FOREX-Pulse of the Market

Currencies tumbled yesterday but reversed before stocks as traders lost confidence in the risk-on rally. With no major economic reports to trigger today’s reversal, it was a typical exhaustion move. Investors were very optimistic ahead of Friday’s non-farm payrolls report, it disappointed in a major way, and instead of selling, they continued to buy on the hope that weak job numbers meant no tapering. Yesterday, reality set in and they realized that without taper or talk of it, inflation could rise quickly. In fact that was exactly what we saw with the New York Fed’s survey of inflation expectations rising to its highest level since September 2013. This survey measures how much Americans expect to spend on homes, rent, gas, and higher education. The increase tells us they expect prices to rise sharply in the coming months. This rise in inflation expectations drove the U.S. dollar higher against the euro, the Japanese Yen, Swiss Franc, Australian, and New Zealand dollars. While non-farm payrolls were disappointing, this week’s consumer price index and retail sales reports could beat expectations. Spending, in particular, is expected to rise only 0.2% which is a very low forecast in our opinion considering the reopening of business activity, the sharp increase in wages, and higher gas prices. Expectations for a stronger report could help the dollar avert further losses this week. There was still more demand for sterling and the Canadian dollar because the Bank of England and the Bank of Canada are expected to reduce monetary stimulus earlier than the Federal Reserve. Adjustments in monetary policy expectations had a big impact on currency movements on Friday and while the U.S. dollar recovered some ground, we don’t expect that fundamental driver to be forgotten. Keep an eye on the euro because pandemic restrictions are beginning to ease. Italy began lifting restrictions two weeks ago but restaurants in Spain reopened this weekend as the curfew and travel ban ended. France plans to ease restrictions on restaurants next week and it may not be long before Germany follows suit. We said often that when euro area restrictions are relaxed, demand for euros will return as the recovery gains traction. Germany’s ZEW survey is due for release tomorrow and we are looking for the confidence to improve as stocks hit record highs and vaccination rates increase in Europe.

Euro

The single currency fell yesterday despite investor morale in the eurozone rose in May to its highest level since March 2018 on all-time high expectations and an upbeat evaluation of the current situation, a survey showed, suggesting the bloc is overcoming the COVID-19 crisis. Sentix’s index for the eurozone climbed to 21.0 from 13.1 in April. Overall, the EUR/USD traded with a low of 1.2126 and a high of 1.2176 before closing the day around 1.2128 in the New York session.

Yen

The Japanese Yen gained as the dollar languished near a more than two-month low as investors continued to assess the implications for monetary policy of a disappointing U.S employment report, ahead of inflation data this week. The U.S created only a little more than a quarter of the jobs that economists had forecast last month. Overall, the USD/JPY traded with a low of 108.44 and a high of 109.03 before closing the day around 108.77 in the U.S session.

British Pound

The British Pound rose to its strongest in more than two months, fueled by a mix of dollar weakness, improved economic forecasts, lockdown easing measures, and market relief about the outcome of the Scottish election. Pro-independence parties won a majority in Scotland’s parliament. Scottish leader Nicola Sturgeon said gave her the mandate to pursue plans. Overall, the GBP/USD traded with a low of 1.3996 and a high of 1.4156 before closing the day at 1.3116 in the New York session.

Canadian Dollar

The Canadian Dollar rose to its highest since mid-September 2017 yesterday, but was last little changed on the day, drawing some support overall from firmer commodity prices and generally higher yields compared with its U.S counterpart. Canada's economy lost 207,100 jobs in April, more than analysts' estimates of 175,000 job losses. Overall, USD/CAD traded with a low of 1.2075 and a high of 1.2135 before closing the day at 1.2098 in the New York session.

Australian Dollar

The Australian Dollar climbed yesterday to be near 10-week highs against its U.S counterpart as a disappointing jobs report pressured the greenback and as strong commodity prices aided risk appetite. The Aussie jumped 1.7% last week, marking its best weekly performance since November. AUD/USD can remain elevated this week because commodity prices show little sign of peaking. Overall, AUD/USD traded with a low of 0.7825 and a high of 0.7889 before closing the day at 0.7828 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 66 and lies above the neutral zone. In general, the pair has lost 0.09%.

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 67 reading and lies above the neutral zone. On the whole, the pair has gained 1.08%.

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 65 reading and lies above the neutral region. In general, the pair has gained 0.02%.

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 44 and lies below the neutral region. Overall, the pair has lost 1.17%.

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 54 and lies above the neutral region. In general, the pair has gained 0.93%.

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

U.S stocks fell yesterday and the Dow Jones Industrial Average snapped back from a record high, as worries about accelerating inflation dragged on shares and hobbled the dollar, which struggled at a 10-week low. U.S equities' losses deepened as the breakeven rates for U.S Treasury Inflation-Protected Securities, or TIPS, scaled multi-year highs, underscoring rising inflation expectations. The Dow Jones Industrial Average lost 0.1% after rising to a record earlier in the day. The S&P 500 extended losses to 1%, and the Nasdaq Composite fell 2.55%. The stock's pullback was mirrored by a broad retreat in riskier assets such as oil and copper, as some investors grew nervous after recent hefty gains. Indeed, copper prices had also shot to an all-time high earlier yesterday as investors piled in on bets of improved demand amid a tightening supply, and driven by the fear that they were missing out on a price rally. Some analysts warned that investor bets on mounting inflation pressure and ensuing interest rate hikes by the Federal Reserve could be overdone.

Dow Jones Industrial Average 

The Dow Jones Industrial Average fell 0.10%. The best performers of the session on the Dow Jones Industrial Average were 3M Company, which rose 2.14% or 4.35 points to trade at 207.42 at the close. Meanwhile, Procter & Gamble Company added 1.87% or 2.53 points to end at 137.68 and Verizon Communications Inc. was up 1.36% or 0.80 points to 59.52 in late trade. The worst performers of the session were Intel Corporation, which fell 2.90% or 1.67 points to trade at 56.00 at the close. Visa Inc. Class A. declined 2.65% or 6.15 points to end at 225.97 and Apple Inc. was down 2.57% or 3.35 points to 126.86.

NASDAQ 100

 The NASDAQ index lost 2.55%. The top performers on the NASDAQ Composite were Tecnoglass Inc. which rose 30.72% to 16.00, Obalon Therapeutics Inc. which was up 30.00% to settle at 2.860 and Cue Biopharma which gained 27.80% to close at 14.39. The worst performers were Rekor Systems Inc. which was down 27.39% to 13.73 in late trade, Trade Desk Inc. which lost 26.21% to settle at 488.05 and Village Farms International Inc. which was down 24.93% to 8.34 at the close.

Oil

Oil prices fell today on fading fears of a prolonged outage of the largest U.S fuel pipeline system, while India’s coronavirus crisis showed scant signs of easing, with a seven-day average of new cases at a record high. U.S crude futures fell 45 cents, or 0.69%, to $64.47 a barrel, after gaining 2 cents yesterday. Oil was retreating amid weak sentiment as Asian stocks suffered a tech-led selloff and the market shrugged off concerns about a temporary shutdown of the Colonial Pipeline. Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said on Monday it was working on restarting in phases with the goal of substantially restoring operational service by the end of the week. It has begun manually operating its 700,000-barrel-per-day multi-product fuel line between Greensboro, North Carolina, and Maryland for a limited time using existing inventories. Meanwhile, sentiment is weighed down by the rapid spread of coronavirus infections in India.

Precious and Base Metals

Gold held firm near a three-month high yesterday after last week’s miss on the U.S jobs growth numbers weighed on the dollar and bolstered expectations that interest rates will remain low. Spot gold rose 0.4% to $1,836.89 per ounce, after touching its highest since Feb. 11 at $1,845.06. U.S gold futures settled 0.3% higher at $1,837.60. The disappointing U.S. job number ultimately catalyzed a round of algorithmic short-covering. Also supporting the precious metal was the return of discretionary capital flowing into gold alongside strong physical demand from China and India last month prior to Indian lockdowns. U.S nonfarm payrolls data on Friday showed jobs growth unexpectedly slowed in April, pushing the dollar to an over two-month trough, making gold less expensive for holders of other currencies. The lower-than-expected job numbers upset investors’ hopes of a roaring recovery in the world’s largest economy and that the U.S Federal Reserve might tighten policy earlier than expected. The U.S. central bank has pledged to keep interest rates low until inflation and employment pick up. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. What is missing from the recent rise in prices and would be required to revive the rally is the participation of safe-haven seekers. Elsewhere, palladium rose 1.5% to $2,971.39 per ounce after hitting an all-time high last week on supply shortfall worries. UBS raised its end-June and end-September price forecasts for the metal, used mainly in emission-reducing auto catalysts for vehicles, to $3,100 per ounce. Silver eased 0.2% to $27.39 per ounce, while platinum climbed 0.8% to $1,258.87 per ounce. Both metals earlier reached a more than two-month peak.

Traditional Agricultures

Corn futures fell yesterday, pausing after rallying to eight-year highs last week, with traders focusing on the U.S Department of Agriculture’s upcoming world supply-demand (WASDE) report for new price direction. Wheat dipped, supported by beneficial rains across the U.S Great Plains, while soybeans traded mixed on continued tight supplies. USDA is set to issue its first supply and demand estimates for the 2021-22 season on Wednesday.

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.

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.