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Market Update – May 13 – USD dominates, Stocks lick their wounds

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USD holds at highs following hot CPI & PPI data but with signs the peak may have been reached. Stocks stalled their recent declines, closing flat in the US and bouncing in Asian markets (Nikkei +2.6%), Yields climbed as risk appetite improved, Fed Chair Powell still flagged half-percentage point interest rate increases at the next two policy meetings, adding that the Fed is “prepared to do more!” and that stable prices are the “bedrock” of the economy but it will cause “some pain”. Oil continued to rally on supply concerns whilst Gold dipped to within $10 of $1800. Kuroda maintains dovish guidance even as Inflation moves higher, Russia threatens “technical retaliation” as Finland seeks NATO membership, Sweden to follow? Putin “humiliating himself on the world stage” – UK Foreign Sec. Truss.

  • USDIndex rallied to within 5 ticks of 105.00 and remains at 20-year highs at 104.75 up from 103.60 last Friday.
  • EquitiesUSA500 -5.10 (0.25%) at 3930, US500FUTS at 3955 now.  COIN +8.9%, TSLA -0.82%, (Musk would not back TRUMP in 2024). APPLE -2.69%, GM -4.59%.
  • Yields rallied, 10-yr closed at 2.817%, significantly below key 3.00% level. Trades up at 2.89%   
  • Oil & Gold both had weak & volatile sessions –  USOil rallied to test $108.00 earlier today from $98.00 on Wednesday.  Gold slump continued with a test of $1810 on open today from highs this week at $1885, struggles at $1822 now. No safe-haven bid.
  • Bitcoin languishes at $30K now, but up from $26.5k. 6th consecutive week lower.
  • FX marketsEURUSD up from 1.0355 to 1.0400, parity calls rising. USDJPY dived from 130.00, to 127.50 yesterday now back to 128.70 and Cable continues to struggle at 1.2335.  AUD again outperformed in Asia.  

OvernightJPY Money Supply better than expected & French M/M CPI in-line at 0.4%.

Today – US Export/Imports Prices, UoM (Prelim.) data, Speeches from ECB’s Schnabel, de Guindos & Fed’s Kashkari.

Biggest FX Mover @ (06:30 GMT) AUDJPY (+0.74%) Rallied from lows at 87.30  yesterday as risk appetite raised it’s head to 89.00 ( and next resistance) earlier. Now back to 88.55MAs aligning higher, MACD signal line & histogram moving higher & testing 0 line, RSI 48 & rising, H1 ATR 0.346, Daily ATR 1.67.

 

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.



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Market Update – May 19 – Fears mount

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Trading Leveraged Products is risky

Stock markets sold off, after a slide on Wall Street, with tech stocks in Hong Kong particularly under pressure. Tencent slumped after reporting no revenue and individual company reports aside markets are concerned by the impact of China’s zero Covid policy, the Ukraine war and fear that inflation will get out of control, despite aggressive central bank actions that are adding to the headwinds to the global recovery. Earnings reports from retail giants added to concerns that high inflation would slow global growth, with Target warning of a bigger margin hit due to rising fuel and freight costs as it reported its quarterly profit had halved. One day earlier, Walmart warned of similar margin squeezes. Bonds were supported in Australia and New Zealand, despite a decline in Australia’s jobless number. The 10-year Treasury yield has picked up 1.3 bp though and the Bund yield is up 0.6 bp at 1.01% in early trade. Oil rebounded to $107.90 whilst Gold appreciated to $1814Australia’s unemployment rate fell to 3.9% – the lowest level in almost 50 years – as employment rose 4k over the month.

  • USDIndex recovered to 103.88 
  • EquitiesNikkei lost -1.9%, the ASX -1.7%, while Hang Seng and CSI300 are down -2.5% and -0.2% respectively. USA100 cratered -4.73%, with the USA500 -4.03% lower, and the USA30 off -3.73%.
  • Yields 10- and 30-year rates plunged over 11 bps intraday to lows of 2.875% and 3.065%, respectively.
  • Oil down to 105.15 – Bloomberg cited “people familiar with the data” as saying that API data will report a drop of 5 million barrels in gasoline inventories for last week.
  • Gold up to $1830.
  • FX marketsGBP and EUR falling to parity against the Dollar. However, USDJPY has weakened to 128.15 after surging to a 20-year peak at 130.85 in late April.

Today – The calendar includes ECB Meeting Accounts, US Jobless Claims, New Zealand trade balance and Japanese inflation.

Biggest FX Mover @ (06:30 GMT) USOIL – Gapped down to 105.14, which filled up immediately. MAs have flattened, MACD signal line & histogram are negatively configured, RSI 38.56, H1 ATR 1.07, Daily ATR 5.45.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.






Previous articleMarket Update – May 18

Having completed her five-year-long studies in the UK, Andria Pichidi has been awarded a BSc in Mathematics and Physics from the University of Bath and a MSc degree in Mathematics, while she holds a postgraduate diploma (PGdip) in Actuarial Science from the University of Leicester.




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AUD/USD drops back towards 0.6950 on mixed Australia employment numbers

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  • AUD/USD retreats towards intraday low despite teasing the first weekly gain in five amid mixed Aussie jobs report.
  • Australia Employment Change eased below forecasts and prior while Unemployment Rate refreshed record low in April.
  • Repeated Fedspeak over 50 bps joins softer yields to weigh on USD amid sluggish markets.
  • Risk catalysts will be crucial to watch for clear directions, US second-tier data eyed too.

AUD/USD pares intraday gains around 0.6960 as the Aussie jobs report flashed mixed reports during early Thursday. Also challenging the pair moves is a lack of major data/events elsewhere as well as a softer USD.

That said, Australia’s headline Unemployment Rate marched 3.9% forecast while refreshing the all-time low but a fall in the Employment Change to 4K, versus the market consensus of 30K and 17.9K prior, seems to have weighed on the AUD/USD prices. It’s worth noting that the softer-than-expected prints of the Aussie Wage Price Index for Q1 2022 probed the RBA hawks the previous day.

Read: Australian labour report leavs AUD sidelined, so far

Given the softer Employment Change and Wage Price Index , the RBA’s 40 bps rate hikes are questionable at the moment, which in turn probes the AUD/USD pair’s recent corrective pullback. It’s worth noting that the risk-aversion wave and downbeat conditions at the largest customer China, due to the covid resurgence, weigh on the AUD/USD prices. Recently, Shanghai’s refrain from total unlocks joined fresh virus-led activity restrictions in Tianjin, the port city near Beijing to portray COVID-19 woes.

Additionally, inflation woes in the developed nations join the geopolitical fears surrounding Russia to sour the sentiment and exert downside pressure on the AUD/USD prices.

Even so, An absence of major data/events and repeated comments from the Fed policymakers seemed to have recently paused the risk-aversion wave. That said, US 10-year Treasury yields dropped 11 basis points (bps) to 2.88% the previous day, mostly unchanged at around 2.89% by the press time of Thursday’s Asian session, whereas S&P 500 Futures drop 0.50% at the latest. It should be noted that the US Dollar Index (DXY) drop 0.14% around 103.77 by the press tie.

Having witnessed an initial reaction to the Aussie jobs report, which matched market forecasts, AUD/USD sellers are likely to return amid Wednesday’s Q1 2022 Wage Price Index and the risk-off mood. This emphasizes today’s risk catalysts and the US second-tier data relating to housing and manufacturing to forecast the pair moves.

Technical analysis

AUD/USD sellers attack short-term key support around 0.6960 as traders struggle to pare the biggest daily loss in a week.

A confluence of the 100-HMA and a weekly rising trend line, around 0.6960, restricts the immediate downside of the AUD/USD prices, a break of which will quickly direct bears towards the 0.6900 threshold ahead of highlighting the monthly low near 0.6830.

Meanwhile, recovery remains elusive until the AUD/USD prices cross a two-week-long horizontal resistance area near 0.7040-60.

 



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British Pound Sinks as Traders Pare BoE Rate Hike Bets, GBP/USD Dances on Support

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BRITISH POUND FORECAST:

  • GBP/USD takes a turn to the downside as traders pare back bets on Bank of England future rate hikes
  • Market pricing on monetary policy, however, could turn more hawkish in the coming weeks as red-hot UK inflation will likely required a more aggressive response from the central bank
  • This article looks at cable’s key technical levels to keep an eye on in the near term

Most Read: April UK Inflation Hits a 40-Year High at 9%, GBP/USD Slides

After staging its biggest rally in 17 months on Tuesday, the British pound reversed course on Wednesday and took a sharp downward turn, sliding 0.65% to 1.2411, as traders pared back money market bets on Bank of England future rate hikes following slightly lower-than-anticipated inflation data.

By way of context, the April UK consumer price index rose 2.5% m-o-m and 9.0% y-o-y, a tenth of a percent below consensus expectations. While this was the first time that the report did not surprise on the upside in recent months, it is misguided to believe that in itself is a victory, given that price pressures continued to broaden, pushing the cost of living to a new four-decade high.

With CPI expected to climb to double digits during the second quarter, and rising wages threatening to exacerbate the trend, the central bank will likely become more hawkish over the coming weeks and signaled it will have to pull back accommodation more aggressively despite rapidly slowing growth.

True, the likelihood of a recession has increased sharply of late, but the UK labor market is still in a good place and should withstand a steeper path of interest rate hikes without collapsing. In any case, policymakers, who now face a large credibility problem, may soon recognize that it is better to go hard now on the tightening cycle to restore price stability than to risk a long-term stagflationary slump that that could be far more damaging to the economy.

If markets begin to price in a more forceful monetary policy response to the current inflationary environment from the BoE, GBP/USD should stabilize and manage to retrace some of the 2022 losses, especially as the Fed has ruled out supersized 75 bps hikes for now. However, any recovery in sterling should be moderate, as headwinds affecting the UK economy are likely to reduce appetite for long positions in the European currency.

In terms of technical analysis, despite Wednesday’s sharp pullback, cable remains above the psychological 1.2400 level at the time of this writing. If traders manage to defend this support and spark a rebound in the coming sessions, the first resistance to consider appears at 1.2650, followed by 1.2835. On the flip side, if downside pressure accelerates and sellers breach the 1.2400 area decisively, GBP/USD could be on its way to retest its 2022 lows in short order.

GBP/USD TECHNICAL CHART

GBP/USD Chart Prepared Using TradingView

EDUCATION TOOLS FOR TRADERS

  • Are you just getting started? Download the beginners’ guide for FX traders
  • Would you like to know more about your trading personality? Take the DailyFX quiz and find out
  • IG’s client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here.

—Written by Diego Colman, Market Strategist for DailyFX





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