23 Mar: Stocks, yields, oil all down again, US$ still in demand. Another volatile week ahead.

23 Mar: Stocks, yields, oil all down again, US$ still in demand. Another volatile week ahead.

 

Markets have opened lower once again, with the US stock indices and with WTI opening limit – down. Trade will be halted here unless there is any sign of recovery – unlikely. Limit down means that the specific contract is not allowed to move down more than 5% in overnight trade and that there can be no trades lower than the 5% line in the sand until 9:30 am NY time. This move has caused another push back into the US$, with the Aud and Nzd both falling sharply – down around 100 pips from their early highs.

US Stocks fell again on Friday, with the US indices ending the day down by around 4%, as fresh measures to contain the coronavirus pandemic spooked investors, capping off the worst week for the markets since October 2008.The day had started brightly enough with European markets squeezing higher after the announcement of further historic simulative measures from the BOE and the ECB,  but  the US indices then pulled back when New York Governor Cuomo ordered the state’s workforce to stay home. California and Illinois issued similar edicts. Stocks sank further after the Trump administration ordered US borders with Mexico and Canada would be closed to nonessential travel.

The US$ was volatile but generally slightly weaker at the end of the session, although the DXY remains within 1% of its new trend highs of 102.99. Meanwhile, bond yields collapsed again, giving up almost all of last week’s entire rally despite the unprecedented action by global central banks last week, but which has so far done little calm investor fears of an impending recession.

Gold, and particularly Silver, made some gains on Friday, while WTI headed the other way, falling by around 12%, and gave back around half of Thursday’s gains. In the bigger picture, oil ended the week with its biggest weekly decline since January 1991, down by 29%, as concern that the collapse in global fuel demand will deepen.

Looking ahead, this week sees Meetings/Interest Rate Decisions to come from the RBNZ and the BOE, although as they both cut last week in their emergency announcements they are probably unlikely to move again this week, sothe interest will lie in the statement that each make, in what is a rapidly moving market. There is actually not much else out this week and the main focus will again be on the various governments handling of the coronavirus. Monday is pretty empty altogether, while Tuesday will look to the flash February PMIs for guidance. Traders will pay particular attention to these as they will be the first global data releases from March and will give an initial reading of how much world manufacturing reallly has slowed. Wednesday sees the RBNZ announcement and also the German IFO (Business Climate/Current Assessment/Expectations) and, later on, the US Durable Goods Orders. Thursday will have the BOE Meeting, although they did cut to 0.1% last week in the emergency move so are unlikely to move again yet, and the UK Retail Sales and then later, the US Q4 GDP, while Friday will see the German CPI, the US Personal Consumption/Expenditure and the Michigan Consumer Sentiment Index. Have a good week.

Economic data highlights will include:

Mon: BuBa Monthly Report, Preliminary EU Consumer Confidence (March), Chicago Fed National Activity Index

Tue: Global Flash Mfg/Services/Composite PMIs (Australia, Japan, EU, UK, US), UK CBI Distributive Trade Survey – Orders, BOE Minutes, US Richmond Fed Mfg Index, New Home Sales, API Weekly Crude Oil Stock Inventory

Wed: NZ Trade Balance, RBNZ Interest Rate Decision/Statement, German IFO; Business Climate/Current Assessment/Expectations, UK CPI, PPI, RPI, CBI Distributive Trade Survey – Realised,  US Durable Goods Orders, House Price Index, EIA Weekly Crude Stocks Change,

Thur: German Consumer Confidence, UK Retail Sales, BOE Meeting/Statement/Minutes/Vote Count/APP Facility, US Q4 GDP, Wholesale Inventories, Jobless Claims

Fri: Japan Tokyo CPI, BOE Quarterly Bulletin, German CPI/HICP, US Personal Consumption/Expenditure, Michigan Consumer Sentiment Index

Market moves, in brief:

FX: DXY 102.05 (-0.85%)

Bonds: US10Y; 0.863% (-25.46%), German 10Y; -0.331% (-69.02%), UK 10Y; +0.557% (-22.40%), Australian 10Y; 1.150% (-22.83%), NZ 10Y; 1.483% (-16.68 %), China 10Y; 2.73% (-1.49%)

Stock Indices: DJI; -4.55%, S+P; -4.34%, NASDAQ; -3.79%, EUStoxx50; +3.85%, FTSE100; +0.76%, Shanghai Composite; +1.61%, ASX200: -4.51%

Metals: Gold $1499 oz (+1.79%), Silver $12.63 oz (+4.36%), Copper $2.153 lb (-1.49%), Iron Ore $89.57 per tonne (NYMEX) (-0.44%),

Oil: WTI $23.40 pb (-15.45%)

CURRENCIES
EURUSD: 1.0698
Res  1.0725  1.0760  1.0790
Sup  1.0665  1.0635  1.0595
USDJPY: 110.81
Res  111.40  111.85  112.20
Sup  110.50  110.10  109.70
GBPUSD: 1.1662
Res  1.1690  1.1745  1.1800
Sup  1.1600  1.1565  1.1525
USDCHF: 0.9844
Res  0.9900  0.9920  0.9940
Sup  0.9810  0.9785  0.9750
AUDUSD: 0.5819
Res  0.5840  0.5905  0.5965
Sup  0.5780  0.5750  0.5700
NZDUSD: 0.5675
Res  0.5700  0.5725  0.5765
Sup  0.5655  0.5625  0.5585
INDICES / COMMODITIES
S&P.fs: 2265.05
Res  2305.00  2410.00  2355.00
Sup  2240.00  2190.00  2135.00
DJ30.fs: 18835.00
Res  19140.00  19435.00  19720.00
Sup  18765.00  18500.00  18250.00
SPI200.fs: 4712
Res  4790  4855  4920
Sup  4680  4610  4540
XAUUSD: 1499.71
Res  1505.00  1525.00  1515.00
Sup  1490.00  1480.00  1470.00
XAGUSD: 12.59
Res  12.85  13.10  13.35
Sup  12.35  12.10  11.85
WTI.fs: 23.60
Res  24.45  25.65  26.95
Sup  22.40  21.40  20.45

The stock markets still look very bearish at the start of the week and selling any rally appears to be the plan. The bounces though can remain vicious so extreme caution is warranted and gearing levels should be minimal.

The US$ looks set to remain supreme, at least in the medium term although the short term charts do hint that we may need a bit of a squeeze to the downside. If so, any decent dip in the dollar should be viewed as a buying opportunity.

On the crosses, the Aud$ looks set to come under further downside pressure, although elsewhere, conditions amongst the major pairs look set to be choppy and probably volatile – but rather directionless.

The metals and oil also still look to be headed lower in the medium term so, once again, rallies appear to be a sell opportunity.

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Bullish Divergence Bearish Divergence Turning Lower Bearish Divergence Turning Lower Neutral – Turning Lower?
4 Hour Possible Basing Formation Possible Topping Formation Turning Higher Possible Topping Formation Up Up
1 Day Down Up Down Up Down Down
1 Week Neutral – Turning Lower? Neutral Turning Lower? Neutral – Turning Higher? Down Turning Lower

 

DXY S+P ASX200 GOLD SILVER OIL_WTI
1 Hour Possible Topping Formation Turning Lower Turning Neutral Turning Neutral Neutral – Turning Lower? Neutral – Turning Lower?
4 Hour Up Turning Lower? Neutral – Turning Lower? Turning Higher Turning Higher Turning Neutral
1 Day Up Down – Oversold Down – Oversold Down Down Down – Oversold
1 Week Neutral – Turning Higher? Down Down Turning Lower Neutral – Turning Lower? Down

 

EURJPY EURGBP GBPAUD AUDJPY EURAUD AUDNZD
1 Hour Turning Neutral Turning Higher Turning Neutral Turning Lower Turning Higher Possible Topping Formation
4 Hour Turning Neutral Down Neutral Up Down Up
1 Day Turning Neutral Up Possible Topping Formation Down Up Down
1 Week Neutral Neutral – Turning Higher? Neutral – Turning Higher? Down Up Neutral – Turning Lower?

Chart of the Day:

EurUsd still looks very heavy in the medium term, although as the 4 hour chart shows the Euro is now becoming oversold in the short term and so we could see a bit of a bounce in the next few hours. If so it would appear to be a sell opportunity given that the dailies still point sharply lower and the weekly/monthly charts are also beginning to look heavy. Given the demand for US$ on all fronts I don’t think that is going to change in the next few days, so topside resistance will be seen at 1.0775 (minor) and then at 1.0830/40 (23.6% of 1.1498/1.0636). I cannot see the Euro above here in the short term but the 100 HMA arrives at 1.0900 and the 200 HMA, at 1.1050. Both are falling sharply.

On the downside, support will be seen at 1.0635/20 – last week’s low/HS objective, below which would open the way to 1.0570 (April 2017 low), to 1.0495 (February 2017 low) and then to 1.0339 (January 2017 low). Below that would then open the way to the major Fibo level at 1.0060 ((76.4% of 0.8225/1.6037), and beyond, towards parity.

If you believe in my long term Head/Sshoulder scenario, as per the monthly chart below, we have a very long way to fall in the Euro! 0.7870!!

 

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