Next 24 hours: Investors still feeling good about stimulus
Today’s report: Investors feeling good as Tuesday gets going
The market has been looking to find the good news wherever it can, and into Tuesday, that news comes out of California, after it was announced the state will ease lockdown restrictions.
Wake-up call
- producer prices
- GBPUSDDeloitte survey highlights sentiment dump
- Japan restrictions
- EURCHFSNB policy runs into tough times
- RBA holds
- Canada trade
- S&P reaffirms
- Gloomy backdrop
- hard asset
- macro players
- more exposed
Suggested reading
- Hedge Funds Aren't What They Were in Buffett's Day, J. Authers, Bloomberg (May 5, 2020)
- Handling A Record Debt Bonanza from Home, P. Clarke, Financial News (May 4, 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 Euro has come under pressure in the early week, with the currency facing headwinds from broad based flight to safety US Dollar demand and nervous tension ahead of today's German court ruling on the ECB's Eur 750bln PEPP. Meanwhile, Eurozone Sentix confidence data didn't help the Euro's cause either, coming in a good deal softer than expected. Key standouts on today’s calendar include speeches from ECB’s Guindos, Weidmann and Mersch, Eurozone producer prices, US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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
It's all been fairly quiet in the UK this week. On Monday, the Pound did a good job absorbing setbacks from broad based flight to safety US Dollar demand. The Pound also wasn't all that bothered by Deloitte's quarterly survey showing UK business sentiment posting the biggest fall on record. Key standouts on today’s calendar include US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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
Things have been relatively quiet for the Yen, with some of that attributed to Japanese holidays. Japan has extended its state of emergency until May 31, but health experts will re-examine the situation on May 14. Key standouts on today’s calendar include US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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
The RBA left rates on hold as widely expected, while leaving forward guidance unchanged. The central bank did however produce downbeat forecasts for growth, inflation and jobs. Overall, Aussie has been better bid as risk appetite returns to the market. Key standouts on today’s calendar include US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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 recovered into Tuesday, with the currency getting a boost from the continued recovery in the price of OIL and some renewed investor risk appetite. Key standouts on today’s calendar include Canada trade, US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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
Some risk on flow into Tuesday has helped to prop up the New Zealand Dollar. On Monday, S&P reaffirmed New Zealand's long-term foreign currency debt rating at AA. Key standouts on today’s calendar include US trade, US ISM non-manufacturing, and speeches from Fed’s Evans, Bullard and Bostic.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.