Fed’s Hawkish Suprise

Growth is seen higher at 7% (yes SEVEN!) in 2021, half a percent up from the prior forecast, 3.3% next year and 2.4% in 2023. Unemployment was left broadly unchanged and core PCE inflation is forecast to rise sharply this year at 3% (+0.8% higher than the previous estimate) before slowing to 2.1% in the following two years. Chair Powell admitted higher inflation could go on for longer though he doesn’t expect it to feed into expectations.

Big dot plot change

The majority of the FOMC brought forward en masse their rate hike outlook and this proved the biggest sucker punch to markets who have been guided over the past eighteen months by nonstop easing and a persistently dovish Fed who has remained purposefully behind the curve. Two hikes are now suggested in 2023 (from zero in the prior meeting) and seven out of 18 members already expect one next year. This all means that tapering, let along the beginning of taper talk, is not so far away!

Dollar bid

This is all quite a shock from the FOMC even if markets had set itself up for one, with traders expecting the Fed to remain fairly cautious while acknowledging rising price pressures. Going forward, the Fed is now more likely to respond to data and is more prepared to tighten than previously thought.

The dollar has burst higher and there is plenty of room for US real rates to continue rising from their low base which means more upside.

This should also mean higher volatility which is good news for traders! EUR/USD especially, has broken out of its recent range and smashed down through the 1.21 support. Although the pair paused last night at the 200-day SMA, this morning has seen follow-through selling as we dip towards the next Fib level at 1.1950.

Gold also got hit as swarms of buyers dashed for the dollar and shorts were desperate to cover positions. After the 200-day SMA got taken out overnight, $1800 is the next support level ahead of the 100-day SMA just below here.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Main Events of the Week!

Transitory versus sustained?

Headline and core prices are expected to jump to 4.7% and 3.5% respectively in the US CPI numbers with base effects being the primary reason for the surge higher. This should be the peak for US prices with the trend starting to come down in June, although some economists still believe they will remain elevated and above target through the rest of the year. But the Fed is in no rush to respond as it is happy to look through the spike in rising prices, especially as the latest US job figures provide a further excuse for its patient stance.

We’ve seen bond markets move already with yields falling steadily all week with the widely-watched US 10-year Treasury now trading below 1.5%, the first time since March. A bumper headline number to the topside of estimates is surely needed to arrest this fall, but bond markets are known to generally lead markets so it will be fascinating to see who is right later today.

USD/JPY has been tracking sideways this week in a narrow range around 109.50. A bumper CPI print would push the pair higher and challenge last week’s highs at 110.32/33 while support rests at the 50-day SMA at 109.10 near this week’s lows.

ECB meeting and taper talk

ECB officials have recently been talking down any mention of tapering bond buys in the emergency ECB programme but there are some expectations that there may be a small change in guidance. This would come in the statement with a shift from “significantly” to “moderately” higher than at the start of the year and see buying cut to €70bn/month versus the current rate of €80bn/month. If President Lagarde does not repeat this “taper on hold” message or there is a communication error, then the risks are skewed to a higher euro as market expectations are generally currently cautious.

EUR/USD has been treading water this week either side of 1.22. Any bullish talk from Lagarde will see the pair push higher towards end of May highs at 1.2266 with the January peak at 1.2349. Last Friday’s low at 1.2103 is support if the ECB gets out its very patient and vigilant card.

By Lukman Otunuga Research Analyst


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stocks Continue Higher Amid Rising Prices

Asian markets are mixed and European bourses have opened up in similar fashion. That said, global equity indices are still sitting near to record / cycle highs as the Fed’s patient message continues to mean the stimulus punchbowl are still being passed around.

We had another reminder this morning about rising price pressures with China’s producer prices increasing at their fastest pace in 13 years. Soaring commodity prices as well as a low base effect after being in negative territory for most of last year has seen the index jump in recent months. This will add to global inflationary pressures and perhaps more action from the Chinese government economic planning agency who last month warned of “excessive speculation” in commodity markets and a crack down on monopolies.

Majors rangebound

Expect more quiet trade in dollar crosses today ahead of the US CPI data and ECB meeting tomorrow. Sterling is trapped in a 1.41-1.42 range with the reopening delay not unduly worrying markets that much. June 21 has been in the minds of many in the UK, but a postponement of a couple of weeks is being signalled by the government.

gbpusddaily_810

The swissie has been attracting buyers this week ahead of the ECB meeting tomorrow with USD/CHF back into its descending channel after venturing north last week above 0.9050. Bear will target the cycle low at 0.8930 unless the US inflation data prints to the topside of estimates.

Bank of Canada to stand pat

After shifting to a hawkish bias at its last meeting in April with the signalling of a rate rise in late 2022 and a second taper of its QE program, the leading hawkish central bank of the moment is set to wait for more post-lockdown data before continuing on its merry way to policy normalisation. A positive tone is expected from the Bank of Canada with an impressive vaccine rollout and strong CPI figures offset by two months of disappointing jobs data.

USD/CAD continues to consolidate above long-term support around 1.20. Any rebounds have been lacking in momentum with prices only moving above 1.22 on one occasion since mid-May. A downside break needs to develop sooner rather than later though as otherwise a deeper retracement may come into play.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Low Volatility

Easing financial conditions and low volatility are an attractive environment for risky assets, as small caps in the US especially continue to outperform.

Questions over how long this “perfect world” can last will of course continue. This “Goldilocks” environment – where the economy is not too hot, or too cold but just about right – is weighing on volatility with markets now in need of a new catalyst. The mega rebound in risky assets has slowed as inflation and Covid variant concerns begin to mount, with last week’s US jobs report not providing as much direction as many would have hoped.

Jobs data inconclusive

While the headline payroll number was mildly disappointing, it was close enough to the consensus number to avoid a major panic about the previous month’s astoundingly weak figure. On the flip side, hourly wage growth came in noticeably higher than expected which adds to the concerns going forward of not-so-transitory pricing pressures, this time in wages.

Perhaps the central issue is that there are still over seven million jobs which have still been lost since the pandemic began and it will take time for this number to come down. Reluctance to go back to work due to Covid concerns, stimulus benefits still being paid out and older people not returning to work all add to the employment puzzle.

Rangebound FX

Falling US bond yields and stable real yields does mean mainly directionless USD trading, with one of the central supports for the greenback potentially ebbing away. Indeed, the FX options markets, which thrive on volatility and sharp directional moves, are trading at or very near to pandemic lows. This tells us that the outlook for broader FX is not going anywhere fast, in the eyes of options traders.

And yet, the more FX markets trade in a range and consolidate sideways, the greater the potential breakout will be which is more often than not, in the direction of the long-term trend. Similarly, risk assets need frequent Fed comfort that the stimulus punchbowl won’t be taken away sooner than expected for the grind higher to continue.

Written on 09/06/2021 12:00 GMT by Lukman Otunuga, Senior Research Analyst at FXTM

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Marking Time Ahead of The Big One…

The slow pace of nuclear talks between the US and Iran is also helping the supply side with Brent bulls now eyeing up the April 2019 highs at $75.58.

FX major pairs are stuck within ranges, but the (even more important) monthly US labour market out tomorrow is building up to be the major risk event for the month of June, setting the scene for the next FOMC meeting mid-month. Although though the recent tone of Fed policymakers is subtly shifting, any key data misses will move the narrative once again back to an uber-patient Federal Reserve on “go-slow” with regard to policy changes and tapering bond purchases. On the flipside, Fed expectations should be gradually built into assets from here as the world heals and the recovery continues to pick up steam.

EUR/USD trading around 1.22

The world’s most popular currency pair has printed two bullish pin bar candles in recent sessions which suggest buyers are in the ascendency and stepping in when prices fall too far, too quickly. With the region’s vaccination surge gathering momentum, so the single currency should push materially higher above 1.22 so consolidating its two-month bullish trend. But for now, we know what’s on everyone’s mind, so we will be rangebound until 1.30pm BST tomorrow!

Big day for USD/CAD…tomorrow

After failing to hold gains to fresh, six-year high against the USD, the loonie is finding some support versus the dollar’s advance on the back of firm oil prices. Canadian GDP showed decent growth and even though the monthly figures highlighted the April slowdown due to the more lockdowns, the BoC remains in the hawkish central bank camp.

USD/CAD continues to consolidate across the 1.20 support zone. The longer it does so, the more explosive the breakout but gains will need to push above the 1.2150 zone to arrest the strong downtrend. The double hit of the NFP and a Canada jobs report tomorrow will no doubt determine direction.


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

 

Risk Sentiment Improves As Inflation Fears Ease

As a chorus of Fed officials reiterated that the recent pickup in inflation would be transitory, investor fears were soothed about rising prices forcing higher interest rates. US equity bulls rejoiced on this development, encouraging buying in expensive growth stocks in sectors such as technology.

While these comments have lifted risk sentiment and offered support to stock markets, concerns still linger over the Fed taking action sooner, rather than later if inflationary pressures mount. In the meantime, financial markets are likely to remain highly sensitive to inflation expectations and comments from Fed officials on this topic.

Dollar drifts lower…

The past few weeks have certainly not been kind to the dollar.

It has weakened against every single G10 currency this month and remains vulnerable to further losses amid weaker treasury yields. Although inflation worries are receding following the latest comments from Fed officials, the damage has already been inflicted on the dollar.

The main risk events for the greenback today will be the US new home sales and consumer confidence data. For April, sales of new homes are expected to hit 950,000, falling from the 1,021,000 new homes sales in March. In regard to consumer confidence, it is expected to decline slightly in May falling to 119 from 121.7 in April.

Focusing on the technical picture, the Dollar Index is under pressure on the daily charts. Sustained weakness below the psychological 90.00 level may encourage a decline towards 89.30.

Germany GDP downgraded in Q1

The euro offered a muted response this morning to the news that Germany’s economy contracted in the first quarter by more than reported in the first release. Europe’s largest economy shrank by 1.8% quarter-on-quarter in the three months to March 2021 which was weaker than the first estimate of -1.7%. On the year, the economy shrank 3.1% compared to the 3.0% preliminary estimate. Despite the downgrade, the economic outlook is starting to brighten as coronavirus cases fall and lockdown restrictions ease across the continent.

The EUR/USD is currently trading above 1.2250 and dollar weakness could send the pair towards levels not seen since early January at 1.2300.

Commodity spotlight – Gold

Gold continues to shine thanks to a weaker dollar, falling Treasury yields and extreme volatility in the cryptocurrency space.

The precious metal is trading around levels not seen in four months and is up over six per cent in May. Despite the receding US inflation fears, gold is supported by other fundamental drivers. Although the path of least resistance points north, the price action around $1870 could determine whether gold extends gains or experiences a technical pullback this week. Should $1870 prove to be reliable support, a move towards $1900 could be on the cards. However, a decline below $1870 may signal a drop towards $1855 and $1840, respectively.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: G10 Currencies On Standby

Other than the flicker of action witnessed on the Norwegian Krone and New Zealand Dollar, it pretty much felt like watching paint dry on a rainy day.

After looking at the paltry intraday gains (below), we decided to identify potential technical setups in the week ahead.

As of writing,

  • NZDUSD = +0.49%
  • USDNOK = -0.43%
  • USDDKK = -0.31%
  • EURUSD = +0.30%
  • AUDUSD = +0.22%
  • USDJPY = -0.21%
  • USDCHF = -0.14%
  • USDCAD = -0.12%
  • GBPUSD = +0.10%
  • USDSEK = -0.05%

One thing that’s strikes out is the fact that all currencies in the G10 space have appreciated against the greenback today.

The not so mighty dollar remains pressured by inflation fears and is struggling to push back above the psychological 90.00 level. Sustained weakness below this point could open the doors towards 89.30.

EURUSD breakout on the horizon?

We see a classic breakout setup forming on the EURUSD.

Support can be found at 1.2170 and resistance around 1.2240. A solid breakout and daily close above 1.2240 could signal a move towards 1.2300. Alternatively, a decline below 1.2170 could pave a path towards 1.2060.

GBPUSD gearing up for a push higher?

It’s safe to say that the GBPUSD is firmly bullish on the daily charts.

There have been consistently higher highs and higher lows while the MACD trades above zero. Should 1.4100 prove to be reliable support, this could provide a platform for bulls to conquer the 1.4200 resistance level. A solid daily close above this point could pry open the doors towards 1.4240 and levels not seen since April 2018 at 1.4300.

One thing to keep in mind is the fact the Relative Strength Index (RSI) is slowly approaching overbought territory. This may instil bears with fresh inspiration if 1.4100 proves to be unreliable support.

USDNOK knocks on 8.3850’s door

If one word could be used to describe the USDNOK’s movements over the past few weeks, the best fit would be choppy.

We can see strong resistance around 8.3850 and support at 8.1700. A decisive breakout and daily close above 8.3850 could result in a move towards 8.4700.  Prices are likely to drift lower if 8.3850 proves to be reliable resistance.

USDJPY below 50-day SMA

Prices are trading below the 50-day Simple Moving Average while the MACD is in the process of crossing to the downside. Bears need to secure a solid daily close below 108.30 to encourage a decline towards 107.67. A rebound from the 108.30 level could inject bulls with enough confidence to elevate prices back towards 109.30.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Gripped By Inflation Concerns

Wall Street slipped on Monday, dragged down by declines among technology shares as concerns over rising prices soured risk sentiment. Although Asian stocks opened firmer this morning and US futures are positive, caution ahead of Wednesday’s FOMC meeting minutes could limit gains across equity markets.

Federal Reserve policymakers have repeatedly played down the inflation risk as transitory. However, the volatile movements witnessed across financial markets recently suggests that investors think otherwise. If inflation proves to be longer lasting, this could force the Federal Reserve into action sooner rather than later. Such a development would be bad news for equity markets, especially expensive growth stocks sensitive to higher interest rates.

Dollar Index dips below 90

The dollar stumbled into Tuesday’s trading session under renewed pressure thanks to dovish comments from the Fed’s Clarida who indicated that it is too soon to talk about tapering, citing the weaker than expected April labour market report. Dallas Fed President Robert Kaplan, a known “hawk”, also spoke on Monday and said he believed price pressures would moderate in 2022. The Greenback has weakened against every single G10 currency this month with the Dollar Index (DXY) approaching levels not seen since late February. If the DXY secures a solid daily close below the 90.00 psychological support, this signals further downside with 89.70 acting as the first level of interest.

Eurozone GDP in focus

The euro slightly weakened against every single G10 currency excluding the dollar and Japanese yen on Tuesday morning ahead of the second estimate of the Eurozone GDP numbers. According to the flash estimates back in April, the European economy shrank 0.6 percent in the period from January to March 2021 and the euro may offer a muted reaction if the second estimate meets expectations. Looking at the technical picture, EURUSD has the potential to push higher if a solid daily close above 1.2170 is secured, a move fuelled by the weaker dollar.

Commodity spotlight – Gold

Gold bulls continue to draw strength from a weaker greenback and inflation fears. The precious metal has gained 5.7 per cent this month and could extend gains as inflation concerns continue to grow. Where the metal closes this week may be influenced by the FOMC meeting minutes, but a solid break above $1870 could open the doors towards $1900.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: EURUSD Breakout On The Horizon?

As US Treasury yields fell slightly and weighed on the Dollar, this pushed the EURUSD to an intraday high of 1.2168 before prices later retreated below the 1.2150 level.

Looking at the daily timeframe, the EURUSD is certainly in an uptrend. There have been consistently higher highs and higher lows since the start of April 2021 with prices respecting a bullish channel.

However, bulls seem to be having a tough time cracking the resistance around the 1.2150 – 1.2170 regions.

After peaking around 1.2180 last week, the currency pair tumbled as low as 1.2050 which became the new higher low. Should prices fail to secure a solid daily close above 1.2170, the EURUSD may experience a pullback towards 1.2050 and 1.2000, respectively.

Alternatively, a solid breakout above 1.2170 could signal an incline towards levels not seen since late February above 1.2240. Lagging indicators are currently swinging in favour of bulls with the MACD trading above the zero level while the 50-day Simple Moving Average (SMA) is back above the 200-day SMA.

Zooming out to the weekly charts, bulls still remain in the driving seat above 1.2050. A solid weekly close above 1.2170 should pave a path towards 1.2240 and 1.2310. If bulls fail to conquer 1.2170, prices could decline back towards 1.2050 and 1.1985, respectively.

Prices are still stuck within a very wide range on the monthly timeframe with support found around 1.1600 and resistance at 1.2300. If bulls can maintain control and secure a monthly close above 1.2300, this may open doors towards 1.2400 – a level not seen since April 2018.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Inflation Angst, Volatile Markets, US Retail Sales Stall

Risk assets resumed their rise on Monday morning despite the shockingly disappointing nonfarm payrolls report last Friday. Market optimism over the reopening of economies and expectations of lower rates for longer supported Asian equities. However, European and US stocks fell as inflation angst sparked a tech selloff.

In the currency space, the British Pound caught our attention after surging above the 1.41 level. The combination of easing political risk for the United Kingdom and a broadly weaker dollar sent the GBPUSD skyrocketing over 150 pips on Monday. The key question was whether the Pound could hold on to recent gains? Looking at the technical, prices remain bullish on the daily charts with a weekly close above 1.4100 potentially opening the doors towards 1.4200.

On Tuesday morning, we discussed why tech stocks were falling so hard. In the afternoon we covered the technical outlook for gold. The precious metal concluded the week gaining 0.67% with prices trading marginally above $1840.

Our stock of the week was Disney which reported its fiscal second-quarter results after U.S. markets closed on Thursday 13th May. Disney announced earnings of 79 cents on revenue of $15.61 billion. Although earnings beat forecasts, revenues fell short of expectations. In regards to its streaming service, the number of paid subscribers for Disney+ hit 103.6 million which was less than the 110.3 million projected in the Bloomberg Consensus. Share of the entertainment giant shed 6% this week.

Mid-week, it was all about the US inflation report which certainly did not disappoint. US inflation surprised to the upside as headline and core both jumped more than expected in April. Consumer prices jumped 4.2% – the biggest headline number since 2008.

The US inflation report roiled equity markets on Wednesday with the Vix punching above 28.00 for the first time since early March. We saw the Dow Jones registering its largest single-day loss since January while the Nasdaq and S&P 500 tumbled like a house of cards.

On Thursday, it was a sea of red across the global equity space as the inflation fears rattled markets. Interestingly, US stocks gained ground in the evening – breaking a three-day losing streak. Despite extending gains on Friday, the S&P 500, Dow Jones and Nasdaq ended the week in losses.

All eyes were on the US retail sales report on Friday which unexpectedly stalled in April. On the bright side, March’s number was revised upwards to 10.7% from the previously reported 9.8% increase.

Taking a look at the Dollar Index, it remains under pressure on the daily charts. Sustained weakness below 90.45 could signal a move towards 90.00 and possibly lower this month.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

A Sigh Of Relief

The Dow and S&P are still on track for their worst week since late January even though the former enjoyed its best day in six weeks, while the Nasdaq remains around 7% below its all-time high. European bourses are all pointing to a better final session in what has been a tumultuous week for risk markets.

Dollar downtrend still intact

The dollar’s jump higher after Wednesday’s knockout inflation data paused below the 91 level in the DXY and sellers are in this morning as US bond yields pare their week’s move higher. While surging prices are a global issue, Fed officials have been sticking to the party line so far with speakers overnight again reassuring markets about the transitory nature of inflation. They also signalled that rates won’t rise until policymakers see inflation either above target for a long time or excessively high.

DXY printed a narrow range day yesterday and failed to push higher with the 100-day moving average sitting just above the 91 psychological mark. The end of March highs look a lifetime away with the down trendline still in play. Bears will be targeting the end of April low around 90.45 to confirm the route back to this week’s lows.

US Retail sales and industrial production data are in focus today with sales expected to remain strong after the blockbuster report in March. Stimulus checks from March have been carried over into April with analysts expecting a reading of 1.1%.

GBP holding onto gains

GBP/USD has come off the levels not seen since February, but the pair crucially found support above the 1.40 floor/ceiling. Sellers tried to push prices through here yesterday but the performance by stocks and dollar selling has held up cable. Progress on the Indian variant of the virus and any potential new lockdown measures is not having an effect as yet. Otherwise, the next phase of reopening is due to happen this coming Monday in the UK, with sterling the top major performing currency so far on the week.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

US Inflation Fuels The Policy Debate

That is the biggest headline number since 2008 and core print month-on-month since 1995. The index for used cars and trucks rose a whopping 10% in April, which accounted for over a third of the seasonally adjusted increase and was the largest one-month increase since records began in 1953! Markets have reacted accordingly with Nasdaq futures down 1.5%, the dollar higher and gold initially extending its losses.

Bond yields pushing up

The market has been wracked by inflation concerns this week as commodity prices continue surging higher with numerous raw materials now at multi-year highs including copper, iron ore and corn. The debate over whether these increasing price pressures will be persistent enough and not “transitory” to force the Fed to change its course will no doubt continue. That said, the bond market and yields hadn’t budged a great deal over recent sessions, trading around 1.60%. Surely if inflation is a major issue, these yields should be alot higher, which means support for the dollar and not so growth stocks?

Sterling proving its mettle

UK GDP was released earlier today and the hit to activity in the first quarter (-1.5% q/q) was pretty resilient and less bad than originally feared at the start of the quarter. The fact the economy managed to grow 2.1% in March despite a lockdown being in place shows that there are some green shoots on the horizon! Momentum is growing into the second quarter which will only benefit more as restrictions are eased. There is also good survey evidence for April that is robust and bodes well for a bumper summer.

GBP is the leading major this month and the positive vaccine rollout and contagion should put a floor under the currency. EUR/GBP is now trading at five-week lows just below its mid-April low and with resistance above at the 50-day SMA around 0.86. Bears are eyeing up the long-term cycle lows at 0.8472 with the MACD looking good for more downside.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Disney Earnings Preview: What You Need To Know

The magic kingdom continues to nurse deep wounds inflicted by the pandemic.

Since the start of 2021, shares of the entertainment giant have gained a paltry 0.27%, underperforming against the S&P 500’s 10.5% gain over the same period.

Although the Covid-19 menace has dished out much pain, it has also provided opportunities. Given how the re-opened theme parks are operating at a lower capacity and the cruise line business remains closed, this may negatively impact Disney’s second-quarter results. However, the streaming services could come to the rescue after Disney reported in early March that Disney+ subscribers surpassed 100 million for the first time.

When is Disney’s earnings call and what to expect?

Disney reports its fiscal second-quarter earnings after U.S markets close on Thursday 13 May.

According to Bloomberg, the entertainment giant is expected to post adjusted earnings of 28 cents per share on revenues of $15.85 billion for the fiscal second quarter. This will mark a 12% decline in revenues during the same period in 2020. For the full year, adjusted earnings are forecast to hit $1.85 per share on revenues of $68.66 billion.

What to watch out for….

Disney+ subscriber numbers will be under the spotlight.

With the company’s cash producing juggernauts closed/operating at limited capacity, Disney’s streaming services are likely to remain the primary driver of growth moving forward. As stated earlier, the streaming platform topped 100 million subscribers by early March. Considering how Disney+ has been running for only 16 months, this growth is certainly phenomenal.

Now, this is where things get interesting. Netflix’s added only 3.98 million paid subscribers in the first quarter. With lockdown restrictions easing and consumers returning to outdoor entertainment, this could bad news for the streaming giants. If the subscription numbers for fiscal Q2 disappoint, it could suggest that growth in the industry may be slowing as normality returns. However, strong subscriber growth will be a welcome development for Disney while enforcing pressure on Netflix.

In March, Disney+ raised its monthly subscription to $7.99 a month from $6.99 while the annual subscription increased to $79.99 from $69.99. This hike in prices could boost profitability, especially when considering how its subscription remains cheaper than other competitors. Netflix charges $8.99 per month for a basic plan, Amazon Prime charges $12.99 while a single subscription plan for HBO costs $14.99 per month.

Back in December 2020, the entertainment giant expected Disney+ to have between 230 to 260 million subscribers by 2024. This is more than the population of Africa’s largest economy – Nigeria.

How about the theme parks and resorts?

It is widely known that Disney’s theme parks, cruise business, and hotels have been severely disrupted by the coronavirus pandemic. However, there is some light at the end of the tunnel as all four Walt Disney World theme parks and Disney’s Blizzard Beach Water Park are now open.

Nevertheless, the need for social distancing will likely cap the number of people which are allowed in the theme parks. This could hit revenues until restrictions are fully eased and the parks can run at full capacity.

Technicals: Is a breakout on the horizon?

Disney shares have traded within a $10 range over the past few weeks with support around $180 and resistance at $190. Despite the range, the longer-term trend respects a bearish channel while the MACD trades below zero.

If the earnings report disappoints market expectations, this could encourage decline and daily close below $180. Such a scenario could open the doors towards $173. Alternatively, upbeat numbers could boost buying sentiment towards Disney shares – propelling prices back towards the $190 resistance level. A strong break above $190 could trigger an incline towards $194 and $200, respectively.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: Gold Retreats From 3-Month High

The precious metal was pressured by rising treasury yields, which tend to dampen appetite for the zero-yielding asset. After tumbling as low as $1817.92, prices later rebounded back towards $1830 regions.

What are yields and why are they rising?

A bond yield is simply the amount of return a bond earns over a period of time. There is an inverse correlation between a bond’s yield and its price. Yields are rising because bond prices are falling.

So why are bonds falling?

The answer in one word is inflation.

US inflation fears have not only soured the market mood but dampened appetite for bonds. One thing to keep in mind is that as inflation rises, it affects the real return on bonds.

Is inflation good news for Gold?

Gold is often hailed as a hedge against inflation as it appreciates as the purchasing power of the dollar falls. This may limit downside losses and provide a platform for bulls to elevate prices to fresh multi-month highs.

However, concerns that rising inflation may force the Federal Reserve to raise interest rates sooner than later could create obstacles for gold down the road. Earlier, we highlighted how the precious metal is zero-yielding.

Given Gold’s zero-yielding nature, it tends to dim in a high-interest rate environment.

All eyes on the US CPI

On Wednesday, the U.S. will release the Consumer Price Index report for April. Headline inflation is expected to show a sharp increase year-on-year to 3.6% from 2.6% in the previous month. Core inflation is forecast to hit 2.3% year-on-year from 1.6% back in March.

Technicals: Gold bulls still in control

Bulls remain in control as long as $1800 proves to be reliable support.

A technical pullback could be in the works before gold resumes the current uptrend. If a solid daily close above $1840 is achieved, this could signal a move higher towards $1855 and $1870. Should $1800 prove to be unreliable support, a decline back towards $1770 may be on the cards.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: GBPUSD Surges Above 1.41

The falling likelihood of a second Scottish independence referendum in the near term following last week’s election boosted buying sentiment towards Sterling. A broadly weaker dollar also played a role in propelling the GBPUSD to its highest level since February 25th.

With Covid-19 cases falling, two-thirds of UK adults receiving a first dose of the vaccine and the next phase of lockdown easing scheduled on May 17th, the economic outlook for the post-pandemic UK remains bright. This may translate into a stronger Pound over the next few weeks.

Can the GBPUSD push higher?

Looking at the daily charts, the technicals are heavily bullish. The GBPUSD has jumped over 150 pips today and a total of 350+ pips since the start of May! Prices are trading comfortably above the 20-day and 50-day Simple Moving Average while the MACD trades above zero. A solid daily close above 1.4100 could provide a platform for bulls to springboard prices towards 1.4200 and the 2021 high of 1.4240.

One thing to keep in mind is that the Relative Strength Index (RSI) is very close to hitting 70 which suggests that the GBPUSD is overbought and may be primed for a technical pullback. Should prices fail to keep above 1.4100, a decline back towards 1.4000 and lower could be on the cards.

Zooming out on the weekly charts, there have been consistently higher highs and higher lows. Prices are trading above the 20-week Simple Moving Average while the MACD trades above zero. A strong weekly close above the 1.4000 resistance could encourage an incline towards 1.4240 which is the 2021 high. A move beyond this point could see the GBPUSD test 1.4350 – a level not seen April 2018.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Dollar Crumbles, Gold Glitters, NFP Massively Disappoints

After a challenging month in April, we questioned whether the dollar could recover? Given its negative performance against G10 currencies this week, bulls certainly have a very steep hill to climb to reclaim back some control.

In our technical outlook, yen crosses were under the spotlight. Military tensions between China and Taiwan sparked risk aversion and boosted appetite for safe-haven currencies including the Japanese Yen.

As discussed on Tuesday, the USDJPY was blocked below 109.686. The repeated rejection around the 109.30 levels created a platform for bears to drag prices lower. A broadly weaker dollar on Friday following the dismal US jobs report sent the USDJPY tumbling towards 108.30.

Our stock of the week was Uber which released its Q1 results after US markets closed on Wednesday. The company reported mixed results for the first quarter of 2021. However, the net loss for the quarter was $108 million which was an incredible improvement from the $968 million it lost in Q4.

Mid-week global equity bulls made an appearance, shaking off the caution from China-Taiwan tensions and comments from Treasury Secretary Yellen. However, a late tech selloff sent the Nasdaq lower for the fourth consecutive session.

The Euro caught our attention after forming a death cross technical chart pattern. But this setup was trashed by a broadly weaker dollar on Friday. The EURUSD is trading around 1.2160 as of writing. A solid weekly close above 1.2150 could signal further upside in the week ahead.

On Thursday, the Bank of England was under the spotlight. Although the central bank left interest rates unchanged as widely expected, it reduced the pace of weekly asset purchases to £3.4 billion from the previous rate of £4.4 billion. While the BoE expressed optimism over the UK economy, hawks were kept at bay.

Looking at the technical picture, the GBPUSD remains in a wide range on the daily charts. A breakout could be on the horizon thanks to a weaker Dollar. Should bulls conquer the 1.4000 resistance, the next key level of interest will be around 1.4110.

It was all about the shocking payroll data on Friday. The US economy added 266,000 jobs in April, massively missing expectations for 990,000. March’s figure was also revised down to 770,000 from 916,000. In regards to the unemployment rate, this rose to 6.1% while average hourly earnings m/m rose 0.7%.

The key question is whether this bad news is good news for markets? Treasury Yields spiked as low as 1.464% before rebounding while the S&P 500 and Dow Jones rallied to fresh record highs.

In the commodity space, Gold exploded higher following the disappointing US jobs report. Prices punched above $1840 thanks to a tumbling Dollar and falling treasury yields.

Looking at the technical picture, the precious metal is experiencing a pullback from the daily high but is still on route to concluding the week over 3% higher. Bulls remain in the driving seat as long as $1800 proves to be reliable support.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Sterling Whipsaws On BoE Rate Decision

As widely expected, the central bank voted unanimously to leave interest rates unchanged at their current record low of 0.1%.

Falling Covid-19 cases, the rapid progress in vaccine rollouts, easing lockdown restrictions, and improving domestic conditions have brightened the UK’s economic outlook. Reflecting these positive developments, GDP is forecast to expand sharply in the second quarter of Q2. Annual economic growth for 2021 is projected to be around 7.25% – the strongest seen since the second world war. In 2022, the bank sees GDP at 5.75% versus the previous estimate of 7.25%.

In regards to inflation, this is expected to reach 2.5% by the end of 2021 before dropping back to 2% in the medium term.

Overall, the Bank of England sounded optimistic over the UK’s post-pandemic economic recovery. However, it felt like the bank took a leaf out of the Federal Reserve’s book in regards to messaging and cooling expectations around tightening monetary policy. Bank of England Governor, Andrew Bailey stated during the press conference that the decision to reduce gilt purchases was not tapering.

What does this mean for the Pound?

After the initial whipsaw, the British Pound later weakened against the Dollar and other G10 currencies.

The weakness could be based around the Bank of England not sounding as hawkish as expected and BoE Governor Bailey’s comments during the press conference. Nevertheless, Pound bulls remain supported by the positive developments in the United Kingdom. Looking at the currency’s performance since the start of 2021, it has appreciated against most of its peers in the G10 space excluding the Canadian Dollar and Norwegian Krone.

GBPUSD trapped within 200 pip range

The currency pair remains trapped in a wide 200 pip range on the daily charts.

Support can be found at 1.3800 and resistance at 1.4000. Given how prices are hovering above the 20-day and 50-day Simple Moving Average, this could provide a platform for bulls to attack with the first level of interest back at 1.4000. Given how the GBPUSD has been trapped within this current range since mid-April, it may take a fundamental catalyst to break out if the technicals fail.

Should prices secure a solid close above 1.4000, this could open a path towards 1.4110. Alternatively, a move below 1.3800 may trigger a decline towards 1.3715.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Stock Markets Rebound, Dollar On Standby

European markets flashed green thanks to encouraging data from Europe while tech shares led a rebound on Wallstreet.

Treasury Secretary Janet Yellen rattled financial markets yesterday by suggesting that interest rates may need to rise to prevent the US economy from overheating. The negative reaction witnessed across the equity space laid bare the market sensitivity to inflation expectations. Interestingly, Yellen later clarified that she was not forecasting interest rate hikes – which came as a breath of fresh air to the Technology sector. The Nasdaq 100 has gained over 0.6% this afternoon, while the S%P 500 and Dow Jones have both gained almost 0.5%.

Looking at the technical charts, the Nasdaq turned bearish on the daily timeframe after securing a solid daily close below the 13750 support. If this level transforms into a dynamic resistance, the index could decline towards 13350 – a level just above the 50-day Simple Moving Average. Alternatively, a sharp rebound back above 13750 is likely to trigger a move towards the 14000 regions.

Dollar on standby ahead of NFP

The Dollar slightly weakened on Wednesday afternoon after the U.S. private payroll data for April missed market expectations.

According to the data released by the ADP Research Institute, the USD ADP employment change came in at 742,000 last month. This was below the 850,000 market expectations but still, the highest growth seen in eight months.

Given how the main risk event and potential market shaker remains the US jobs report on Friday, the Dollar could remain on standby. Looking at the technical picture, the Dollar Index (DXY) could challenge 91.80 if a solid daily close above 91.31 is achieved. Should this level prove to be reliable resistance, a decline back towards 91.05 and 90.50 could be on the cards.

Commodity spotlight – Gold

Gold is trading within a range on the daily charts with layers of support around $1700 – $1665 and resistance at $1800. Although the MACD trades above 0, prices seem to be capped below the 100-day Simple Moving Average. There is a possibility that the precious metal remains rangebound until the US jobs report is published on Friday. Should the Dollar push higher on Thursday, this could inject Gold bears with enough confidence to drag prices below the $1770 – $1665 regions with the first level of interest at $1755.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Technical Outlook: Yen Crosses Under The Spotlight

Our currency spotlight shines on the Japanese Yen which has appreciated against most G10 currencies today.

Yen bulls could remain in the scene if U.S. Treasury yields decline further.

USDJPY blocked below 109.686?

It was not only the Japanese Yen that derived strength from the market caution. The Dollar has also dominated the G10 space today, appreciating against major peers including the Yen.

Given how the risk-off sentiment is supporting both currencies, a technical move could be needed to determine the USDJPY’s near-term outlook. There seem to be some layers of resistance around the 109.686 and 109.30 regions. Sustained weakness below these levels could encourage a decline towards 108.30 and possibly lower.

EURJPY: Technical pullback or start of a downtrend?

Taking a look at the technical picture, the EURJPY is heavily bullish on the daily charts. There have been consistently higher highs and higher lows while the MACD is trading comfortably above 0.

A technical pullback is in the works with 130.60 acting as potential dynamic support for bulls to push prices back higher. However, if this level proves to be unreliable support, a decline back towards 129.70 could be on the cards. Such a move may threaten the current uptrend and invite bears back into the game.

GBPJPY breakout on the horizon?

The currency pair has formed a symmetrical triangle pattern on the daily charts. This pattern either signals a continuation of the current trend or the start of a new trend in the opposite direction.

Given how prices are trading above both the 50-day and 100-day Simple Moving Average, the technicals swing in favour of bulls. However, an appreciating Japanese Yen could throw a proverbial wrench in the works, opening the doors for bears. A breakdown below the 50-day Simple Moving Average could result in a sell-off towards 148.50. If this level is cracked, the GBPJPY will turn bearish on the daily charts. Alternatively, a strong move back above 153.40 will most likely signal further upside.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Dovish Fed, US GDP Jumps, Blockbuster Tech Earnings

Global stocks held near record highs on Monday as investors looked ahead to a week dominated by key economic data and quarterly earnings from tech giants.

We covered various technical outlooks throughout the week with Gold snatching our attention on Monday. Despite the choppy price action seen during the second half of April, Gold is on route to concluding the month over 3.4% higher. Given the conflicting forces pulling and tugging at the precious metal, the next few weeks could be volatile.

Our focus shifted to Tesla after its first-quarter earnings smashed expectations. We questioned whether Tesla shareholders were becoming an insatiable bunch after shares of the electric vehicle car maker fell as much as 3.1% in after-hours trading.

On Tuesday, European stocks opened higher after US markets eked out fresh record highs overnight. The overall mood across markets turned mixed as investors adopted a cautious stance ahead of the Federal Reserve meeting.

We decided to cover commodity currencies after the Canadian Dollar, New Zealand Dollar, and Australian Dollar appreciated against major peers in the G10 group.

Remember how we highlighted how the USDCAD was screaming bearish? Well, prices eventually cut through the 1.2400 support like a hot knife through butter.

As the Fed meeting and President Joe Biden’s spending plans loomed, market sentiment turned mixed with investors on the defense.

Our stock of the week was Facebook which released its first-quarter earnings after US markets closed on Wednesday. The social giant beat on both earnings and revenue in Q1 with shares gaining almost 8% this week. Apple also reported an insanely great quarter with profts and revenues crushing expectations. The same story was for Microsoft and Google.

It was all about the Federal Reserve on Wednesday evening. As widely expected, the central bank left interest rates unchanged while striking a dovish tone.

After being punished by a dovish Federal Reserve, the dollar nursed its wounds on Thursday. In our technical outlook, we highlighted how the Dollar Index was under pressure on the daily, weekly and monthly charts. However, the Dollar sprung a surprise on Friday afternoon by aggressively appreciating across the board.

Looking at the technical picture, a solid daily close above 91.31 could open the doors towards 91.80.

Confidence over the US economy boosted by the GDP report which showed growth expanding at a 6.4% annualised rate in the first quarter of 2021.

Risk-on was the name near the end of the week with the S&P 500 logging fresh record highs on Thursday. Interestingly, U.S. stocks lost ground on Friday but posted monthly gains thanks to a string of robust earnings. The S&P 500 has gained 5.24% in April, its biggest monthly rise since November 2020.

April was a month defined by improving economic data from developed economies, earnings and worsening Covid-19 cases across the world. As head into the new month, the risk pendulum is bound to swing back and forth as investors juggle with these themes.

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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.