Key To Markets - Discussions

[KeyToMarketsUK]

KTM FX Daily: ECB preview and EURUSD overview

ECB Rate Decision at 13.45 CEST followed by a press conference at 14.30 CEST.

What to expect?

Ahead of today’s ECB meeting, the traders seem preparing for a cautious approach. Therefore, we acknowledge that EURUSD to remain range-bound in the near-term.

We expect the ECB will adopt a wait and see approach. Market participants are particularly focusing on the forward guidance.

We estimate that at that point the ECB will raise interest rates by 0.2 percentage points. However, we still expect bond buybacks to cease towards the end of this year, Deutsche Bank reported in the Market Guide Report.

According to our base case scenario, the ECB will wind down its QE programme (€30bn per month) at the end of September. We continue to forecast the first hike in the deposit rate (from -0.4% to -0.2%) for July 2019, followed by a second depo hike (from -0.2% to zero) in September 2019, reported by UBS.

FX Outlook

EURUSD traced out a medium-term price top between 1.2535-1.2555 between Jan-Feb 2018 via the formation of a double top pattern. Ever since the Feb high, the major has been locked in a range-bound with a bearish tag.

Recent soft economic data especially lagging inflation and the dollar comeback are the key factors to reinforce our near and medium-term bearish views.

Since mid- Feb we kept our near-term bearish profile and thus continue to see 1.2150 and 1.2080 with resistance seems to be at 1.2240 and 1.2330 levels. At last the price posted a low at 1.2160 (Wed) and currently trading at 1.2170 in a Thursday early Asian session. It has lost 100MAs, this suggests that the downturn is set to reassert again.

If the shift in sentiment improves that will trigger a minor rally to resistance 1.2220 and 1.2240 should attract selling interest with support against the early March low 1.2150.

Overall, the major is prone to a meaningful correction because in our view the A-B-C correction pattern aiming at 1.2080. The daily studies RSI and our favorite oscillator RVI has been remaining bearish.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: NZDUSD is nearing support zone

NZDUSD has plunged about 5.40 percent year to date, but would still need to fall another few pips to erase all of the 2018 gains. In our weekly chart pack (Mon) we forecasted for 0.7100 whereas the cross-posted a low at 0.7055.

The cross has closed below the previous day’s low for 7 days in a row. The run last extended to 7 days on 01 March 2017 and down for eight straight sessions on 09 November 2016 and again on 13 July 2016 (run last for 7 days)

We are shifting the near -term view from bearish to neutral. Based on the below factors we are expecting a minor rebound in the coming days.

Quick overview:

• Jan 2018 low @ 0. 7035 coincides with a 61.8 % fib reaction (below chart)200MA (month) @0.6985
• The RSI already into oversold zone 30, the oscillator will be turned next week or so (below chart)
• Overall near-term support zone @ 0.7035-0.6980

View: Focus is shifting back to support zone.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Weekly: Global economic calendar ( April30- May 04)

This week seems to be a heavy week with a series of high impact key economic releases scheduled. PMI readings across the Globe, RBA and FOMC rate statement, GDP for Canada and EA, jobs data for NZ and US, and elsewhere Trade balance for Aussie and Canada.

Higher yields indicate higher interest rates

Last week US Treasury yields breach above 3.0% the crucial resistance but failed to close above. Ahead of FOMC meeting this week, we expect the yields will consolidate around 3.0% levels. After March rate hike, currently, market participants are widely expected to make no change to interest rates.

The Federal Open Market Committee has raised rates by 0.25%, which brought the fed funds target rate band to 1.50-1.75%. Since December 2015, this was the 6th time that the Federal Reserve has raised the rates.

As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”.

We forecast further dollar strength lot depends on the yields movement.

RBA policy meeting

At this week’s meeting, we are expecting the board decided to leave the cash rate unchanged at 1.50%. At April policy meeting Governor Lowe said, “Inflation is likely to remain low for some time, reflecting low growth in labor costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018”.

FX reactions: AUDUSD, AUDNZD and GBPAUD

UK March weaker GDP will dampen BOE rate hike in May

After March weaker than expected GDP (0.1% q/q vs 0.3% q/q) data, pound traders are particularly focusing on April PMI survey. Post the data the GBP was beaten down hard and on the other side sent expectations for a May hike lower.

“Any further weakening of the UK numbers, or even a lack of rebound from March, will seriously dampen the likelihood of the Bank of England hiking rates in May” IHS Markit reported.

“Weaker-than-expected GDP print we have changed our forecast for the Bank of England (BoE) and have shifted out by a quarter (i.e. to August) the next 25bp rate hike from the MPC” according to Nomura Research Analysts.

“The likelihood of a hike in May was just 20%, down from about 50% yesterday and 90% a week ago”, reported by Barclays. In an Economic Research note, Barclays reported, “We maintain our expectations of a rate hike in May on the grounds that the MPC will have sufficient reasons to believe that Q1 soft data are temporary and that the underlying trend, in their view, is still somewhat slightly above potential”.

FX reactions: GBPUSD, EURGBP, GBPAUD and GBPNZD

Labour Market

For the US April jobs report, we are expecting the NFP to rise by 185k MoM, for average hourly earnings to drop by 0.2% and for unemployment rate we expect to decline to 4.0% vs 4.1%.

For New Zealand, we are expecting in the Q1 unemployment rate will stable at 4.5% whereas ANZ forecast “a modest tick up to 4.6% in Q1 2018”. According to Liz Kendall Senior Economist at NAZ reported, “Our expectation is that the unemployment rate will fall to 4.1% in mid-2019 – consistent with further tightening in the labour market”.

FX reactions: NZDUSD and AUDNZD

Please read the chart pack article on our Key To Markets Blog
http://www.keytomarkets.com/blog/blog/ktm-fx-weekly-chart-pack-april30-may-04/
It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Weekly: EURUSD reached the 100.0fe targets

This week seems to be a heavy week with a series of high impact key economic releases scheduled. Last week US Treasury yields breach above 3.0% the crucial resistance but failed to close above. The dollar index has been tagged with bulls and as a result, the EURUSD has broken below the range which has been maintaining since Jan 2018.

Data review:

Flash Eurozone Manufacturing PMI at 56.0 down from 56.6 in March. 14-month low
The ECB left its benchmark interest rate unchanged

Data preview:

Catalysts are EA GDP, FOMC meeting, and April NFP data.

Ahead of FOMC meeting this week, we expect the yields will consolidate around 3.0% levels. After March rate hike, currently, market participants are widely expected to make no change to interest rates.

The Federal Open Market Committee has raised rates by 0.25%, which brought the fed funds target rate band to 1.50-1.75%. Since December 2015, this was the 6th time that the Federal Reserve has raised the rates.

As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”.

For the US April jobs report, we are expecting the NFP to rise by 185k MoM, for average hourly earnings to drop by 0.2% and for unemployment rate we expect to decline to 4.0% vs 4.1%.

TECHNICAL OVERVIEW​

Early last week the major broken the 12-month ascending trendline (below chart), since broken the selling pressure accelerates and reached the 100.0fe targets at 1.2150 and 1.2080. Since mid- Feb we kept our near-term bearish profile and thus continue to see 1.2150 and 1.2080, finally, the patience has paid in full.

The below fib reactions are acting as an immediate support level ahead of the economic events.

• 50.0% (1.1550-1.2555 rally) @1.2050
• 23.6% (1.0340-1.2555 rally) @1.2030

Additional support will be available from its 200EA lies at 1.1975 breaking this could retrace further to 1.1900/1.1880 and 1.1700 it’s 38.2% fib reaction (1.0340-1.2555 rally) with resistance seems to be at 1.2140 and 1.2250 levels.

Turning to the daily studies RSI is approaching nearly oversold whereas the Oscillator has been remaining bearish. Based on the RSI any short-term rally will face selling pressure again.

View: Our weekly basis is neutral whereas monthly target is 1.1900.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: Guide to the Thursday FX

Today’s economic calendar seems to be a heavy week with a series of high impact key economic releases scheduled.

In the Asian session, Aussie Trade Balance and Building approvals are in focus. Today in early Asian session the cross AUDUSD is trading below 0.75 levels and also settles below the 16-month ascending trendline. Our preferred cross is AUDNZD and we kept our Q2 bullish profile and thus continue to see 1.0800 levels.

Turning to European session UK Services PMI and EA CPI are in focus. Post-UK GDP releases the cable has been falling like a dead weight in the sky led by expectations for a May hike pushed lower. As a result, the cable sold off 2.70% sitting tad above 200MA 1.3535, fails to hold then 1.3460 and 1.3430/1.3400 comes into the picture with resistance seems to be at 1.3670 and 1.3750. The daily RSI already in oversold territory whereas the oscillator is remaining bearish. This week’s UK PMI is not quite encouraging the pound bulls. UK manufacturing growth fell to a 17-month low of 53.9 in April, down from 54.9 in March. In contrast Construction, PMI picked up sharply TO 52.5 from the 20-month low seen in March (47.0).

Another side the major EURUSD tested the 61.8% fib reaction (1.1550-1.2555 rally) and the daily studies are like the cable.

Finally, in the US session, Trade report and ISM Non-Manufacturing PMI are the key drivers but these are overshadowed by Friday’s NFP.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: April NFP preview. USDJPY sell trade available

The dollar index is facing plenty of resistance at 92.60 October 13 low and an earlier swing low. Traders are waiting for today’s April NFP figures after FOMC meeting (Thu).

In March, the numbers were disappointing but we expect they will bounce back in April. Total nonfarm payroll employment edged up by 103,000 in March, and the unemployment rate was unchanged at 4.1 percent. Whereas, total nonfarm payroll employment increased by 313,000 in February. Awe believe, after a big rise in February the numbers were corrected a bit in March.

Preview: In April we expect the numbers will bounce back to 190k and the unemployment rate to fall to 4.0% from 4.1%, average earnings to steady by 0.3%. Whereas Westpac, Barclays and NAB Research forecast “192K “. ING and Danske Bank are reported an extreme bullish number at “200k”.

According to Sean Callow, Analyst at Westpac, “Consensus is 192k for Apr, with the chance that the Apr headline NFP reading is muted by an upward revision to Mar. The unemployment rate is seen edging down to just 4.0%, which would be low since Dec 2000. But average hourly earnings are still a bit lackluster, seen at 0.2%mth, 2.7%yr, the annual pace steady vs Mar and short of the Sep 2017 high of 2.8%”.

According to Barclays, “For the April employment report, we forecast nonfarm payrolls to increase 175k, in line with the long-run trend of monthly employment growth (Friday). We expect the unemployment rate to fall one tenth, to 4%, average hourly earnings to rise by 0.3% m/m and 2.8% y/y and average weekly hours to hold steady at 34.5”.

According to NAB, “Payrolls tonight are expected to print at 192K, the unemployment rate at 4.0% (down from 4.1%) while average hourly earnings to print at 0.2%/2.7% after 0.3%/2.7%”.

James Smith at ING said, “We saw a bit of a readjustment in March, and a further fall in unemployment in April is likely to have dragged the overall rate down to 4.0% – another post-crisis low and this month we could see a rebound to the 200k area after the March drop”.

Danske Bank also forecast a rebound to 200k in April, reported in its research note. “We expect employment growth to rebound from the weak print of 103,000 in March to around 200,000 in April. We would not be surprised to see a decline in the unemployment rate from 4.1% to 4.0%, as employment growth remains higher than labour force growth”.

FX comments:

• AUDUSD: Holding the 50.0% fib reaction
• EURUSD: Paused at the 61.8% fib reaction. Sell the rally.
• GBPUSD: Holding the 200MA
• USDJPY: Rejected at 200MA (supply zone seems to be between 110.40-111.00)
• USDCAD: On the verge of a minor range breakdown. Limited upsdie risk.
• NZDUSD: Holding the support 0.6980

FX market is heading to the NFP event with oversold RSIs. On the daily chart AUDUSD, RSI study is at 39 bounce from 29, EURUSD RSI stands at 31.50, GBPUSD at 26.75 and NZDUSD at 33. On the other hand USDCHF study has been consolidating at 82.00, USDJPY study cooled to 59 from 70.50 and USDCAD study has been in a sloping mode, currently stands at 55.00.

Trade: We prefer selling USDJPY between 110.40-111.00 with a target 108.00. To limit the risk use sl above 111.65.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Weekly: Global economic calendar ( May 07-11)

• CPI for UK and US
• RBNZ and BOE are in focus

The dollar seems to be predominant for the third week in a row when compared to the most traded currencies. We still expect the continuation of this dollar momentum in the weeks ahead, as the tradable dollar index (DXY) rises above 200MAs and settles.

Among the dropping factories, the cable price action remains vulnerable, whereas rest of the pairs/crosses manage to hold the support levels.

Review:

In the EA Service and Manufacturing PMI data continues to show weakness. In addition, weak inflation data discounted the euro bullishness. As 2018 unfolds the euro lovers rushed to buy the common currency, now the view has been shifted to cautious mode after early 2018 gains were wiped off completely.

Turning to the UK, Manufacturing PMI lost the momentum in April, whereas Services growth accelerates and Construction sector rebounded strongly.

The Fed decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent with an accommodative stance. The statement suggests that labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Looking into the April jobs data, the wage growth is still subdued but June Fed hike still on the table.

Preview:

This week seems to be a quiet start week with the only data as Australia Business Confidence reported by NAB. Things should pick up rapidly from Tuesday with Aussie Retail sales, China Trade Balance and NZ Inflation expectations. Moving to the European session, German Trade balance and IP are scheduled.

In the mid of the week (Wednesday) US CPI and RBNZ monetary policy statement are due, followed by the press conference.

The Mega Thursday offers CPI for China YoY and US MoM basis, BOE Monetary Policy Report, and Inflation report.

Finally (Friday) Canada jobs data and ECB President Draghi speaks at the 8th edition of The State of the Union, organized by the European University Institute, in Florence.

RBNZ Monetary Policy Statement
We expect the RBNZ will leave the OCR unchanged at 1.75% since Nov 2016.

According to Liz Kendall, Senior Economist at ANZ reported, “we expect the RBNZ will retain a cautious approach, with the policy outlook little changed”. The Economist also said, “The RBNZ will remain cautious until it sees a definitive broadening in inflationary pressures, with the OCR to remain on hold for some time yet. We continue to pencil in August 2019 for the first increase.”

FX reaction: AUDNZD (Buy the dip) and NZDUSD (limited downside)

MEGA Thursday
BOE Monetary Policy Summary: Post the data the GBP was beaten down hard and on the other side sent expectations for a May hike lower and chances to downgrade the inflation forecast. A surprise hike would be a shock to the GBP bears.

FX reaction: GBPUSD (Tad above minor support) and EURGBP (sideways)

US CPI
We expect April CPI to rise by 0.3% and core CPI to rise by 0.2%.

FX reaction: USDJPY (Selling opportunity) USDCAD (Bearish) USDCHF (Parallel resistance in focus)

Chart of the week: GBPNZD

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[KeyToMarketsUK]

KTM FX Weekly: Not too bearish on EURUSD

The underperformance of the EURUSD has been continuing for the four weeks in a row and tested the support level. Recent strength in the dollar index (DXY) has pressed the major below 200MAs and we expect a further continuation of this dollar momentum in the weeks ahead., as the tradable dollar index (DXY) rises above 200MAs and settles.

Data Review:

In the EZ Service and Manufacturing PMI data continues to show weakness. In addition, weak EA inflation data discounted the euro bullishness.

EZ Manufacturing PMI fell to a 13-month low of 56.2 in April, down from 56.6 in March and slightly above the earlier flash estimate of 56.0.
Eurozone PMI Services Business Activity Index fell to an eight-month low of 54.7 in April, down from 54.9 in March and below the earlier flash estimate of 55.0.
Euro area annual inflation is expected to be 1.2% in April 2018, down from 1.3% in March 2018.

Data Preview:

Germany IP (Tue) and ECB President Draghi speech.

TECHNICAL OVERVIEW​

As 2018 unfolds the euro lovers rushed to buy the common currency, now the view has been shifted to cautious mode after early 2018 gains were wiped off completely. The dollar index technical breakout from the 16-month descending trendline indicating further upward momentum is underway in the coming weeks.

Even with a DXY breakout, we are not too bearish EURUSD, our near-term support zone spread between 1.1900 and 1.1850 below this 1.1750 exists. On the other side, resistance seems to be at 1.1980 and 1.2050. Noting that the 161.08 fe (below chart) pointing 1.1830 coincides with the 14MA (weekly) and as shown on the below chart, 250MA sits at 1.1880.

Turning to daily studies, the daily RSI has been forming a base at an oversold level and underneath the oscillator has been turned to bullish. We believe from the current levels the major is offering limited downside risk in the near term. Overall, between 1.1900-1.1830 we could expect the price action will resume the short-term rally to 1.2000 and 1.2050 levels or even 1.2080 could possible.

View: Limited downside risk


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[KeyToMarketsUK]

KTM Commodity Daily: Gold price remained locked in a tight range

The precious metal traced out a near-term price top between 1361.50$-1366.25$ in January-February and April 2018 via the formation of a triple top pattern. While the resulting downward resumed in mid-April and the corrective phase has tested the parallel support at 1301.00$ March 01 low which coincides with the 161.8% A-B-C corrective pattern (1365.25$-1333.70$-1355.60$).

Between 1295.00-1301.00$ the price has a near-term cluster support zone. Turning to underlying indicators the daily study RSI has been sloping whereas the oscillator has been turned bullish, overall a mixed bias.

Earlier we spotted the same kind of pattern in AUDUSD, EURUSD, GBPUSD, and NZDUSD (dropping factories). All the four pairs were attracted with selling interest and completed the A-B-C corrective pattern targets.

Coming back to gold, since seven-sessions in a row the price has been rotating between 1301.70$-1319.00$ with weekly support available at 1295.00$. While hold 1295.00$, we could expect a short-term rally to 1327.00$ and 1340.00$ levels. This view will strengthen if the price close above 1320.00$. In the extreme case, we could expect to test the triple top levels.
On the flip side, close below 1295.00$ could open further downside risk to 1275.00$.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: AUDNZD Trade update.

Beautiful picture emerges

The Official Cash Rate (OCR) will remain at 1.75 percent for some time to come. The direction of our next move is equally balanced.

The Kiwi dollar down 0.60% against the USD after the RBNZ Governor Orr says his decision to keep the OCR at 1.75%. The losses are gradually increasing to 0.90% post media conference.

The cross AUDNZD trading 0.85% higher on the Asian session. We have been recommending the bullish view since early April and again updated in mid-April. Today morning the cross elevated the nose again raises further and settles above 100MAs. On the daily and H4 charts a beautiful picture emerges from the double bottom pattern posted at 1.0658. We are still biased for another leg up to ideal target at 1.0920 upgraded from 1.0800. Over the medium term, 1.0655 should hold to maintain the upside potential.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: Canada employment data is the catalyst

In response to the Central bank meetings RBNZ in the Asian session and BOE in the European session, local currencies weaken by a percent each. Turning to the US, the U.S dollar eases after a soft April U.S inflation data. Post the data, dollar selling was accelerated, supported the Aussie dollar and Kiwi dollar to resume the forward thrust, as a result, AUDUSD rose nearly a percent and the NZDUSD manage to filled the Asian session gap. The major EURUSD rallied nearly 0.90% to 1.1946.

Data review:

• RBNZ: The Official Cash Rate (OCR) will remain at 1.75 percent for some time to come. The direction of our next move is equally balanced, up or down. Only time and events will tell.
• BOE: The MPC voted by a majority of 7–2 to maintain Bank Rate at 0.5%.
• The CPI increased 0.2% vs forecast 0.3% in April after falling 0.1% in March, the U.S. Bureau of Labor Statistics reported Thursday. Core CPI also increased 0.1% vs forecast 0.2%. The dollar index settled at 92.54 and the U.S 10year treasure yield settled at 2.97%.

What’s on today?
Canada employment data and ECB President Draghi speaks at the 8th edition of The State of the Union, organized by the European University Institute, in Florence.
According to Westpac Analyst Sean Callow, “Consensus is +20k on employment and a steady unemployment rate at 5.8%”.

Chart of the day: USDCAD (buy the dip)

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​

 

[KeyToMarketsUK]

• GDP for Japan and EA
• Jobs data for Aussie and UK
• Retail sales for US and Canada

Last week, the dollar index momentum eased slightly and the 10-year Treasury Yield failed to close above 3.00%.

Brent oil continues to rally as the Trump announce US withdraw from Iran nuclear deal (Tue). And as we discussed last week’s article, there is so far sufficient evidence to pause the rally at the resistance zone. We are watching particularly on monthly reports by OPEC (Mon) and the International Energy Agency (Wed).

Elsewhere, May 18th is the absolute deadline for NAFTA negotiation.
“Administration officials have told reporters they believe the deadline is May 18, but have avoided saying that publicly, because they don’t want to be tied to that date if they cannot make it” reported by Washingtonexaminer.com.

This week seems to be a quiet start week with FOMC Member Mester speaks. Things should pick up rapidly from Tuesday with China IP, moving to the European session, German Prelim GDP, UK jobs data, EA Flash GDP and US Retail sales are due.

In the mid of the week (Wednesday) Japan Q1 GDP and EA Final CPI are the key drivers.

The Mega Thursday offers CPI for China YoY and US MoM basis, BOE Monetary Policy Report, and Inflation report. Thursday Aussie jobs data are the only data available.

Finally (Friday) occupied with Canada CPI and retail sales data.

Japanese Q1 preview:
GDP data due on Wednesday, we expect a minor contraction of 0.2% annual pace.
According to Marcel Thieliant of Capital Economics “GDP growth slowed sharply last quarter and we think that the economy won’t expand as strongly this year as it did in 2017,” reported by AP NEWS.

We also expect the economic data should continue to have a limited impact on JPY.
FX reaction: USDJPY (Limited upside risk), EURJPY and GBPJPY manage to hold the parallel support.

US Core retail sales:
April Monthly retail sales are expected to gain 0.4% slightly less than March gain of 0.6,% was the first gain in four months.

FX Reaction: EURUSD (Bullish)

UK employment figures:
Market traders are closely watching the employment figures after BOE stays on hold.
At its meeting ending on 9 May 2018, the MPC voted by a majority of 7-2 to maintain Bank Rate at 0.5%. “Wage growth and domestic cost pressures are firming gradually, broadly as expected” reported in the MPC minutes report. The bank also reported, “Hiring intentions have remained strong and, over the past three months, the unemployment rate has fallen slightly further.”
We expect the unemployment rate will remain at 4.2% and the average weekly earnings are likely to rise by 2.9 y/y basis vs 2.8%. A solid report could uplift the cable’s range from the key support level.

FX reaction: GBPUSD (Bearish- Mild bullish) and EURGBP (sideways)

Aussie jobs data:
RBA minutes, Wage growth and jobs data are the catalysts for AUD. In April unemployment rate likely to remain steady at 5.5% and the economy is forecast to add 20.3K.

FX Reaction: AUDUSD(Bearish-Slight bullish) and AUDNZD (Bullish)

Chart of the week:

EURUSD (Bullish)

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[KeyToMarketsUK]

KTM FX Weekly: EURUSD wheels leave the runway

Since CPI data, the dollar index eased slightly whereas on the Monday’s session the tradable index (DXY) bounce back and the US 10-year yields close for the day at 3.0% (below chart). The euro bulls have utilized the recent dollar weakness and resumed the short-term rally. We believe the dollar is subjected to downside risk again in the near -term

In Monday’s European session the euro bulls were encouraged after the news of an “agreement between Italy’s populist parties 5-star Movement and far-right league close to a deal to form a new government”, reported by Telegraph. We also believe EURCHF is exposed upside risk to Italian political development rather EURUSD.

Review:
In March 2018, German production in industry was up by 1.0% from the previous month

Preview:
The week ahead it will be quiet in terms of data risk events. EA CPI is the catalyst for the major. Considering euro positioning “In the week ending 8 May, leveraged funds’ positioning turned long EUR again for the first time in two weeks” reported by Nomura in a note to the clients.

TECHNICAL OVERVIEW​

As we discussed in the last two weeks we remain to our forecasted targets at “1.2000 and 1.2050 levels or even 1.2080 could possible”. The major was rejected at the 23.6 fib reaction 1.1995 (1.2555-1.1822) beyond this resistance comes between 1.2050-1.2090 with support exists at 1.1890 and 1.1820. Before rebounded to 1.1995 the major spotted with an inverse H&S pattern aimed at 1.2010, but rejected at 23.6% fib reaction (below chart). Buying the dip favors the trend and looking beyond the near -term we believe 1.2240 is an open target in the Q2.

View: Wheels leave the runway

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[KeyToMarketsUK]

KTM FX Daily: Equity indices and Gold take a hit as US government yields hit four-yea

Higher yields indicate higher interest rates. They are now at four-year highs.

U.S Treasury yields finally settle above 3.0%, hit four years high and the tradable dollar index (DXY) jumped to 2018 high. Post the retail sales data, the yield on the benchmark 10-year treasury settle above 3% resistance eventually indicating that the U.S economy is improving and more hikes are coming.

As we pointed in our earlier article, we remain to our forecast, “expect four Fed hikes in 2018, but more confirmation will be available at the June meeting”. Overall, further dollar strength lot depends on the yields movement.

As bond yields rise money starts shifting from risk asset class, like equities to Bonds which offers less risk. The Dowjones 30 index(KTM: US30) down by 0.75%. The index has been locked in a tight range since the end of Jan, facing resistance at the middle of the tight range.

The spikes in the dollar dragged the Gold price below its multi-support level. We expect further selling with targets at 1277.00$ and 1265.00$. In Q2 potential support zone spread between 1265.00$-1260.00$. Silver-spotted with a bearish H&S pattern (Daily chart) but still above the neckline (16.10-16.00). A move below 16.00$ needed to forecast 15.60$ levels. Platinum has been dropping in a falling channel (below chart) with immediate multi-support zone spread between 888.00$-873.00$ levels. Interestingly Palladium spotted with an inverse H&S pattern.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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[KeyToMarketsUK]

KTM FX Daily: AUD and NZD grabs the attention in the Asian session

• Aussie April labor force
• NZ Annual budget
• U.S weekly unemployment claims

What’s on today?
Today in the Asian session, Aussie labor force data and NZ annual budget are the risk events scheduled. Overnight the cross AUDUSD recover lost ground and again closed above 14MA. We believe the further rally in the Oil price has supported the AUD on Wednesday session. Brent oil is just sitting at 79.00$.

We expect in April, unemployment rate likely to remain steady at 5.5% and the economy is forecast to add 20.3K.
According to Westpac, “Consensus in the Bloomberg survey is for the unemployment rate to hold at 5.5%, with jobs expected to have risen 20k (Westpac +17k and 5.5%).”

The new government will deliver the NZ annual budget this afternoon (2.00pm local time). In Grant Robertson’s first budget we are mainly focusing on the kiwi build plan.
The new Government has committed $2 billion for KiwiBuild, an ambitious programme that aims to deliver 100,000 affordable, quality homes for first home buyers over the next decade. 50,000 of these homes will be in Auckland.

Today’s U.S data is unlikely to move the DXY. The yield on the benchmark 10-year treasury closed at 3.09% (Source: U.S. Department of Treasury)

FX REACTIONS:

The AUDNZD is teasing at 1.0900 levels, a tad below to our target 1.0920. We suggest “taking profit” at the current market price. Support finds at 1.0840 below this, 1.0800 exists.

AUDUSD recover lost ground and again closed above 14MA. Ahead of today’s labor force data the trading range will remain between 0.7385-0.7600 with support finds at 0.7440. We prefer buying in the dip with sl below 0.7330 initial targets at 0.7600 and 0.7650. We remain cautiously bullish as we continue to study the price action.

Yesterday’s chart:

NZDUSD manage to hold the support zone, widely spread between 0.6860-0.6815 which coincides with the 50.0% reaction. The 61.8% fib reaction (below chart) lies at 0.6660 which corresponds with the weekly A-B-C corrective wave pattern target (100.0fe).
On the flip side, intraday resistance seems to be at 0.6925 above this, scope to rally further to 0.6965 levels.

USDJPY gave a bullish break through an inverse H&S pattern and nearly completed the pattern target. The cross finally closed above 200MA for the first time since early Jan 2018. The daily study of an RSI has been consolidating at 67.00 levels. In case of an RSI break out, we could expect further elevation to 111.00 with support finds at 110.00 below this, 109.50 and 109.15 exists.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

Have a question? Let us help!

A KTM Analyst is ready to assist you, click on the comment section below
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