Yesterday, USD weakened against most major currencies except EUR and CHF.The U.S. Unemployment Claims data (Actual: 4427K, Forecast: 4350K, Previous: 5237K revised from 5245K) released yesterday was worse than forecasted.Also, the U.S. Flash PMI data released yesterday indicated an unprecedented decline in business activity for the month of April.- Flash Manufacturing PMI (Actual: 36.9, Forecast: 35.1, Previous: 48.5 revised from 49.2)- Flash Services PMI (Actual: 27.0, Forecast: 30.5, Previous: 39.8 revised from 39.1)The U.S. Durable Goods Orders m/m data will be released later at 2030 (SGT).- Core Durable Goods Orders m/m (Forecast: -6.1%, Previous: -0.6%)- Durable Goods Orders m/m (Forecast: -12.0%, Previous: 1.2%)If the released data are worse than forecasted, USD may weaken.
Yesterday, USD weakened against most major currencies except EUR, NZD and CHF.The U.S. Unemployment Claims data (Forecast: 4350K, Previous: 5245K) will be released later at 2030 (SGT).The U.S. Flash PMI data will be released later at 2145 (SGT).- Flash Manufacturing PMI (Forecast: 35.1, Previous: 48.5 revised from 49.2)- Flash Services PMI (Forecast: 30.5, Previous: 39.8 revised from 39.1)It is forecasted that the manufacturing and services sectors contracted further in March due to the COVID-19 pandemic.If the released data are worse than or as forecasted, USD may weaken.
Overall, USD/JPY is trending downwards. Recently, USD/JPY has been ranging across within the support level of 107.300 and the key level of 108.USD/JPY’s next support level is at 107.300 and the next resistance level is at 109.000.
Last Friday, USD weakened against all major currencies after a risk-on mentality of market participants was sparked by President Trump’s announcement that some parts of the U.S. will be opening up, allowing some states and employers to drop most social distancing practices within four weeks.Also, positive partial data from experimental drug trials on severely ill Covid-19 patients at the University of Chicago hospital was reported by a health-oriented news website last Friday, creating an optimistic view on a possible vaccine.
CRUDE OIL AND GOLD TALKING POINTS:Crude oil prices sank as the prospect of huge supply meeting very limited demand glowered over the marketImminent May futures contract expiry didn’t helpGold prices inched higher through the session and remain well supported despite a break of their recent uptrendUS crude oil prices plummeted in Monday’s Asia Pacific morning as the market continued to worry about a coronavirus-related collapse in demand even as supplies remain ample despite production cuts.The price of West Texas Intermediate for May delivery fell to $15.43/barrel, with the futures contract due to expire this week for that month. Prices are now at lows which haven’t been seen for more than twenty years.
GOLD PRICE TALKING POINTSGold continues to pull back from the yearly high ($1748) even though the International Monetary Fund (IMF) forecasts global growth to contract 3.0% in 2020, and the price for bullion may face a larger correction as it carves a series of lower highs and lows.GOLD PRICE CARVES LOWER HIGHS AND LOWS AMID PLANS TO REOPEN US ECONOMYThe price of gold fails to test the November 2012 high ($1754)as the Trump administration outlines a three-phased approach to reopen the US economy, and the bullish momentum may continue to abate over the coming days as the Relative Strength Index (RSI) reverses course ahead of overbought territory.Hopes of a V-shaped recovery appear to be dampening the appeal of gold as St. Louis Fed President James Bullard insists that “it is entirely possible and feasible we can get past the crisis mostly in the second quarter,” and a growing number of Federal Reserve officials may adopt an improved outlook as the central bank takes unprecedented steps to combat the economic shock from COVID-19.However, New York Fed President John Williams, a permanent voting-member on the Federal Open Market Committee (FOMC), warns of a protracted recovery as “it's going to take longer to get us back to where we want to be.” Mr. Williams went onto say that “I don't see the economy being back to full strength by the end of the year”during an interview with CNBC, and the weakening outlook for growth may force the FOMC to retain a dovish forward guidance at its next interest rate decision on April 29 as the IMF sees the US economy contracting 5.9% in 2020.It remains to be seen if the FOMC will continue to push monetary policy into uncharted territory as the committee “remainscommitted to using its full range of tools to support the flow of credit to households and businesses to counter the economic impact of the coronavirus pandemic,” but the unprecedented response may ultimately lead to unintended consequences as the Fed relies on its balance sheet to cushion the US economy.With that said, the low interest rate environment may continue to act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies, and the broader outlook for bullion remains constructive as the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) helped to rule out the threat of a Head-and-Shoulders formation, with a similar scenario arising in March as the price of gold reversed course from the monthly low ($1451).However, the price of bullion may continue to pullback from the yearly high ($1748) as it initiates a series of lower highs and lows, while the Relative Strength Index (RSI) reverses course ahead of overbought territory.
HOW TO TRADE 2020 BITCOIN HALVINGLeading up to and following a Bitcoin halving, markets frequently witnessed high periods of volatility. However, price swings may be tamed by traders who have priced in the anticipated change and positioned themselves ahead of it. Since Bitcoin’s inception in 2009, there have been two halvings occurring at four-year intervals – on November 28, 2012 and July 9, 2016.Bitcoin prices rose approximately 18 percent in the month before the halvings of 2012 and 2016. They added an additional 8 percent after the first instance but fell 16 percent following the second one. Volatility this year may be particularly difficult to gauge because of two opposing forces that could amplify or dampen high-magnitude price swings.
US DOLLAR ASEAN WEEKLY RECAPThe US Dollar mostly aimed higher this past week against ASEAN currencies such as the Singapore Dollar, Malaysian Ringgit and Philippine Peso. It lost ground however to the Indonesian Rupiah, resulting in an overall down week for my ASEAN-based US Dollar index. Weakness in the haven-linked Greenback notably slowed as of late despite a cautiously optimistic mood on Wall Street as equities rose over the past 5 days.The resilience in the Rupiah comes amid upbeat commentary from Bank of Indonesia’s Governor Perry Warjiyo who mentioned last week that intervention needs “have been largely reduced”. As I mentioned prior, the USD continued to focusing on external developments to find direction against currencies in the developing Asia Pacific region. This will likely continue being the case in the week ahead.LAST WEEK’S US DOLLAR PERFORMANCEUS Dollar Fundamental Outlook: SGD, IDR, MYR, PHP Focus on EarningsASEAN-Based US Dollar Index averages USD/SGD, USD/IDR, USD/MYR and USD/IDRConfirmed coronavirus case growth in Singapore, Malaysia, Indonesia and the Philippines has been slowing on average. The weekly chart below overlays these cases alongside my ASEAN-based US Dollar index. The latter averages USD against SGD, MYR, IDR and PHP. This is also following the cautious easing in global reports such as in countries like the United States, Italy and France.
CANADIAN DOLLAR, CRUDE OIL, US DOLLAR, STOCKS, EARNINGS - TALKING POINTS:Canadian Dollar down as crude oil, stocks drop to start the weekAnxiety ahead of key Q1 earnings reports maybe risk-off catalystUS Dollar buoyed by haven demand, anti-fiat gold prices lowerThe Canadian Dollar led the way lower among its G10 FX counterparts financial markets started the trading week in a defensive mood. Bellwether S&P 500 futures fell – pointing to a broadly risk-off disposition – as financial markets. Crude oil prices sank to the lowest level since 2001, which probably explains some of the Loonie’s outsized losses. The haven US Dollar traded broadly higher, pressuring anti-fiat gold prices.Investors’ dour disposition may reflect anxiety ahead of a busy week for corporate earnings report that look set to paint a bleak picture of the damage wrought by the coronavirus outbreak. Perhaps most worryingly for cyclical assets like stocks and commodity-linked currencies, early signs of stabilization in the Covid-19 infections tally may be shifting the markets’ focus to the outbreak’s long-term economic impact.
AUD/USD RATE RETAINS ASCENDING CHANNEL FORMATION AHEAD OF RBA MINUTESAUD/USD continues to track the upward trending channel carried over from the previous month as the Reserve Bank of Australia (RBA) abandons the dovish forward guidance for monetary policy, and the minutes from the April meeting may heighten the appeal of the Australian Dollar if the central bank tames speculation for additional monetary support.The update to Australia’s Employment report may encourage the RBA to adopt an improved outlook as the economy unexpectedly adds 5.9K jobs in March, and Governor Philip Lowe and Co. may continue to change their tune over the coming months as officials insist that “smaller and less frequent purchases of government bonds will be required” if market conditions continue to improve.The unprecedented efforts taken by monetary and well as fiscal authorities should help to curb the slowdown in economic activity, but the RBA may come under pressure to further support the economy as the International Monetary Fund (IMF) sees global growth contracting 3.0% in 2020.
MAJOR OIL TRADER’S COLLAPSE, RISK APPETITE. TALKING POINTS:Oil trading giant Hin Leong has filed for bankruptcy protectionMarkets are now weighing the exposure of its lendersEnergy prices’ collapse seems to have claimed a major playerIn every major crisis there comes a point at which weakening economic numbers translate into corporate scalps and the nodal Singapore energy market has reached that point. Its biggest oil trading firm Hin Leong Trading has filed for bankruptcy protection, seeking to restructure nearly $4 billion in debt.If course, the energy sector has taken an unprecedent hit. The coronavirus has shredded energy-demand forecasts even as major producers saturate the market with cheap oil. Oil prices have collapsed to lows not seen since 2001, even after major production cuts which have so far done nothing to revive it.
EURO TECHNICAL PRICE OUTLOOK: EUR/USD WEEKLY TRADE LEVELSEuro updated technical trade levels & sentiment – Weekly ChartEUR/USD in consolidation within April monthly opening-rangeCritical support at 1.0657 – breach above 1.1187 needed to shift broader focus higher.
Also, the DXY Index appears to have found technical support around the 99.00 price level, which is highlighted by the confluence of its 50-day simple moving average, October 2019 swing high, and mid-point retracement of last month’s bullish leg. From a fundamental perspective, the latest coronavirus developments have likely rekindled demand for safe-haven currencies and US Dollar dominance. Specifically, investor risk appetite soured on the back of news that several countries are prolonging their coronavirus lockdown.
Market participants have already started to show signs that their recent influx of coronavirus optimism has waned. This is indicated by a pop in the VIX Index, or ‘fear-gauge,’ which happens to mirror a spike in implied currency volatility. Ominously, the recent uptick in expected FX volatility and S&P 500 volatility seems to resemble the volatility explosion traders witnessed throughout February and March.
A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +1.72 (63.26% of traders are long) – bearishreadingLong positions are 17.19% lower than yesterday and 1.10% higher from last weekShort positions are 0.21% higher than yesterday and 38.94% higher from last weekWe typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week and the recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.
Technical Outlook: In my last Gold Price Outlook we noted that the XAU/USD rally was vulnerable heading into the close of March trade and that, “ultimately a larger pullback may offer more favorable entries with a breach of the highs needed to keep long-bias viable.” Price plummeted more than 5% to register a low at 1560 before ripping to fresh yearly highs into the April open.The advance failed at slope resistance this week with price unable to mount a daily close above the 78.6% retracement of the decline from the record highs at 1733. Initial daily support rests at the March high-day close at 1678 backed by the median-line / 38.2% retracement of the yearly range at 1633- look for a larger reaction there If reached. Key support / bullish invalidation now rests at 1564/85.
Notes: A closer look at Gold price action sees XAU/USD trading within the confines of an ascending pitchfork formation extending off the March lows. A reversal off the upper parallel has price testing the weekly opening-range lows / median-line in early New York trade on Friday- look to the break for guidance with the broader advance at risk sub-1732 into the close of the week. A topside breach / close above the weekly highs needed to fuel the next leg higher in price with such a scenario eyeing subsequent resistance objectives at the 2012 high at 1795
EURO TECHNICAL PRICE OUTLOOK: EUR/USD WEEKLY TRADE LEVELSEuro updated technical trade levels & sentiment – Weekly ChartEUR/USD in consolidation within April monthly opening-rangeCritical support at 1.0657 – breach above 1.1187 needed to shift broader focus higherEuro is down nearly 0.6% against the US Dollar this week with EUR/USD trading at 1.0880 ahead of the New York close on Friday. The focus remains on a break of the April opening-range with price continuing to contract within the confines of well-defined technical levels. These are the updated targets and invalidation levels that matter on the EUR/USD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Euro trade setup and moreNotes:In my most recent Euro Weekly Price Outlook we highlighted that the, “The immediate focus is on a break of the 1.0777-1.0977 range for guidance,” with our broader outlook still dependent on a hold above the March 2017 high-week close at 1.0657. A weekly reversal this week keeps price within the confines of the April opening-range heading into the close with Euro currently holding just above the 61.8% retracement of the late-March rally at 1.0831.Initial support steady at 1.0778 with a breach above 1.0976 needed to fuel the next leg higher in price towards key resistance at the 61.8% Fibonacci confluence zone at 1.1167/87 – a breach / close above this threshold would suggest a more significant low was registered last month with such a scenario exposing subsequent resistance objectives at the 100% extension at 1.1280 and the June 2019 high-day close at 1.1367. A weekly close below 1.0657 is needed to mark resumption of the broader downtrend towards the 2017 low-week close at 1.0532.
Therefore, optimistic equity traders might look to capitalize on the relative strength of the Aussie Dollar. Should risk trends continue, AUD/USD may probe overhead resistance once more, while support around 0.62 will aim to keep price afloat in the interim. Further still, IG Client Sentiment Data reveals retail traders just recently shifted their bias to the short side, suggesting continued AUD/USD strength may be ahead.
A summary of IG Client Sentiment shows traders are net-short EUR/USD - the ratio stands at -1.12 (47.18% of traders are long) – neutral readingLong positions are6.10% higher than yesterday and 12.29% lower from last weekShort positions are 6.11% higher than yesterday and 34.08% higher from last weekWe typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias from a sentiment standpoint.
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