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.
Evidenced in the chart below, the Australian Dollar has considerably outperformed the ASX 200 relative to one of the other leading risk assets, the S&P 500. Using the US index as a benchmark, we can see not only the divergence between the two Australian assets, but also the formidable strength of the S&P 500 which has outperformed both AUD/USD and the ASX 200 since mid-March.
AUD/USD has gained on hopes the world’s financial authorities are equal to the massive challenge of coronavirusHowever it may be that some doubts on this score are setting inThe currency could slip back if they get much deeperThe Australian Dollar has risen sharply through April, benefitting as have many other growth-correlated assets from the astonishing rescue packages launched around the world in an effort to cushion economies from the coronavirus’ effects.And yes, billions of dollars’ worth of extra liquidity is now ready to flood markets, very possibly, turbo-charging recovery. When it comes. However, it hasn’t come yet and most national economies remain in varying states of lockdown while the contagion continues to spread and forecasts of global recession spread almost as fast.HAS OPTIMISM BEEN OVERDONE?There are now signs of market fear that they may have overdone the optimism and, if they take deeper root, progress could be tough for the Aussie.There’s not a huge amount on the domestic data slate likely to deter investors from their broad focus on the coronavirus headlines worldwide. Tuesday will bring a look at the minutes of the last monetary policy meeting of the Reserve Bank of Australia which took place on April 7. Interest rates were held at their record lows back then, to the surprise of markets which had just about expected a further reduction to go with the two quarter-point trims made in March.However, it seems likely that the minutes will do no more than make it clear that all stimulus options remain on the table, and that will not add anything to what the market must already know. Investors will also get a look at the ‘trimmed mean’ quarterly inflation numbers, a curtain raiser for the full official release which will come toward the end of the month. Stickily low inflation was a key barrier to higher interest rates in the pre-Covid days but, as rates are likely to remain constrained for some time in any case now, the numbers may lose a bit of their bite.Skilled vacancy data for March could attract more attention than usual given that official jobless data for the month held up astonishingly well. It’s likely that this merely reflects a survey period which expired before virus-linked travel bans and shutdowns were imposed, but the labor market is in special focus now.Barring some unpredictable bit of left-field good news it seems likely that the Australian Dollar could struggle this week, so it’s another bearish call.
AUSTRALIAN DOLLAR & ASX 200 PRICE OUTLOOK: AUSSIE LEADS RECOVERY BUT STOCKS LAGThe Australian Dollar has charged higher in recent weeks as it continues to recover lost ground from the abrupt declines suffered across all risk assets in late February and much of March. Now more than 13% off its March 18 low, AUD/USD has been a leader among growth-sensitive markets but its equity counterpart, the ASX 200, has lagged comparable indices in other developed regions.ASX 200 PRICE CHART: INDEX LAGS INTERNATIONAL COMPETITION
Overall, AUD/USD is trending upwards. Recently, AUD/USD tested and failed to break below the key level of 0.63.Currently, AUD/USD is moving towards the key level of 0.64. Its next support level is at 0.61800 and the next resistance level is at 0.64200.
Overall, NZD/USD is trending upwards. Recently, NZD/USD moved lower, breaking the support level of 0.60300.NZD/USD’s next support level is at 0.58400 and the next resistance level is at 0.60300.
Overall, USD/JPY is ranging across. Recently, USD/JPY moved lower towards the key level of 107.Currently, USD/JPY is testing to break below the key level of 107. Its next support level is at 106.800 and the next resistance level is at 108.500.
GOLD AND CRUDE OIL TALKING POINTS:Gold prices made new 7-year highs as haven assets continued to find favorChinese import and export numbers beat gloomy forecastsCrude oil held up, but massive production cuts have not seen an upside range break yetGold prices pushed on to new seven-year highs on Tuesday as investors continued to fret about the global economic hit dealt by the coronavirus even as Chinese economic data came in less weakly than expected.In US Dollar terms exports fell by 6.6% on the year in March, while imports slipped by 0.9%. This was in both cases much less than forecasts which centred on respective falls of 13.9% and 9.8%. While these numbers may suggest that supply chains are holding up better than economists had feared, it remains likely that the full extent of the demand collapse seen in western economies now to varying extents locked down has yet to show up in the data.The US Congress struggled to come up with a new relief bill on Monday with the Republicans and Democrats in standoff. The budget deficit is now forecast to balloon and anxious eyes are being cast are the dawning corporate earnings season. Meanwhile the International Monetary Fund said on Monday that it would provide immediate relief to 25 member nations under its catastrophe relief program.Given all of the above a continued strong haven bid into gold is unsurprising and, indeed can be clearly seen. The metal is now at its highest since November 2012, with its all-time peaks now in the bulls’ sights.
NEW ZEALAND DOLLAR TALKING POINTSNZD/USD trades to a fresh monthly high (0.6131) even though New Zealand’s Treasury anticipates “a deep contraction in activity in the present June quarter,” and the exchange rate faces a key test as it comes up against the former support zone around 0.6170 (50% expansion) to 0.6230 (38.2% expansion).NZD/USD RATE FORECAST: FORMER SUPPORT ZONE ON THE RADARNZD/USD extends the advance from earlier this month even though New Zealand’s Treasury outlines five different economic scenarios following COVID-19, with the growth rate expected to decline “around 13% in Scenario 1, the least restrictive of the scenarios considered.”Recent price action raises the scope for a larger correction as NZD/USD negates a bear flag formation and breaks out of a narrow range, but the weakening outlook for global growth undermines the recent rebound in the exchange rate as it puts pressure on the Reserve Bank of New Zealand (RBNZ) to further support the economy.The government projection warns “peaks in the unemployment rate vary from around 13% in Scenario 1 to nearly 26% in Scenario 3,” and the nationwide lockdown may force the RBNZ to deploy more non-standard measures even though the central bank adds “$3 billion of Local Government Funding Agency (LGFA) debt to its Large Scale Asset Purchase programme (LSAP).”Unlike the Reserve Bank of Australia (RBA), the RBNZ may continue to endorse a dovish forward guidance at its next meeting on May 13 as Governor Adrian Orr insists that the central bank “can keep monetary support going for as long as necessary through QE (quantitative easing) and other tools.”It seems as though the RBNZ will continue to utilize its balance sheet as officials insist that the official cash rate (OCR) will sit at the record low of 0.25%for “at least 12 months,” and it remains to be seen if Governor Orr and Co. will continue to push monetary policy into uncharted territory as the central bank plans to “update its economic assessment and the size and scope of the LSAP at its next scheduled meeting.”With that said, the near-term correction in NZD/USD may continue to evolve ahead of the next RBNZ interest rate decision, but the exchange rate faces a key test as it comes up against the former support zone around 0.6170 (50% expansion) to 0.6230 (38.2% expansion
SINGAPORE DOLLAR, INDONESIAN RUPIAH, MALAYSIAN RINGGIT, PHILIPPINE PESO – TALKING POINTSUS Dollar sank versus ASEAN FX as sentiment continued improving last weekAll eyes are on US earnings and retail sales. China GDP, Bank of Indonesia upWhat else is in store for USD/SGD, USD/IDR, USD/MYR and USD/PHP ahead?US DOLLAR ASEAN WEEKLY RECAPLast week’s US Dollar rout continued against ASEAN FX as it depreciated against the Singapore Dollar, Indonesian Rupiah, Malaysian Ringgit and Philippine Peso. Market sentiment continued to broadly improve which helped to slow overall capital outflows from emerging market economies. To learn more about the importance of this fundamental theme, check out last week’s ASEAN fundamental outlook.Investors’ cheery mood could be attributed to a combination of hope for further US fiscal stimulus as well as slowing coronavirus case growth around parts of the world. Once again, the markets brushed aside the ongoing onslaught of dismal economic data. An unprecedented 17 million people have applied for jobless claims in the United States since the middle of last month as local consumer sentiment dwindled.One of the best-performing ASEAN currencies was the Indonesian Rupiah. This could have been attributed to the Federal Reserve opening up a US$60 billion repo facility with the country to help ease a USD shortage. ASEAN central banks have been stepping up efforts to stem devaluations in their currencies. Foreign exchange reserves are being spent and may continue being unwound. Investors are looking on with greater scrutiny.
GBP PRICE, NEWS AND ANALYSIS:Chinese trade data for March exceeded expectations, boosting market sentiment generally.GBP is one of the beneficiaries, along with other ‘risk-on’ currencies including AUD and NZD.Now, 1.30 is in the frame as a long-term target for GBP/USD.GBP/USD EXTENDS ADVANCERisk-on currencies including GBP, AUD and NZD are advancing against the USD after the latest Chinese trade data showed exports and imports both exceeding the expectations of analysts polled by the news agencies. The numbers showed exports down 6.6% in March, rather than the forecast -13.9%, and imports lower by 0.9% rather than the predicted -9.8%.Along with hopes that the coronavirus pandemic may be close to peaking, the start of measures being eased in countries like Austria and Spain, and central bank and government stimulus, a ray of optimism has returned. That has extended the climb in GBP/USD that began three weeks ago, bringing the early March high above 1.30 into focus as a long-term target.GBP/USD PRICE CHART, FOUR-HOUR TIMEFRAME (MARCH 4 – APRIL 14, 2020)
EURO OUTLOOK, DAX INDEX, IMF WORD ECONOMIC OUTLOOK, IMF GLOBAL FINANCIAL STABILITY REPORT – TALKING POINTSEuro, DAX index could face selling pressure if IMF outlook spooks European marketsCoronavirus pandemic threatening to undermine regional financial, economic stabilityDAX index has experienced a recovery but remains down over 20 percent year-to-dateASIA-PACIFIC RECAPUS equity futures aimed higher along with Asia-Pacific stocks in what appeared to be a “risk-on” tilt in investors’ mood. This was also reflected in currency markets where the anti-risk US Dollar and Japanese Yen fell while their growth-oriented counterparts – the Australian and New Zealand Dollars – strengthened. This also followed better-than-expected Chinese trade data.EURO, DAX MAY FALL ON IMF WEO AND GFSRThe Euro and DAX may fall if the International Monetary Fund’s (IMF) World Economic Outlook (WEO) and Global Financial Stability Report (GFSR) reports inspire a selloff in the already-battered currency and index. While Eurozone finance ministers were able to reach an agreement on stimulus, unresolved political rifts may soon haunt the region at a time when it faces a crisis worse than what it had endured in 2008.Year-to-date, the Euro has fallen almost three percent and is trading at a multi-year low with the German DAX equity index down over 20 percent. The coronavirus pandemic has exposed underlying issues in the Eurozone both financially and economically that are now requiring unprecedented efforts on the part of governments and the European Central Bank (ECB) to address.The IMF’s assessment – particularly as it relates to financial stability – could inspire a selloff in the Euro and growth-oriented assets in the region if the institution’s outlook undermines confidence in a smooth recovery. Concern about the cross-continental so-called leveraged loan market has stirred investors’ angst in recent months with policymakers warning of another possible regional debt crisis.
Overall, EUR/USD is ranging across. Recently, EUR/USD tested but failed to break below 1.09.EUR/USD’s next support level is at 1.08000 and the next resistance level is at 1.10000.
EURO ANALYSIS, EUR/USD, FRENCH PRESIDENT EMMANUEL MACRON, CORONAVIRUS– TALKING POINTSThe Euro could suffer if Macron extends French coronavirus lockdownOther states may mimic second-largest Eurozone economy’s decisionEUR/USD broke out of compression zone but gains could be cappedASIA-PACIFIC RECAPInitially, crude oil prices and US equity futures pointed higher after OPEC struck an historic production cut agreement over the weekend. However, what appeared to be a flicker of optimism initially quickly deteriorated into a risk-off tilt as growth-oriented assets turned lower. Asia-Pacific equities were generally mixed while the Japanese Yen edged higher against its G10 counterparts.EURO EYES FRENCH PRESIDENT EMMANUEL MACRON EASTER SPEECHThe Euro may fall if French President Emmanuel Macron hints at extending the lockdown to curb the spread of the coronavirus. The prospect of a prolonged period of weaker consumption and higher unemployment because of shelter-in-place orders in the second-largest Eurozone economy could send a chilling message across the region.Other states may follow out of concern that a premature opening could risk a second wave of contagion. While Eurozone finance ministers were able to make some progress on a unified agreement for stimulus, additional may be needed if the shelter-in-place orders are extended. The main elements of the emergency package include revised credit lines from the ESM and a new 100 billion euro unemployment insurance policy.But the debate on how to deal with spending and structural issues after the coronavirus crisis is dealt with remain at the back of everyone’s minds. Learn more about market-moving political rifts here.EUR/USD PRICE CHARTEUR/USD has broken above resistance labelled as “Downtrend Alpha” and out of the compression zone. However, the victory for Euro bulls may be short-lived as the pair mounts to challenge former support-turned-resistance between 1.0981 and 1.0989. If EUR/USD capitulates, it may instill a sense of discouragement and pressure the pair to retesting support at 1.0783.
JAPANESE YEN, AUSTRALIAN DOLLAR, NEW ZEALAND DOLLAR TALKING POINTS:Stocks slipped in a holiday thinned start to the weekRisk aversion was notable as earnings season loomsCrude oil prices were up but below the highs reached on news of production cuts.A new Asia Pacific trading week started off with risk aversion in the ascendant as investors fretted the likely heavy hit to corporate earnings dealt by the coronavirus’ awful spread. The anti-risk Japanese Yen made gains, while the growth-correlated Australian and New Zealand Dollars took an early hit, admittedly in markets thinned by Easter Monday holidays which saw major centers like Sydney and Hong Kong out of the game.Open stock markets were lower, with the Nikkei 225 down more than 1% and the Kospi off by 0.75%. US stock futures also pointed lower.Oil prices climbed on news that the Organisation of Petroleum Exporting Countries and its allies in the so-called ’OPEC Plus’ group had agreed production cuts, apparently ending the ruinous dispute on the subject which threatened to flood the market with cheap crude oil. Still, it’s by no means certain that such a flood would have been a bad thing in a world reeling from coronavirus, and end-demand for energy remains under heavy clouds. The bloc which includes Russia has agreed on reduction of 9.7 million barrels per day.Goldman Sachs has already reportedly called the reductions too little and too late and still sees downside risk to its $20/barrel 2020 forecast, fearing that storage capacity will still be overwhelmed.US earnings season will kick off this week, with first quarter performances from the major banks in focus. With interest rates now cut back to the bone all over the world profitability will be under the microscope.Given all of the above it’s hardly surprising that the markets should have endured a cautious open. USD/JPY headed lower early but found Dollar bulls ready US crude oil prices have also risen on Monday but they remain well below the $31/barrel level hit in the immediate aftermath of the news that production cuts had been agreed.to defend psychological support at 108.00.
US DOLLAR, SINGAPORE DOLLAR, INDONESIAN RUPIAH, MALAYSIAN RINGGIT - TALKING POINTSASEAN countries step up FX intervention amid the coronavirus outbreakAs they did this, pairs like USD/SGD, USD/IDR and USD/MYR stabilizedInvestors may scrutinize central bank FX reserves when sentiment soursUSD/SGD, USD/IDR, USD/MYR CLOSELY EYEING FOREIGN EXCHANGE RESERVESAs the haven-linked US Dollar aggressively appreciated amid the coronavirus outbreak, ASEAN central banks stepped up FX intervention efforts to help stem selling pressure in their currencies. A great way to measure the vigor of their actions is by looking at foreign exchange reserves. Lately pairs such as USD/SGD, USD/IDR and USD/MYR have given back recent gains, perhaps suggesting that these efforts are working.On the chart below, foreign exchange reserves have been declining in ASEAN nations such as Singapore, Malaysia and Indonesia. In fact those in Malaysia dipped to US$101.7 billion in March which was the lowest since the beginning of 2019. Indonesian FX reserves fell to US$120.97 billion last month which was the smallest since May 2019. Singapore levels have also turned cautiously lower.China – the world’s largest holder of foreign exchange reserves - has also been spending its fair share. Their holdings declined by $46.1 billion last month which was the most aggressive pace since the end of 2016. When central banks spend their international reserves – which are mostly held in US Dollars - they can use them to purchase domestic FX and boost prices. This can go on so long as their holdings are not fully depleted.Granted, there has been a material shift in market sentiment since the end of last month. A combination of aggressive fiscal and monetary easing efforts from nations across the world to help stabilize economic health appears to be working thus far. But investors can become nervous in the event that risk aversion resurfaces and look at levels of FX reserve depletion with greater scrutiny.
Eurozone Faces Severe Recession in Economy; signs of a rebound may show up in the third quarter, but the economy won't recover completely until 2021.EURUSD daily pivot point: 1.0935 S1: 1.0919 R1: 1.0951 S2: 1.0902 R2: 1.0967
After hesitating in the previous week, gold prices soared in these last few days, with spot gold trading as high as $ 1,690.23 a troy ounce, to close the week less than $ 10.00 below this last. The bright metal gained the most on Thursday, following the US Federal Reserve decision to announce another round on massive easing, this time in the form of loans of up to $2.3 trillion.Following the announcement, US Federal Reserve Chief Powell offered a speech afterwards and reaffirmed that the central bank would continue to use all available tools to support the American economy until it recovers. Concerned about the high levels of unemployment the US may reach, Powell was overall confident that the situation will revert as soon as the pandemic is under control.Gold futures, in the meantime, reached a 7.5 year high around $1,750.00 a troy ounce after the announcement, as the ongoing pandemic-related crisis, keeps fueling demand for the safe-haven metal. With the world’s economies in pause, fears or recession loom, hence, demand for gold will likely persist.Excess of liquidity and shortage of physical goldMeanwhile, gold supply remains subdued. This past week, several Swill refineries re-opened, but global demand keeps rising. And as central banks have turned on the printing machine, much of the excess of liquidity has already a place to go.The extend of the global economic damage caused by the pandemic is yet to be seen, although nobody doubts it will be long and painful. In this scenario, gold is meant to keep on rallying.More hints on how the pandemic is hitting the world will be out next week, as the US will report March Retail Sales, and Initial Jobless Claims for the week ended March 3.Spot Gold Technical OutlookTrading at around 1,680, spot gold is close to the multi-year high set early Mach at 1.703.18. The commodity is bullish, with technicals aligned with fundamentals.The weekly chart shows that it bottomed at around the 61.8% retracement of its latest weekly slump, at 1,606.60. It has continued to develop far above all of its moving averages, with the 20 SMA accelerating north. Technical indicators have resumed their advances within positive levels, although they lack enough strength to confirm a steeper advance.In the daily chart, the Momentum indicator is partially losing its bullish strength in overbought levels, while the RSI maintains its strength upward at around 63. The 20 DMA has turned back north, although it’s barely picking up after trending lower for the past 5-weeks. Anyway, the larger moving averages maintain their bullish slopes.The weekly high at 1,690 is the immediate resistance ahead of 1,703. Beyond this last, 1,795.80, the high from October 2012, comes at sight. Supports for the upcoming days come at 1,661 and the 1,640 price zone.
Technical OverviewEUR/USD faces the next key up barrier at the January’s low at 1.0992 ahead of the psychological 1.10 mark. Further up, the pair needs to surpass the critical 200-day SMA, today at 1.1060, in order to allow for a visit to recent peaks in the mid-1.1100s (March 27/30). In case sellers step in, the monthly/weekly low at 1.0768 (April 6) should emerge as an interim support ahead of the 2020 low at 1.0635 recorded in mid-March.Fundamental OverviewEUR/USD manages well to keep business in the upper end of the weekly range at the end of the week, always in a context of the renewed and moderate selling pressure in the buck and the positive outcome from the Eurogroup meetings.In fact, the recent deal clinched by the Eurogroup has mitigated political concerns that have re-surfaced following the effervescence between Holland-Germany and France-Italy-Spain, all regarding the joint efforts to fund the effects of the COVID-19 on some economies.Later in the day, the focus of attention is expected to be on the publication of US March’s inflation figures, although marginal volatility and flat trade conditions due to the Easter holidays could remove some significance from the release.
CANADIAN DOLLAR, LOONIE, USD/CAD TALKING POINTS:USD/CAD put in an aggressive breakout in March, and has since started to pullback.That bullish breakout stopped 21 pips shy of the 17-year-high.The ensuing snapback has grown in aggression, with price action now testing around the 1.4000 psychological level.
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