US stockmarkets finished mostly higher on Friday, ending a 2nd months of gain following on from the strong selloff seen in February/March, after Donald Trump announced measures against China in response to new security legislation that were less threatening to the US economy than investors had feared. Trump said that his administration would take measures to revoke Hong Kong’s special trade status with the US that grants it favorable terms across trade, financial transactions and immigration. However he refrained from taking more serious measures on trade, which allowed the stockmarkets to finish on a strong note, with the Nasdaq once again standing out in closing Friday less than 200 points below its all-time high.
The US$ was generally under further downside pressure heading into the weekend, with the Euro again performing strongly as traders continue to draw comfort from the EUs Covid recovery package of €750bio. The Euro was also underpinned by end-of-month trade flows, with EurGbp seeing a bid tone into the fix, although the cross did fade a little into the weekend allowing Sterling to squeeze a little higher. The Aud$ also performed well in drawing strength from the fact that Donald Trump did not mention further trade tariffs with China and closed near its session highs.
The Jpy crosses jumped around while Trump was speaking, sagging initially as risk sentiment soured before recovering as relief set in that there is to be no escalation in the US/China trade war. – Yet!
In the commodity markets, Gold and, particularly, Silver had a good session and appear to be set for further gains ahead. Gold ended with a monthly close above $1,700 an ounce for the first time since 2012, albeit below session highs on Friday, as the renewed US tensions with China sent risk-averse buyers steadily toward the safe-haven ahead of the weekend. Comments from Fed Chair Powell that a full economic recovery from the Covid-19 could not be attained until people felt confidence to resume living like before the pandemic also helped to underpin gold prices on Friday.
Oil posted its best month ever as WTI gained by nearly 100% for May, after closing April at $19pb, and further gains from here will be very dependent on how the global economy recovers from the pandemic. From a technical perspective, after closing May at close to the monthly high, further gains do seem very possible – see the technical comments, below.
The week ahead will be busy in terms of data, beginning today with the release of the May Mfg/Non-Mfg PMIs. The China official Mfg and Services PMIs were released over the weekend, coming in at 50.6/53.6 respectively – pretty much in line with expectations. The rest of the world’s figures will be released during the course of the session. Tuesday will feature the RBA Interest Rate Decision, where no change to policy is expected and as per the last set of Minutes, on May 19, the RBA said that they will continue to monitor economic and financial developments. Wednesday will see the global Services PMIs and, importantly, the Q1 Australian GDP, where the hope is that the number will come in above 0.0% although expectations are generally for a contraction of 0.3%. The EU/German unemployment figures will be released, as will the US ADP Jobs data, coming ahead of Friday’s official Unemployment numbers. Thursday will see the ECB Interest Rate Decision and as elsewhere, the Bank will maintain a dovish bias, willing to do more if necessary to ease conditions. Friday will look to the US Unemployment data which will be horrendous, so any surprises could be to the upside if the numbers are not as bad as expected. Have a good week.
Economic data highlights will include:
Mon: Germany Holidays, Global Manufacturing /Non-Manufacturing PMIs (Australia, China, Japan, EU, UK, US), US ISM Mfg PMI/Prices Paid
Tue: NZ Terms of Trade, Building Permits, Australian New Home Sales, Current Account, Company Gross Operating Profits, RBA Interest Rate Decision/Statement, ISM Mfg PMI/Prices Paid NY Business Conditions, Total Vehicle Sales, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory
Wed: Global Services/Composite PMIs (Australia, China, Japan, EU, UK, US), Australian Q1 GDP, Building Permits, German Unemployment, EU PPI, Unemployment, US ADP Jobs data, ISM Non-Mfg PMI/Prices Paid, Factory Orders, Bank Of Canada Interest Rate Decision, EIA Weekly Crude Stocks Change
Thur: NZ ANZ Commodity Price Index, Australian Trade Balance, Retail Sales, EU Retail Sales, ECB Interest Rate Decision, /Press Conference/Statement, US Trade Balance, Jobless Claims,
Fri: Australian AIG Performance of Services Index, Japan Coincident Index, Leading Economic Index, German Factory Orders, US Unemployment, NFP, Average Hourly Earnings, Average Weekly Hours
Market moves, in brief:
FX: DXY 98.30 (-0.17%)
Bonds: US10Y; 0.658% (-5.38%), German 10Y; -0.446% (-6.80%), UK 10Y; 0.185% (-15.65%), Australian 10Y; 0.894% (+0.51%), NZ 10Y; 0.833% (+1.56 %), China 10Y; 2.700% (+0.38%)
Stock Indices: DJI; -0.07%, S+P; +0.48%, NASDAQ; +1.29%, EUStoxx50; -1.43%, FTSE100; -2.29%, Shanghai Composite; +0.22%, ASX200: -2.00%
Metals: Gold $1729 oz (+2.85%), Silver $17.87 oz (+2.85%), Copper $2.4425 lb (+1.20%), Iron Ore $99.50 per tonne (NYMEX) (+4.39%),
Oil: WTI $35.19 pb (+4.42%)
|INDICES / COMMODITIES|
|1 Hour||Down||Turning Higher||Neutral – Turning Higher?||Turning Higher?||Neutral – Turning Higher?||Turning Neutral|
|4 Hour||Possible Topping Formation||Neutral||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?|
|1 Day||Up||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Higher?||Turning Higher?|
|1 Week||Turning Neutral||Neutral||Turning Lower?||Neutral||Turning Higher||Possible Basing Formation|
|1 Hour||Turning Higher||Neutral – Turning Higher?||Turning Higher||Possible Topping Formation||Turning Higher?||Up|
|4 Hour||Turning Neutral||Turning Neutral||Turning Lower||Turning Neutral||Neutral – Turning Higher?||Turning Neutral|
|1 Day||Turning Lower?||Turning Higher?||Turning Higher||Turning Lower||Neutral – Turning Higher?||Turning Higher?|
|1 Week||Turning Neutral||Up||Turning Higher||Possible Topping Formation||Turning Higher||Turning Higher|
|1 Hour||Turning Higher?||Turning Lower||Turning Neutral||Turning Higher||Turning Lower?||Turning Higher|
|4 Hour||Turning Higher||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Up||Neutral – Turning Higher?||Possible Basing Formation||Turning Higher?||Turning Neutral||Turning Lower|
|1 Week||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Lower||Turning Higher||Down||Neutral – Turning Higher?|
The Euro reached the target that we mentioned on Friday by trading up to a high of 1.1145, where we now have a double top with the 27 March high; 1.1147. With the daily charts looking increasingly positive, buying short term dips towards Friday’s low of 1.1067 might be the plan for Monday, in looking for a an eventual break of 1.1145/50, where the next target should be at around 1.1165 (61.8% of 1.1496/1.0635). This should be strong at the first attempt but a break would then open 1.1200/30 and the PMIs are unlikely to provide any positive momentum for the Euro. Buy dips – SL should be placed below 1.1030.
A reverse Head/Shoulder formation seems to be approaching maturity in US$Jpy, with a measured target at around 108.00. If correct, this would seem to flow through to further strength in the Jpy crosses, with EurJpy looking particularly positive, possibly along with AudJpy.
AudUsd and NzdUsd, although fairly neutral in the short term, both look constructive on the daily/weekly charts. As I said last week, we need to see a daily close above 0.6675/0.6230 in order to build confidence for further gains and in the meantime I think some choppy action, either side of current levels is likely over the next 24 hours, while waiting on the outcome of the RBA Meeting tomorrow.
As I said yesterday, we need to see a daily close above 0.6675/0.6250 in order to build confidence in further gains and in the meantime I think some choppy action either side of current levels is likely over the next 24 hours. As I said yesterday, we need to see a daily close above 0.6675/0.6250 in order to build confidence in further gains and in the meantime I think some choppy action either side of current levels is likely over the next 24 hours.
The S+P did as we suspected on Friday in dipping below 3000 before a strong bounce to close at near session highs. With the dailies and weeklies both looking positive I suspect further gains may lie ahead so prefer to trade from the long side. Those who did buy at 3000 should now raise the SL from 2950 to break-even, but looking for a rise 3100 (76.4% of 3397/2165) and beyond there to 3136 (3 March high).
The ASX also reached our downside target at 5700. SL should be at around 5675, but with the daily/weekly charts looking positive I am looking for a slow grind back towards 5800/5900.
Keep a close eye on Oil. WTI seems to be building a huge reverse Head/Shoulder formation – as per the charts. A break of the 100 DMA (35.90) is required but the measured target for WTI would seem to be at around $55per barrel – so worth watching.