Today’s report: Taking it all in as the week closes out
We’re getting set to close out the week as we get started with a new month of trade. Looking back at the week that was, it was OIL that emerged from the depths of despair, outperforming across the board, and very much helped along by hopes the global economy has pushed past the worst of the coronavirus pandemic.
Wake-up call
- ECB holds
- comprehensive plan
- extra budget
- EURCHFSNB policy runs into tough times
- data slumps
- OIL rebounds
- confidence dump
- Gloomy backdrop
- hard asset
- macro players
- more exposed
Suggested reading
- In Covid Crisis, the Mob Is the Ultimate Enforcer, J. Authers, Bloomberg (May 1, 2020)
- How Beijing is Cracking Down on Hong Kong, S. Wong, Financial Times (May 1, 2020)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
A higher low is now sought out above the multi-year low from 2017, ahead of the next major upside extension. Look for the major pair to be well supported into dips ahead of the next big run towards the 2019 high at 1.1570. Ultimately, only a weekly close below 1.0700 would compromise this outlook.EURUSD – fundamental overview
The ECB left its benchmark interest rate unchanged at 0.0% as expected, announced new pandemic refinancing operations for banks, and maintained its pandemic purchase program at EUR750 bln. ECB President Lagarde said the Euro-area economy 'could shrink as much as 12%' this year, Q2 annualized GDP could decline 15%, and the central bank is 'ready to adjust all instruments as needed' and 'will not tolerate risk of monetary fragmentation.' Key standouts on today’s calendar include US ISM manufacturing and US construction spending. Many European markets are off on holiday.EURUSD - Technical charts in detail
GBPUSD – technical overview
The market has rebounded sharply, after collapsing to a +30 year low below 1.1500. This supports the longer-term constructive outlook, with a major bottom sought out ahead of the start to a big run to the topside back through 1.3000. Look for the major pair to hold up above 1.2000 on a monthly close basis for confirmation.GBPUSD – fundamental overview
UK PM Johnson 'pledged a comprehensive plan to lift the lockdown' and said the UK 'has now passed the peak of the coronavirus outbreak.' The UK office for Budget Responsibility said the government's economic policy response to the coronavirus has cost 'nearly GBP105 billion.' The UK will send 100,000 home testing kits to citizens to track the spread of the coronavirus. Key standouts on today’s calendar include UK manufacturing PMI reads, UK consumer credit and net lending, US ISM manufacturing and US construction spending.USDJPY – technical overview
We're seeing a pickup in volatility in the major pair, with the market swinging wildly through the upper and lower bound of a massive triangle. Still, there is no clear direction in sight, with rallies well capped above 110.00 and dips well supported below 104.00.USDJPY – fundamental overview
Japan Finance Minister Aso said 'lending requirements for firms should be flexible', support will be provided for 'both lenders and borrowers,' and it's 'most important to make sure firms get financing now.' Japan's parliament passed a JPY25.7 trillion extra budget for this fiscal year which secures partial funding for its record stimulus package with funds slated to help small businesses. PMI Abe indicated he plans to extend the nation-wide state of emergency. Key standouts on today’s calendar include US ISM manufacturing and US construction spending.EURCHF – technical overview
The market remains very well capped into offers and the medium-term picture continues to favour the downside. A break back above 1.0710 would be required to take the immediate pressure off the downside. Technicals are however looking extended and the market should be well supported around 1.0500.EURCHF – fundamental overview
The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook, and from a US administration that has put Switzerland on its currency manipulator watchlist. Any signs of risk liquidation in 2020, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.AUDUSD – technical overview
Technical studies are in the process of unwinding, after the market traded down to its lowest levels since 2003. There is evidence of a longer-term bottom, though the market will need to break back above the December 2019 high at 0.7032 to take the immediate pressure off the downside.AUDUSD – fundamental overview
Figures from Australia's department of social security revealed that the number of Australians receiving unemployment benefits rose to 1.3 million, an increase of 500k from year end 2019, with an additional 300k applications yet to be processed. This would translate to a jump in Australia's jobless rate to 8.8% (and 10.8% if the unprocessed applications are included). On the data front, Aussie manufacturing reads slumped to 35.8 from 53.7 previous. Key standouts on today’s calendar include US ISM manufacturing and US construction spending.USDCAD – technical overview
An intense market rally has stalled out just ahead of the 2016 high. At this stage, there is risk for a more meaningful period of correction, with potential for setbacks to extend back down towards previous resistance turned support, in the form of the 2018 high at 1.3665.USDCAD – fundamental overview
The Canadian Dollar has been benefitting this week from broad based US Dollar outflow and renewed demand for the price of OIL. There wasn't anything surprising out of Wednesday's Fed decision, and on Thursday, Canada GDP data was unchanged. Key standouts on today’s calendar include Canada manufacturing PMIs, US ISM manufacturing and US construction spending.NZDUSD – technical overview
There's a case to be made for a meaningful bottom, with the market looking quite extended after dipping below major psychological support at 0.5500. As such, look for setbacks to continue to be well supported in the weeks ahead, in anticipation of additional upside. Only a weekly close below 0.5500 would give reason for rethink.NZDUSD – fundamental overview
The New Zealand Dollar is under pressure as the week closed out, with risk off flow working back in. We've also seen a disturbing consumer confidence print out of New Zealand, which hasn't helped Kiwi's cause. Earlier today, the New Zealand government announced today that it will provide loans to SMEs that will be interest-free if repaid within a year. Key standouts on today’s calendar include US ISM manufacturing and US construction spending.US SPX 500 – technical overview
Setbacks have been intense as the market puts in a longer-term top. The market has collapsed through the 2018 low, with the next major support coming in at the 2016 low around 1800. Extended readings have led to an overdue corrective bounce, but rallies should now be well capped ahead of 3000.US SPX 500 – fundamental overview
Although we've seen attempts at recovery in response to unlimited QE from the Fed and massive US stimulus, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with coronavirus fallout, should weigh more heavily on investor sentiment in 2020.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1800 (measured move extension target, 2012 high), while in the interim, look for any setbacks to be well supported above 1500.GOLD (SPOT) – fundamental overview
The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, coronavirus fallout, systemic risk and trade war threats. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.BTCUSD – technical overview
Setbacks should be very well supported ahead of the 2018 low, with a higher low sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 5,000 would compromise the constructive outlook. Back above 10,500 further encourages the bullish prospect.BTCUSD – fundamental overview
Bitcoin has felt the impact of global macro pressures, with the currency falling victim to the broad based risk liquidation in Q1 2020. However, despite the recent slide, there continues to be good demand from players looking out to the medium and longer term, who see Bitcoin as a safe haven, store of value asset.BTCUSD - Technical charts in detail
ETHUSD – technical overview
The market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above the 2018 low, in favour of another big bounce, eventually back towards and through the 2019 high up at 363.ETHUSD – fundamental overview
While there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a negative role in 2020, with Ether expected to underperform in a mostly risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.