yen

EUR/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 64 and lies above the neutral zone. In general, the pair has lost 0.02%.

Sterling-Yen

Currently, GBP/JPY is trading above 14, 50, and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 56 reading and lies above the neutral zone. On the whole, the pair has lost 0.07%.

Aussie-Yen

Currently, the cross is trading above 14, 50, and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 58 reading and lies above the neutral region. In general, the pair has gained 0.35%.

Euro-Sterling

This cross is currently trading below 14, 50, and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 54 and lies below the neutral region. Overall, the pair has gained 0.07%.

Sterling-Swiss

This cross is trading below 14, 50, and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 45 and lies above the neutral region. In general, the pair has gained 0.07%.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

Daily Market View-U.S Stock Market

The NASDAQ index fell more than 2% yesterday as steep declines in mega-cap growth stocks led Wall Street below record trading levels, with investors seeking shelter in more defensive parts of the market. Highly valued technology companies including Microsoft Corp, Alphabet Inc., Apple Inc., Amazon.com Inc., and Facebook Inc. fell between 0.6% and 2.4%. All of the 11 major S&P 500 sectors fell in early trading, with technology, communication services, and consumer discretionary falling more than 1.5% each. The defensive consumer staples, utilities, and real estate sectors fell the least. When you're at all-time highs and the market pulls back, the ones that tend to lead to the downside are often the high-beta stocks such as technology. When we have pauses or pullbacks people tend to move out of growth stocks into more defensive names. Investors also waiting for data through the week, including the Labor Department's non-farm payroll data, slated to be released on Friday.

Dow Jones Industrial Average 

The Dow Jones Industrial Average gained 0.06%. The best performers of the session on the Dow Jones Industrial Average were UnitedHealth Group Incorporated, which rose 1.34% or 5.44 points to trade at 411.34 at the close. Meanwhile, Dow Inc. added 2.59% or 1.67 points to end at 66.22 and The Travelers Companies Inc. was up 1.24% or 1.94 points to 158.53 in late trade. The worst performers of the session were Apple Inc., which fell 3.54% or 4.69 points to trade at 127.85 at the close. Salesforce.com Inc. declined 2.94% or 6.58 points to end at 217.18 and Boeing Co was down 0.66% or 1.56 points to 233.63.

NASDAQ 100

The NASDAQ index fell 1.88%. The top performers on the NASDAQ Composite were Cocrystal Pharma Inc. which rose 72.58% to 2.1400, BioLineRx Ltd which was up 52.98% to settle at 4.880, and Neuronetics Inc. which gained 39.21% to close at 14.13. The worst performers were ChemoCentryx Inc. which was down 45.45% to 26.63 in late trade, Sequential Brands Group Inc. which lost 37.66% to settle at 17.0200 and Image Sensing Systems Inc. which was down 23.96% to 8.60 at the close.

Oil

Oil prices rose nearly 1% today, extending overnight gains after industry data estimated U.S crude stockpiles fell much more than expected last week reinforcing bullish views on fuel demand in the world's largest economy. U.S crude futures leaped 60 cents, or 0.9%, to $66.29 a barrel, after climbing to $66.45, its highest since March 8. API figures showed crude stocks fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. This should provide some further immediate upside momentum for the market. Traders are awaiting data from the U.S. Energy Information Administration due today to see if official data shows such a large drawdown. If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January. The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.

Precious and Base Metals

Gold prices fell from a more than two-month high on Tuesday, as a rebound in the dollar dented the metal’s safe-haven appeal, while investors speculated that a swifter than expected U.S. economic recovery might prompt an interest rate hike. Spot gold was down 0.4% at $1,786.10 per ounce, after hitting its highest since Feb. 25 at $1,797.75 on Monday. U.S. gold futures fell 0.4% to $1,785.50. A strong dollar is a primary reason for the slight correction. The dollar index rose 0.3%, making gold less attractive for other currency holders. Federal Reserve Chairman Jerome Powell said on Monday the U.S economy is doing better, but it is “not out of the woods yet”. At this stage, it doesn’t really seem particularly market-moving for the Fed to repeat the status quo, the market is now starting to consider when the time for an alternative is going to come. The U.S. central bank wants to keep monetary policy loose for the foreseeable future, but the economic recovery gaining pace has fanned speculations of a pullback in support sooner than expected. Higher interest rates increase the opportunity cost of holding non-yielding bullion. Investors now await April payroll data due later this week for further cues on the U.S. economy’s health. Spot gold may test a resistance at $1,802 per ounce, and a break could lead to a gain to $1,816. Elsewhere, palladium rose 0.1% to $2,973.29 per ounce, after scaling an all-time high of $3,007.73 on Friday. Silver was down 0.3% at $26.79, after hitting its highest since March 1 on Monday, while platinum was steady at $1,230.49.

Traditional Agricultures

Corn rose yesterday to hold near an eight-year high, as weather forecasts showed little sign of rain relief for dry southern Brazil, keeping attention on global supply tensions despite US planting progress. Wheat edged up after dropping more than 2% on Monday as the corn rally underpinned wheat prices, countering pressure from favorable signs for some northern hemisphere wheat harvests, including in Ukraine. Soybeans edged higher as tight oilseed inventories kept the market supported in the face of concern over reduced vegetable oil demand in India due to a surge in coronavirus cases.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.