Having reached levels last seen in early March early in the US session on Thursday, stocks then turned lower, giving up their gains to end the day down by around 0.2%-0.5%, weighed down by a selloff in Facebook shares after Donald Trump said he would sign an executive order related to social media companies. Additional risk aversion added to the move lower after Donald Trump said that he will hold a Press Conference on Friday in relation to China’s current actions in Hong Kong, along with the expected US response to those actions. It could make for a volatile ride into the weekend, which is also the end of month.
FX markets were once again choppy, but with the theme of general US$ weakness, particularly against the Euro which traded up to a 2 month high as traders took confidence from the announcement of the previous session regarding the €750 billion coronavirus recovery fund for the EU. Amid the improved risk appetite which has led traders to favour riskier assets, EUStoxx50 finished the day up by +1.4%. In other currency markets, the Jpy remains under some mild downside pressure, particularly on the crosses, because of the overall positive risk sentiment which is diminishing the need for a safe haven.
In the commodities markets, the squeeze higher in oil continues, and yesterday’s dip was reversed with WTI gaining by 4.5% on Turning Higher. The metals remained choppy but Gold seems to be building a solid base above 1700.
In terms of data on Thursday, the US initial jobless claims fell by -323k, to 2123k in the week ending May 23 while the continuing claims dropped -3860k to 21052k in the week ending May 16. The April Durable Goods Orders dropped by -17.2% to USD 170.0B although this figure was better than the expectation of -18.1%, but it was the second sharp decline in a row, following -16.6% in March. The Pending Home Sales dropped by -21.8%mm in April, worse than expectation of -15.0% mm.
Thursday will start with the April Australian Private Sector Credit and a whole raft of data from Japan (Tokyo CPI, Unemployment, Retail Trade, Industrial Production, Housing Starts, Construction Orders and Consumer Confidence). Europe will look to the German Retail Sales (exp -12%mm, -14.3%yy) and the EU CPI (exp CPI; 0.2%yy, Core; 0.8%yy) for guidance, while the US session will see the Personal Consumption/Expenditure – Price Index (exp ; Income -6.5%mm, Spending -12.5%mm) , Wholesale Inventories , Goods Trade Balance, Chicago Purchasing Managers Index (exp 40, previous 35.4%), Michigan Consumer Sentiment Index (exp 74, previous 73.7% and Baker Hughes Oil Rig Count. Have a good weekend.
Economic data highlights will include:
Fri: Australian Private Sector Credit, Japan Tokyo CPI, Unemployment, Retail trade, Industrial Production, Housing Starts, Construction Orders, Consumer Confidence, German Retail Sales, Import/Export Index, EU CPI, US Personal Consumption/Expenditure- Price Index, Wholesale Inventories, Goods Trade Balance, Chicago Purchasing Managers Index, Michigan Consumer Sentiment Index, Baker Hughes Oil Rig Count, Donald Trump Press Conference
Market moves, in brief:
FX: DXY 98.49 (-0.45%)
Bonds: US10Y; 0.695% (+0.23%), German 10Y; -0.418% (+0.17%), UK 10Y; 0.217% (+13.69%), Australian 10Y; 0.889% (-0.78%), NZ 10Y; 0.766% (+1.13 %), China 10Y; 2.693% (-0.28%)
Stock Indices: DJI; -0.58%, S+P; -0.21%, NASDAQ; -0.28%, EUStoxx50; +1.42%, FTSE100; +1.21%, Shanghai Composite; +0.33%, ASX200: +0.25%
Metals: Gold $1719 oz (+0.55%), Silver $17.38 oz (+0.62%), Copper $2.408 lb (+1.09%), Iron Ore $95.32 per tonne (NYMEX) (+1.56%),
Oil: WTI $33.63 pb (+4.45%)
|INDICES / COMMODITIES|
|1 Hour||Possible Topping Formation||Neutral – Turning Lower?||Turning Higher?||Down||Turning Lower?||Neutral – Turning Lower?|
|4 Hour||Turning Higher||Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Higher||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||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Neutral||Turning Lower?||Turning Neutral||Turning Higher|
|4 Hour||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Lower?||Turning Higher?||Turning Higher||Turning Lower||Neutral – Turning Higher?||Possible Topping Formation|
|1 Week||Turning Neutral||Up||Turning Higher||Possible Topping Formation||Turning Higher||Turning Higher|
|1 Hour||Possible Topping Formation||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Lower?||Turning Higher||Turning Neutral|
|4 Hour||Turning Higher||Turning Neutral||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Turning Neutral|
|1 Day||Turning Higher||Turning Neutral||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 has reached the first target that we mentioned yesterday by trading up to a high of 1.1093, and with the 4 hour and daily charts looking constructive, buying short term dips towards 1.1050/30 might be the plan for Friday, in looking for a break of 1.1100, where the next target should be at around 1.1150 (27 March high; 1.1147).
Stock markets saw a late selloff on Thursday, which I suspect is healthy for the longer term move higher, as suggested by the medium/longer term charts. Right now, in the S+P I would look at buying dips at around 3000 (200DMA @3005), but with a tight stop loss placed at 2950 (100DMA). For the ASX, I am not so sure as we may have seen a near term top yesterday at 5927. Some choppy trade in the 5700/5900 range may lie ahead, although, with the weeklies looking positive I still like to play it from the long side.
The Aud and Nzd are both currently closely correlated to the stocks markets, so once again, I prefer to look to the upside in the medium term, albeit that I suspect we are in for another choppy day into the month end, with a range of something like 30points either side of current levels for both AudUsd and Nzd Usd. 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.
On the crosses, the JPY seems to be under pressure while risk sentiment remains positive. The EurJpy charts suggest we can see higher levels – although note that we are currently running into resistance at the 200DMA and the 38.2% Fibo level of the drop from 127.50 to 114.40, so it may be better to wait until thse are cleared. Worth keeping an eye on though. Possibly the same applies to AudJpy; It looks positive but the 200DMA lies at 72.05.
Continue to keep an eye on EurChf. Although it is not a cross that I trade, may be in the early stage of reversing its long term, 2 year, downtrend. Having seemingly found a base at 1.0500, we have seen a sharp move higher in the last couple of days, badly squeezing the shorts, and a move towards 1.0800 may be on the cards.