28 / 04 / 2017 | Market news
Pound in favour
Sterling had been left to one side in the wake of last weekend’s first round of the French presidential election, but renewed optimism over a successful Brexit and the fact we saw some far better than expected retail sales figures coming from the CBI trade body has give the pound something to cheer. Cable is testing levels not seen since the pound’s flash crash of October last year and the focus will now shift to the flash Q1 GDP reading that’s due at 8.30am GMT. Expectations are upbeat here so any shortfall could leave traders itching to book profits – after this rally, there’s certainly scope on the downside.
US GDP readings for Q1 will also be in focus with this print expected at 12.30pm GMT. A somewhat lacking US durable goods order reading on Thursday is hiking expectations that the flash GDP reading will also disappoint, adding up another slug of woe to the US. Today’s print shouldn’t be negative but it could be close run, in which case another bout of profit taking from the greenback could be in order. And unless there’s a notable change of tone from the Fed in terms of cutting some slack with monetary policy then these latest gains for stocks will look difficult to justify, too.
EUR/USD has been very much on the back foot since yesterday’s underwhelming ECB meeting brought nothing new to the table and attention is now turning to the Eurozone’s scheduled release of inflation data at 9am GMT. Given the lack of intervention yesterday, the expectation here has to be that this print will disappoint too, but with oil prices drifting lower, it’s easy to see why the nascent inflationary pressures will be difficult to sustain. We have seen speculation that the outcome of the first round of the French Presidential election would help drive the decision to quicken the pace of policy tightening at the ECB, but with both candidate being seen as Eurosceptic to some degree, again there’s reason to argue that waiting until the shape of any new government in Paris is known may be the next trigger.
28 / 04 / 2017 | Technical analysis
The 23.6% retracement of the April rally on EUR/USD is already being tested. If this falls, look for a retreat down to the week’s lows around 1.0820.
Gold is looking at further losses on the daily chart with the 200 day moving average and the 50% retracement of the sell-off from H2 2016 likely to provide support around the $1250.50 level.
27 / 04 / 2017 | Market news
Euro struggling ahead of ECB meet
The common currency is struggling to find further support ahead of today’s ECB announcement over monetary policy. There have been some suggestions that the greater clarity over the outcome of the French Presidential election – and the inevitability of a Eurosceptic winning – means that some policy tightening will be seen in the not too distant future, but it’s as if markets want reassurance of this before making another push higher. The bank’s press conference starts at 12.30pm GMT, but if we hear even just some modestly hawkish tones coming out here, the expectation would be for the Euro to find some renewed support
US Durable goods order data is slated for release at 12.30pm GMT today and expectations are that we’re going to see growth here, albeit at a slower pace than was posted last month. If this doesn’t prove to be the case and we see a print above 0.5% then that will once again put the focus back onto the Federal Reserve to consider pushing through that next rate hike. Such a move is clearly unpopular with Donald Trump who wants to see a weaker US dollar to help facilitate trade, but the prospect of mounting inflationary pressures will demand a reaction from the Fed.
Gold process ticked a little higher yesterday with the shipping of almost all US senators to the White House for a briefing over North Korea raising some concerns. However, with little new information emerging from the session, it looked more like a sabre rattling move than an indication that intervention was imminent. The White House said the briefing took place there rather than on Capitol Hill for logistical reasons – this situation is certainly one to watch, although the mooted reaction fro the precious metal seems appropriate given the fact little progress as been made.
Weekly oil inventories may have provided some momentum for the market yesterday where a bigger than expected draw sent US crude to briefly retest the $50 level, but this proved short-lived. The big question is whether Russia will maintain its output cap – Saudi Arabia is due to discuss this matter with the country ahead of the Opec meeting late next month but it seems that assumptions over this will continue to have some significant sway on prices.
27 / 04 / 2017 | Technical analysis
EUR/USD still finding support
ECB could impact here but longer term chart shows support for EUR/USD, with 61.8% retracement and recent highs around 1.0960 likely to provide next resistance then psychological 1.1000.
USD/CHF has comprehensively broken below the 200-day moving average and next leg lower is likely to target late January lows of 0.9870.
26 / 04 / 2017 | Market news
Euro gains resumed
The common currency traded higher yesterday against the US dollar as traders continued to buy into the fact that centrist candidate Macron would be likely to win the French Presidential run-off that’s scheduled for a week on Sunday. HSBC had mooted that a target of 1.1350 would be a reasonable outcome so we still have some way to travel there, but a degree of confidence from the US (see below) is likely pinning back progress, too. With little data due from the Eurozone during today’s session, the march higher may prove somewhat sluggish but there seems little reason to believe the upward momentum on EUR/USD will stall.
USD/JPY has been marching higher too, driven by optimism over tax reform plans that are expected to be unveiled by Donald Trump during the day ahead. The market’s acceptance of these proposals will be critical in ensuring the recent gains can be sustained, as again data beyond this is looking relatively thin on the ground in the short term. That resurgent new home sales figure yesterday is certainly something worth cheering too, as it’s more data like this that will likely encourage the Fed to make its next move over tighter monetary policy.
The Aussie dollar has found further weakness overnight with a shortfall in inflation data for Q1 proving unsettling for the market, especially when the RBA had been talking up expectations here. Admittedly the print did just scrape into the central bank’s target zone, but that tariff imposition on Canadian timber imports by the US is also a likely cause for concern here. The import and export price data that’s due for release at 1.30am GMT tomorrow may provide more momentum here in the short term, but as it has acknowledged, the RBA is still working with challenging conditions.
Expectations are for a meaningful draw in US oil inventories this afternoon and that may help provide some support for crude, which is now languishing below the $50/barrel level. This, combined with the fact Opec appears committed to extending those production cuts does suggest that oil could be sliding into oversold territory.
26 / 04 / 2017 | Technical analysis
EUR/AUD still rising
EUR/AUD continues its rebound from lows of two months ago and is now eyeing a move to the 36.8% retracement of the run lower that started in August 2015. Look for 1.4668 as next target.
USD/CAD had once again found resistance at the 50% retracement of the Q1 2016 sell-off. Failure to breach this does open up the way for a move back to the 38.2% level at 1.3330.
25 / 04 / 2017 | Market news
Markets uneventful as focus swings from Europe to US
It has been a largely uneventful 24 hours for the major currency pairs with little overall direction having been found. The relief rally off the back of the likely win for centrist candidate Macron in the French presidential elections was relatively short-lived – at least as far as currencies were concerned – and the focus is now moving to the US. Donald Trump will mark 100 days in office this weekend and there’s a degree of expectation over delivery of promised tax reform by then. We also have those mounting tensions with North Korea still very much on the agenda, but with granular fundamentals looking to be in relatively short supply, downside pressures on the greenback could be sustained in the near term. The DXY dollar index is wallowing around the 99 mark, perhaps reflective of those concerns that the hawkish stance at the Fed may be abating, too.
UK public sector borrowing data is due for release at 8.30am GMT this morning, something that could have influence over both the value of Sterling as well as UK bond yields. The country does have a general election looming but media reports are increasingly bullish over the fact this will deliver a significant majority for the incumbent Prime Minister, so even a modest rise in any reported deficit this morning is unlikely to derail sentiment here.
The Canadian dollar has been left on the back foot amidst reports that the US is to levy tariffs of up to 24% on some timber imports from the North. The move is backed by allegations of unfair Canadian government subsidies for some firms in the sector and apparently came off the back of the collapse of talks between the two nations over dairy imports. It’s worth pointing out that the sector has been embroiled in a cross-border trade war for some years, but this will be seen as a defining moment in the Trump presidency in terms of delivery against one of those campaign pledges.
25 / 04 / 2017 | Technical analysis
AUD/NZD finds Fibonacci resistance
AUD/NZD rallied last night but has stalled at the 23.6% retracement of the September ’16 – March ’17 rally. A break above 1.0825 would open the way for a move to 1.1000.
USD/CHF looking at further pressure on the downside, with the pair having failed to break above the 100-hour moving average. Look for support at recent lows around 0.9910.
24 / 04 / 2017 | Market news
Euro spikes then stalls
By the time Asian markets opened last night, the provisional results of the French election were well established and with a high voter turn out, it was perhaps no surprise that it was the two who had polled the best who went on to be declared winners. Arguably the risk markets had perceived in the run-up was the run-off being contested between left and right, in turn splitting the vote far closer, but with centrist Macron now pitted against right-wing candidate Le Pen, the result seems easier to call. EUR/USD opened above 1.09 – its highest level since the US Presidential election almost six months ago – but confidence has waived since. European traders may be in a position to give the currency another boost as their day gets underway, but for now, the gains do have the potential to look a little under-done.
We have the German Ifo business climate index due for release at 8 am GMT and although any momentum here is likely to be overshadowed by the outcome of the French elections, any shortfall here could still serve to reign in upside for the common currency. As we have seen through the Asian session, the market isn’t quite ready to hand victory to Macron, yet.
There’s a French government auction of short-term debt scheduled for 1 pm GMT and this will again give a good idea of how markets see the run-off vote playing out. With these instruments currently trading with negative yields, the expectation would be that this pattern continues, but with the En Marche! Movement having no track record in politics, will we see a degree of caution creeping in over what may lie ahead here? A victory for Macron may well be the best outcome for keeping the European project alive, but can the campaign pledges be turned into reality – and in a cost effective manner?
24 / 04 / 2017 | Technical analysis
USD/JPY still holds momentum on upside
USD/JPY popped higher last night as the French vote reduced risk mitigation but met resistance at the 23.6% retracement of the year to date sell off. Look for a move higher with resistance at 110.65.
USD/CAD rally from last week is stalling, lining up a reversion to the 38.2% Fibonacci level from the sell-off since January at 1.3340 and beyond that the 200-day moving average at 1.3240.