Trading Week Ahead

The risk was mainly back on call last week as we saw stocks, indices, and forex majors post solid gains. Forex wise the action was centered around the Japanese Yen as buyers moved out of the safe-haven. The USD traded in a mixed week pulling back heavy losses to the AUD and EUR but failed to hold a firm GBP.

Currencies saw solid gains to the JPY during last week with the USD, GBP, and EUR leading the majors. The USDJPY moved back into the 109 handles and broke the 109.82 high. The GBPJPY re-took 155 and tested 156.

Buyers maintained a 5-week winning streak. The EURJPY broke 133 and cleared 133.46 April high. Yields were seen as a driver for the USD gains. Locally, Japan remains under pressure with a state of emergency looking to be extended due to the current COVID situation and murmurs the Olympics could still be canceled. If they were to be canceled this could erase current gains. Adding to the situation the Japanese jobless rate rose and prices fell.

Stocks globally saw a solid week. Sticking with Japan, despite local worries, the Nikkei saw a higher week as the JPN225 saw gains of over 2%. Locally, the ASX200 had a great week. Friday’s session saw 1.19% added with new records reached after the index closed at 7179.50. The ASX joining other indexes in pulling back all of the 2020 COVID sell-off. The commodity surge and strong financial sector helped the ASX200 move into record territory.

US indexes also found some direction despite a miss in US preliminary GDP that came in at 6.4%. President Biden will present a $6 trillion budget to boost the middle-class infrastructure. This will take the United States to its highest sustained levels of federal spending since World War II, running deficits above $1.3 trillion throughout the next decade. Chips remain a talking point as the shortage continues, the Democrats and GOP look to be teaming up a bill that targets China. US automakers continue to take the brunt of the shortages. US jobless claims fell to 406K, a new pandemic low and this data was one of the key drivers for equities. The Dow, S&P500, and Nasdaq all posted solid gains with the Dow and SP starting to close in on May records.

US optimism has been a driver in Europe as we saw a few indexes move back into record territory late last week. The EUStoxx600 and Germany’s DAX hitting fresh records in Friday’s session.

Oil bounced back last week. Buyers taking prices back above $67 and shaking off weakness seen in the week prior. Positive US data and reopening optimism maintained buyer demand. This week traders will be focused on Tuesday’s OPEC meeting. Gold saw gains erased which could be a sign of profit-taking moving into a hot market. Inflation remains on the radar, but a stronger USD at the end of last week could be having an impact.

We finish with Bitcoin. China and now Japan continue to negative government influence topic. China banned cryptocurrencies which added to jitters and could be seen as a key reason the crypto dropped like a stone. Last week Japan voiced its concerns around cryptocurrencies and we see what was looking like a firm recovery come undone late in the week. Bitcoin traded as high as 40,903 before falling back down to the 35K handle. Price continues to sit around the 50% Fibonacci retracement point but a close below the 61.8% point starts to paint a worrying picture.

Looking Ahead

This week's focus will be on Friday’s US employment data. Last data we saw a shock to the downside. With Canadian data also being released could we see more trading opportunities on the USDCAD and CAD pairs? To add a little more spice Fed Chair Powell will be speaking one and half hours before the employment data release.

Other points of interest will be US services and manufacturing PMI data, Australian GDP and OPEC meetings. Stock indexes will remain in focus with indexes either at or close to records. Bitcoin remains on the radar as buyers look to be stalling in holding their fightback rally after a really big fall from grace.

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.

Bitcoin Starting to Find Some Demand After a Brutal Week?

Buyers have started to produce a few signs that could suggest that in the short-term selling could be becoming exhausted.

The bad news for BTC came last week when Elon Musk announced Tesla stops accepting cryptocurrency payments. This week has seen one hell of a sell-off which peaked yesterday morning as the price crashed back to 29,567. At one stage sellers took a massive 33.14% off Bitcoin’s price at this week's low.

Buyers returned late in yesterday’s session pulling back 23.01%. Today sellers made a new attempt at taking price lower but once again it was rejected by buyers. From that point, buyers have continued to hold momentum adding 5.45%. There are a few technical points I would like to raise that could support a counter-rally.

What Does the Chart Say?

Firstly, looking at the orange box we can see clear buyer rejection on two candles. Yesterday’s low lines up with key support and for now we’re seeing the 2nd level of support. Lastly, the 2nd level of support lines up around the 50% Fibonacci retracement point. The 50% point is seen as a strong retracement point in a trend. 

Obviously, we want to see today’s bar close higher and hold above the 2nd support maintaining the 50% point. A close below would be a concern and we would need to see more evidence from buyers before we go back on the counter-rally idea. Above we see points of potential resistance awaiting. If Bitcoin’s price continues to rally and we do see a reaction it’s not a big deal if a new higher low is formed. A new lower low and break back to support or below would be a worry for buyers and could suggest seller numbers are en masse.

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

AUD the weakest of the main three risk majors 

Risk majors saw a mixed week of trade to the USD and JPY. The AUD was the weakest of the main three, while the GBP performed the best with gains to the USD and JPY. The EUR strengthened to the JPY but was hit during the week by a surprise rise in US inflation that put some life back into a beaten-down USD (despite it started well). This came as a surprise to the market as the expectations had been lower to stable figures in the CPI and core CPI.

The CPI data came in at 0.8%, and the core hit 0.9%. This data gave the USD a firm boost on Wednesday night local time and hit U.S. stocks.

The Dow, Nasdaq, and S&P500 all went into the red as inflation worries kept the rates raised, there are now concerns in play. The SPX500 CFD index that tracks the S&P500 snapped a seven-week winning streak. Looking at that run, it’s not really the end of the world.

Things on the Nasdaq are not as rosy. It closed lower for a 4th straight week and remains around 5% off record highs.

Talking about indexes, in Australia the ASX200 was close to a new record but key resistance remained unbreakable for the buyers.

Gold and Oil news

Gold was caught up in the USD fightback and found its self in mixed trade for the week fighting back from lows. For now, interest remains on the buy-side as price remains in a new uptrend.

Oil was mainly lower last week as COVID continues to ravage India dampening demand in the world’s second-largest population. The situation in India remains dire; many nations are committing much-needed supplies to help combat this latest deadly outbreak.

Oil was also affected by cybercrime this week, a group hacked and closed down a major pipeline. The pipeline has been restarted. Fuel shortages were reported in the South East due to the cyberattack on the nation's top fuel pipeline.

Bitcoin remains to be fragile

We end on Bitcoin. The market remains fragile as one man continues to guide and hurt the market. Elon Musk continues to be a major influence in the crypto market, and that is a worry. Markets with that type of cap can still, in a sense, be moved by one man’s tweets.

Elon tweeted early Thursday morning that Bitcoin will no longer be accepted as a form of payment due to the reliance mining has on fossil fuels. Bitcoin lost over 15% to its daily low, but the sell-off also hit other crypto markets, with Etherum dropping over 14% and Lite Coin falling over 18%. Etheruem and Litecoin posted fightbacks late in the week.

Upcoming data

This week we have a light week in data. The keys being Australian employment and Flash PMI manufacturing and services data out of Germany, France, European Union, the UK and US manufacturing. Attention will remain on late rallies seen on US and European indexes after the inflation scare. Will these carry forward, was this nothing more than a short-term reaction before new moves are made to test highs? Friday’s weaker US retail sales data resumed downward pressure on the USD. Will we see downtrends continue on the USDCAD and USDCHF?

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

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.