26 Mar: US stocks rally for 2nd day as investors await aid package, marginally improving risk sentiment. Jobless Claims in focus, Thursday.

26 Mar: US stocks rally for 2nd day as investors await aid package, marginally improving risk sentiment. Jobless Claims in focus, Thursday.

US stocks ended mixed on Wednesday, with both the DJI and the S+P fishing higher, but well off their highs after retreating sharply in the last hour of trade, while the Nasdaq ended a little lower on the day. Earlier, the White House and Congress had reached a deal on a $2 trillion stimulus package to support the economy through the Covid-19 pandemic, although voting has reportedly been held up by a drafting error in the bill and by lawmakers arguing over the U.S. $2 trillion coronavirus stimulus package, potentially denting hopes of a speedy rollout. The package is expected to clear the Senate in the coming session, with a vote in the House reportedly slated for Thursday.

The US$ ended the day lower (DXY -0.89%) after another choppy, volatile session as traders seemed to feel that the safe-haven dollar was surplus to requirements. The commodity currencies, after having squeezed higher in the first half of the session, have now turned lower once again, although the current overall trend does remain up as they continue to recover from last week’s sharp selloff.

The metals and oil were mixed but were all little changed of the day.

In terms of data, the Germany IFO Business Climate collapsed from 96.0 to 86.1 in March, the steepest fall recorded since German reunification, and the lowest result since July 2009. The Current Situation index dropped from 99.0 to 93.0, while the Expectations Index dropped from 93.1 to 79.7. More alarmingly, the IFO reported that their research suggests that the German economy could shrink by as much as 20% due to the coronavirus.

The US durable goods orders rose 1.2%mm in February, much better than the expectation of -0.9% decline. However, ex-transport orders dropped -0.6%, below expectation of -0.2%. The US house price index rose 0.3%mm in January, matching expectations.

Looking ahead, Thursday will begin with a fairly empty Asian session while Europe will have the German April Consumer Confidence, the BOE Meeting/Minutes, at which rates are likely to remain on hold following on from the recent emergency rate cut and economic stimulus package, and the UK Retail Sales (exp +0.2%mm, 0.8%yy). Later on the focus will turn to the US Q4 GDP (exp +2.1%qq), February Wholesale Inventories (exp 0.0%mm) and the  Initial Jobless Claims which are likely to explode this month, given the current circumstances and could be well in excess of 1 million. The consensus is for around 1.5 million claims, although California alone has apparently already had +1 million jobless claims, so it could be much higher. Citibank are predicting 4 million!!

Economic data highlights will include:

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

Market moves, in brief:

FX: DXY 100.92 (-0.85%)

Bonds: US10Y; 0.869% (+0.40%), German 10Y; -0.273% (+16.60%), UK 10Y; +0.437% (-5.94%), Australian 10Y; 0.983% (+9.33%), NZ 10Y; 1.121% (+9.95 %), China 10Y; 2.719% (+0.38%)

Stock Indices: DJI; 2.39%, S+P; +1.15%, NASDAQ; -0.45%, EUStoxx50; +3.13%, FTSE100; +4.45%, Shanghai Composite; +2.17%, ASX200: +2.73%

Metals: Gold $1616 oz (-0.66%), Silver $14.42 oz (+0.93%), Copper $2.2085 lb (+1.31%), Iron Ore $88.77 per tonne (NYMEX) (+0.35%),

Oil: WTI $24.27 pb (-0.29%)

CURRENCIES
EURUSD: 1.0878
Res  1.0910  1.0945  1.0980
Sup  1.0850  1.0820  1.0785
USDJPY: 111.19
Res  111.45  111.70  112.00
Sup  110.95  110.60  110.30
GBPUSD: 1.1870
Res  1.1925  1.1965  1.2000
Sup  1.1855  1.1820  1.1785
USDCHF: 0.9766
Res  0.9810  0.9845  0.9875
Sup  0.9745  0.9720  0.9690
AUDUSD: 0.5952
Res  0.5965  0.5990  0.6015
Sup  0.5925  0.5895  0.5865
NZDUSD: 0.5840
Res  0.5870  0.5890  0.5915
Sup  0.5820  0.5800  0.5775
INDICES / COMMODITIES
S&P.fs: 2467.28
Res  2500.00  2575.00  2535.00
Sup  2435.00  2395.00  2360.00
DJ30.fs: 20978.00
Res  21255.00  21550.00  21915.00
Sup  20795.00  20515.00  20195.00
SPI200.fs: 5130
Res  5175  5205  5245
Sup  5090  5055  5020
XAUUSD: 1616.24
Res  1625.00  1635.00  1645.00
Sup  1605.00  1595.00  1585.00
XAGUSD: 14.43
Res  14.65  14.80  15.00
Sup  14.25  14.05  13.85
WTI.fs: 24.31
Res  24.85  25.60  26.50
Sup  23.35  22.60  21.70

Trend Table:

The stock markets have had another reasonably positive session although the late selloff put a dent in the day’s overall gains. However, while the hourly charts look a little heavy, the medium term momentum indicators still look constructive so I would be looking to play the market from the long side. Keep stops relatively tight though, as any failure to pass the US stimulus package through Congress while see a sharp selloff. This is not expected to happen and the news headlines suggest that the bill will pass without a problem once the minor glitches are ironed out.

The US$ looks mixed. The DXY is a little heavy in the short term and the Euro looks as though it wants to test 1.0900 and possibly 1.1000. However the price action is very choppy, particularly in Sterling, so caution is warranted. Sterling also looks as though it wants to head higher but the price action is extremely volatile, so again, be nimble and trade with caution.

On the crosses, the Aud$ seems set to be under some downside pressure against all the other majors, even the Nzd$, so trading any of those from the short side may be the plan (AudJpy, EurAud, GbpAud, AudNzd).

If risk sentiment does continue to improve on the back of the global stimulus packages then we should see weakness in the Jpy and Chf as well as strength in the Aud and Nzd. The Oil price should also remain underpinned and I do think that we may have some upside potential here. We really need to see the coronavirus curve flattening out around the world in order to see a major lift in risk sentiment and that does not appear likely in the near term.

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Turning Higher? Neutral – Turning Lower? Neutral – Turning Higher? Turning Neutral Turning Lower? Turning Neutral
4 Hour Turning Higher Turning Lower? Neutral – Turning Higher? Turning Lower Turning Neutral Turning Neutral
1 Day Possible Basing Formation Up Oversold – Turning higher? Neutral – Turning Higher? Oversold – Turning higher? Oversold – Turning higher?
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 Lower? Neutral – Turning Lower? Possible Topping Formation Turning Neutral Turning Neutral Turning Neutral
4 Hour Turning Lower Up Up Possible Topping Formation Turning Higher? Neutral – Turning Higher?
1 Day Up – Overbought Oversold – Turning higher? Oversold – Turning higher? Turning Higher Possible Basing Formation Oversold – Turning higher?
1 Week Turning Higher Down Down Turning Lower Neutral – Turning Lower? Down

 

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

Chart of the Day:

The Euro looks relatively sturdy at the present, and may keep the US$ under pressure although the upside may be rather limited given the coronavirus issues in Europe. However the short term charts look constructive, and if the 200 Hour MA (1.0890) can be overcome then we could see a run towards 1.0965 (38.2% of 1.1498/1.0635) and to 1.1000. Look to buy dips today, towards 1.0800, with a SL placed below 1.0760 (100 Hour MA).

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