25 Mar: Stocks bounce strongly on hopes of huge US rescue package. IFO, UK CPI, US Durable Goods ahead today.

25 Mar: Stocks bounce strongly on hopes of huge US rescue package. IFO, UK CPI, US Durable Goods ahead today.

US stock indices have surged by around 10%, after US lawmakers said they were close to a deal for an economic rescue package to underpin the economy, injecting a shot of optimism into markets which have been reeling from the biggest selloff since the covid-19 crisis began. On the other hand the US$ is generally  a little weaker, with the DXY trading down by around -0.5%, but with the notable exception of the Jpy, which is trading  on the back foot after the bounce in stocks diminished the need for a safe haven currency. Those currencies that have been particularly hard hit by the recent downturn – Aud$, Nzd$, Gbp – have all had better sessions and are trading towards their session highs. The Euro fared less well, initially bouncing towards 1.0900 but then giving up those gains in the wake of some very poor EUP MIs.

The EU March Markit composite PMI was much worse than expected at 31.4, (exp 38.8), and 51.6 last month, mostly due to the services implosion to 28.4 from 52.6 in February. The US composite PMI tumbled to 40.5 from 49.6, though damage in manufacturing was far less than expected, at 49.2 versus 50.7 in February. The Services PMI, at 39.1 and down from 49.4 was also worse than expected.

Looking ahead, Wednesday will begin with a speech from Donald Trump, who will provide the latest update on the coronavirus issue in the US, and the NZ Trade Balance, but that is all that is due from Asia. Later on, the German IFO (Business Climate/Current Assessment/Expectations) is due for release, which will not offer any comfort and may weigh on the Euro, while from the UK we get the February UK CPI, PPI, RPI figures. From the US we get the February Durable Goods Orders (exp -0.8%mm), the January House Price Index and the EIA Weekly Crude Stocks Change.

Economic data highlights will include:

Wed: NZ Trade Balance, 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,

Market moves, in brief:

FX: DXY 101.96 (-0.51%)

Bonds: US10Y; 0.836% (+8.24%), German 10Y; -0.328% (+13.25%), UK 10Y; +0.466% (+11.63%), Australian 10Y; 0.90% (-2.27%), NZ 10Y; 1.020% (+5.27 %), China 10Y; 2.709% (+0.71%)

Stock Indices: DJI; +11.36%, S+P; + 9.38%, NASDAQ; +8.12%, EUStoxx50; +9.24%, FTSE100; +9.05%, Shanghai Composite; +2.34%, ASX200: +9.78%

Metals: Gold $1625 oz (+4.60%), Silver $14.19 oz (+7.02%), Copper $2.1955 lb (+4.52%), Iron Ore $88.46 per tonne (NYMEX) (-0.10%),

Oil: WTI $24.08 pb (-0.10%)

CURRENCIES
EURUSD: 1.0783
Res  1.0820  1.0855  1.0890
Sup  1.0745  1.0705  1.0665
USDJPY: 111.39
Res  111.70  112.00  112.30
Sup  111.10  110.70  110.30
GBPUSD: 1.1741
Res  1.1765  1.1800  1.1835
Sup  1.1715  1.1690  1.1660
USDCHF: 0.9818
Res  0.9840  0.9870  0.9900
Sup  0.9790  0.9765  0.9740
AUDUSD: 0.5941
Res  0.5965  0.5990  0.6015
Sup  0.5920  0.5895  0.5865
NZDUSD: 0.5812
Res  0.5840  0.5870  0.5900
Sup  0.5785  0.5755  0.5725
INDICES / COMMODITIES
S&P.fs: 2434.03
Res  2455.00  2545.00  2500.00
Sup  2395.00  2345.00  2300.00
DJ30.fs: 20606.00
Res  20885.00  21165.00  21430.00
Sup  20330.00  20050.00  19755.00
SPI200.fs: 4993
Res  5025  5050  5080
Sup  4955  4920  4885
XAUUSD: 1626.30
Res  1640.00  1660.00  1650.00
Sup  1615.00  1605.00  1595.00
XAGUSD: 14.29
Res  14.50  14.65  14.85
Sup  14.10  13.90  13.75
WTI.fs: 24.22
Res  24.75  25.60  26.50
Sup  23.35  22.60  21.70

Trend Table:

The stock markets have rebounded strongly and do look as though they may have further upside momentum, particularly now that the momentum indicators in the daily charts seem to be basing out. Buying dips in the DJI currently looks a reasonable bet, but with a SL placed below 20,000.

The currencies look less certain although the Aud$ and the Nzd$ do seem as though they may have further upside momentum ahead of them. Elsewhere, the major currencies do still seem to have medium/long term downside pressure ahead against the US$, The EU PMIs would seem set to keep the pressure on the Euro, although the rescue package that seems imminent from the US may place the dollar under some longer term downside pressure of its own. Overall, I think that we are in for further choppy conditions ahead, between the 1.0635 low and 1.10 on the topside. Play the range. On the crosses, Sterling looks a little firmer today against the Euro, so selling rallies, with a SL placed above 0.9400 may be a plan.

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

 

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

 

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

Chart of the Day:

WTI: The daily chart seems extremely oversold, and given the current bounce seen in stocks, WTI looks comparatively cheap at 24.35pb. The momentum indicators may be basing out, and although the weeklies still look very bearish, the momentum indicators do show a degree of Bullish Divergence. Buying WTI at current levels, with a SL placed below 20.00 may be a plan.

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