Date Monday April 26, 2021
Drivers
Major blue-chip companies reporting earnings this week in both the US and the UK will keep investors on their toes, while a surge in coronavirus cases in both India and Japan will most likely drag on sentiment ahead of a busy week on the economic front including IFO index in Germany and US durable goods orders today, Q1 GDP figures for Germany and the US later this week, in addition to Central Bank meetings in both the US and Japan.

Meanwhile Biden’s speech to congress Wednesday is likely to focus on the details of the Capital Gains Tax rise that was leaked last week.

For the US Dollar, the way that US yields have failed to rally back shows that the recent move lower is more than just a position wash out. The global outlook for growth and inflation has fundamentally changed, with high inflation yet to show up in the data and even once it does, the Fed’s commitment to keeping rates low seems as though it is being taken more seriously now by the market. Low US yields but positive risk sentiment are keeping USD under pressure. From here it seems that USD demand is more likely to come from any risk aversion rather than higher US yields.

There are downside risks to risk sentiment from the resurgence of Covid-19 cases; possible defaults coming from China’s Huarong that could lead to contagion fear in China’s credit markets; summer seasonality of equity markets suggest that recent gains will lose momentum as higher taxes in the US start worrying investors.

Inclination is to be positioned defensively as we expect further pull backs in crossJPY. Particularly as USDJPY pushing back into the ichimoku cloud. A break below Friday’s low of 107.48 will trigger an acceleration to the bottom of the cloud at 106.35

The strong move higher in Iron Ore is so far supporting AUD despite the downside risks from trade retaliation from China, therefore express a risk off view via short CADJPY as tighter global travel restrictions will weigh on Crude Oil.

Market Updates

EURUSD The Euro has reached our target at 1.21 and slightly off two-month highs amid a weak US Dollar on positive market sentiment, ahead of today’s key stats including Germany’s IFO business sentiment figures for April. A sustained move above the 1.2110 resistance level will trigger an acceleration to the upside with 1.2240 as next resistance level, while the old resistance at 1.2170 along with the 50-period SMA act as support.

GBPUSDAfter a pullback to the 50-period SMA and to the 1.3840 support level, the British Pound is slowly working its way back up to 1.39 as the US Dollar retreats. 1.3915 acting as resistance, may attract some sellers, while the RSI pointing upwards signals strong bullish momentum, therefore a move beyond 1.3915 will trigger an acceleration to the upside with 1.40 as nearest target.

USDJPYAlthough the Dollar/Yen bounced back from the ¥107.50 support level in late trading on Friday, the FX pair still looks weak as investors expect the US Fed to maintain its loose policy which is bearish for the US Dollar as US yields retreat. A trade through ¥107.50 will signal a resumption of the near-term downtrend with ¥106.90.

FTSE 100Stocks in London are set to dip today, as a rise in coronavirus cases in India and a stronger pound to drag on the blue-chip FTSE100. Technically speaking, the UK index is still trading below the 200-period moving average suggesting more weakness ahead with 6890 and 6855 as support targets.

DOW JONESWall Street ended higher last Friday, with the Dow Jones bouncing back from the 33760 support and lower side of the range to the 34150 resistance and upper side of the range, although failing to break either side, ahead of a busy week full of corporate earnings releases, in addition to US durable goods orders due later today, FOMC on Wednesday, and Q1 GDP figures on Thursday.

DAX 30Stronger than expected German Manufacturing PMI data along with robust US New Home Sales increasing by 20.70% month-on-month (vs. expected 12.80%) lifted back the DAX30 from red to green on Friday’s session, with 15360 resistance level to direct today’s session. An hourly close above it will favor higher prints.

GOLDGold ended the week on a second consecutive daily close in the red after US Services and Manufacturing PMI data came in better than expected at 63.1 vs. 61.50 and 60.6 vs. 60.5 respectively. Attention shifts this week to Fed Powell’s talk on Wednesday along with the latest central bank policy update, with the yellow metal poised for a pullback towards $1773 support level coinciding with the 200 period SMA in today’s session.

USOILSpiraling Covid-19 cases in India and Japan, the third and fourth largest oil importers, is keeping higher prints on WTI Crude oil capped, while stronger than expected Services and Manufacturing PMI data out of the Eurozone and the United States supported prices on Friday. Technically, an hourly close below $61.55 support level will open the door to further downside with $61 and $60.75 as next closest support targets.

 

 

Rony Nehme

Rony Nehme

Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

 

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