指標

CHINA RETURNS FROM ELONGATED BREAK With Chinese market participants away, given the market holiday, the offshore Yuan (CNH) is trading at its largest discount (700pips) to the onshore (CNY) since the beginning of 2016. As such, with China returning from its elongated break, eyes will be on the Yuan mid-point overnight. Signs that China is content in allowing the Yuan to depreciate would leave topside resistance in USDCNH exposed at 7.16 where a breakthrough would leave both emerging and commodity currencies vulnerable.

Gold volatility (as measured by the Cboe’s gold volatility ETF, GVZ, which tracks the 1-month implied volatility of gold as derived from the GLD option chain) is trading at 23.72, breaking its coronavirus pandemic low set on March 16 at 23.96. It’s worth noting that, despite gold volatility breaking its coronavirus pandemic lows, gold prices have not: gold prices were trading at 1696.94 at the time this report was written; on March 16, gold prices traded as low as 1451.43. As such, the 5-day correlation between GVZ and gold prices is 0.08 while the 20-day correlation is -0.41; one week ago, on April 28, the 5-day correlation was 0.68 and the 20-day correlation was -0.43; and one month ago, on April 7, the 5-day correlation was 0.99 and the 20-day correlation was -0.55. It remains the case that, as has occurred many times over the past year, when gold volatility falls but gold prices do not follow, leading to a situation of negative correlations in the short-term, it has typically indicated a digestion period for the market prior to further gains. If history is a guide, the recent sideways move in gold prices in context of the decline in gold volatility may be setting up the conditions for a rally after all.

CHFJPY daily price chart zoomed in 05-05-20. Based on analysis of the daily chart, on March 31 CHF/JPY broke below the uptrend line originated from the March 9 low at 109.58. Last month, the price failed on multiple occasions to overtake the 50-day moving average, indicating that bears were still in charge. On April 13, the pair fell and stuck in the current trading zone 10.7.76- 111.68. A close below the low end of the zone could embolden bears to press towards 103.93. A further close below that level could send CHFJPY towards 101.87. In that’s scenario, the weekly support levels underscored on the chart (zoomed in) should be watched closely. In turn, a close above the high end of the zone would mean a weaker bearish sentiment. This may trigger a rally towards 114.38. A further close above that level could extend this rally towards 116.43. Although, the weekly resistance levels printed on the chart would be worth monitoring.

With that in mind, we can surmise much of the market’s focus has shifted to the expected recovery timeline, not the current despair. Still, I find it difficult to accept the jobs lost will immediately return and suspect the recovery will be more treacherous than the market is currently projecting. Regardless, price action has shown its ability to climb higher in the face of bad news so it seems unlikely Friday’s report will shift the tide, but it could erode sentiment into the rest of the month. While the fundamental side develops, bullish technical traders will look to retake recent highs around 9,157 and establish a fresh high in pursuit of a continuation higher. Such a move would also require a break above 9,000 and the Fibonacci level nearby, while support may exist underneath from the ascending band around 8,565. So, the Nasdaq may take the upcoming news in stride, but the chickens will come home to roost eventually which leaves risks tilted to the downside in my opinion.

Generally speaking, there is a strong inverse relationship observed among the direction of risk assets, like stocks, and level of market volatility. This is indicated by the negative correlation typically held between S&P 500 price action. An influx of coronavirus optimism since mid-March, though supportive of the S&P 500, has largely kept the VIX Index and several cross-asset volatility benchmarks under pressure. The retracement lower in market volatility over recent weeks might seem encouraging on the surface, but VIX Index term structure indicates that investor uncertainty remains extremely high, and leaves the stock market rally in jeopardy, even as spot VIX falls.

Without going too far down the academic rabbit hole, there are two takeaways of the IS-LM model that carryover into understanding the Mundell-Fleming model. First, that the downward sloping IS curve demonstrates that as the level of interest rates fall, the level of economic activity rises. This is intuitive: the more readily credit is available, the more economic activity will flourish. Second, the upward sloping LM curve demonstrates that as economic activity rises, the level of interest rates rise too. This is also intuitive: stronger economic activity provokes inflation and higher bond yields in response.

That being said, the FTSE is far from a position of power despite early signs that European and American cities have begun to ease restrictions. Therefore, one of the few bright spots for the index may exist in the series of higher highs and higher lows starting in late March and holding above the recent low around 5,670 will be crucial in keeping the formation alive. While the upcoming event risk may provide the spark to make or break the level, evidence for a broader continuation higher might exist even if the immediate reaction to the news is negative – as long as it holds above the recent low. Should it fail however, the FTSE 100 may slip to an area of subsequent support around 5,500. This would muddy the series of successive higher highs and lows and would deal a technical blow in the short-term. If, on the other hand, the event risk passes and market participants are happy with the bank’s intentions, establishing another high above resistance around 6,225 will be important for staging the next leg higher. A gap exists immediately above the area, which may allow for bulls to capture the zone and enjoy a quick rush higher. Either way, price action may remain subdued until Thursday’s rate decision has passed. Join my colleague Justin McQueen for a live webinar of the event in which the resultant price action and implications will be discussed.

Technical Outlook: In my last S&P 500 Price Outlook we noted that the SPX rally had, “extended into a pivotal resistance barrier and the immediate focus is on a reaction up here with the bulls at risk sub-2930 near-term.” A false breakout on April 29th quickly reversed with the index pulling back into the 23.6% retracement of the mid-March rally at 2786 before rebounding. The recovery is now once again approaching critical resistance at 2890-2932 – a region defined by May open, 100% extension of the advance off the yearly low and the 61.8% retracement of the 2020 range. A breach / close above this threshold is still needed to unleash the next leg higher in SPX towards the August 2019 highs at 3026. A break below Fibonacci support would risk a larger price correction with subsequent objectives at 2670.

WEDNESDAY’S ASIA PACIFIC TRADING SESSION S&P 500 futures are only pointing cautiously higher heading into Wednesday’s Asia Pacific trading session. In fact, stocks on Wall Street trimmed a lot of their gains into the close as the Dow Jones and S&P 500 ended the day +0.56% and +0.90%. Comments from Fed Vice Chair Richard Clarida seemed to inspire risk aversion as he mentioned that the unemployment rate “is going to get very elevated”. He also added that it is “going to take time” for the labor market to recover. Meanwhile Texas - one of the early states to relax lockdown measures - saw Covid-19 hospitalizations rise 1,888 in the biggest rise in 3 weeks. These developments may have cooled what was a more robust “risk-on” tone in markets, perhaps raising concerns over the speed of an economic recovery. With that in mind, Asia Pacific equities may see a mixed session Wednesday. An absence of major economic event risk arguably places the focus for foreign exchange markets on sentiment. To that end, if fears of escalating US-China tensions continue rising, the sentiment-linked Australian Dollar could be left vulnerable.

Keep in mind, the near-term rally in USD/CAD emerged following the failed attempt to break/close belowthe Fibonacci overlap around 1.2950 (78.6% expansion) to 1.2980 (61.8% retracement), with the yearly opening range highlighting a similar dynamic as the exchange rate failed to test the 2019 low (1.2952) during the first full week of January. The shift in USD/CAD behavior may persist in 2020 as the exchange rate breaks out of the range bound price action from the fourth quarter of 2019 and clears the October high (1.3383). However, recent price action warns of range bound conditions as the break of the descending channel formation failed to produce a test of the April high (1.4298), with USD/CAD snapping the series of higher highs and lows from the previous week amid the lack of momentum to break/close above the Fibonacci overlap around 1.4130 (100% expansion) to 1.4140 (161.8% expansion). Failure to hold above the 1.4010 (38.2% retracement) to 1.4040 (23.6% retracement) region may spur a more meaningful run at the Fibonacci overlap around 1.3810 (50% retracement) to 1.3830 (100% expansion), which sits just below the April low (1.3850), with the next area of interest coming in around 1.3730 (78.6% expansion).

Rebounding from its record low of 74.50, the rupee traded higher by 48 paise at 73.80 against the US currency on Friday after the Reserve Bank's assurance that steps will be taken to maintain sufficient liquidity in the panick-stricken currency market.  At the interbank foreign exchange, the rupee opened lower at 74.39 and slid further to the day's low of 74.50 against the US dollar as investors panicked weighing turmoil in financial markets due to coronavirus fears. 

Coming into May, it’s likely that GBP/USD will eventually see greater volatility. If Britain and the EU fail to make some progress in the two rounds of week-long trade negotiations,scheduled on May 11th and June 1st respectively, it will have some noticeable impact on the pound’s fluctuation before mid-2020. After a month of jittering in March, April has been rather peaceful for the pound. GBP/USD once plunged to a 35-year low of 1.1413 in March, while GBP/EUR also fell to 1.0527, a record low in 11 years. But both pairs have experienced some rally afterwards. The EU-Britain negotiation regarding new trade measures introduced since January 1st has recently come to a deadlock. June 30th will be the deadline for extending the negotiation, yet the British Prime Minister Boris Johnson has repeatedly emphasized that an extension is unlikely to take place. Latest statistics from CFTC show that as of the week ending April 21st, speculators at Chicago’s International Monetary Market(IMM) are holding net shorts in pound for the first time in the past 12 months. During the last 6 weeks, speculators have been reducing holdings of GBP long positions. GBP/USD daily pivot points: 1.2434 — -1.2457 S1 1.2410 R1 1.2506 S2 1.2351 R2 1.2543

Yesterday, USD weakened against most major currencies except GBP and EUR. The U.S. Conference Board Consumer Confidence data (Actual: 86.9, Forecast: 88.3, Previous: 118.8 revised from 120.0) released yesterday was worse than forecasted. The U.S. Advance GDP q/q data (Forecast: -4.0%, Previous: 2.1%) will be released later at 2030 (SGT). The Federal Open Market Committee (FOMC) will be announcing their interest rate decision tomorrow at 0200 (SGT). It is expected that the FOMC will be holding interest rate unchanged at a target range of <0.25%. The FOMC may also reiterate and provide more specifics on the recent measures being carried out. There will also be a press conference after the decision at 0230 (SGT). During this time, volatility is expected of USD.

Overall, EUR/USD is trending downwards. Recently, EUR/USD moved higher, breaking the resistance level of 1.08000. Last Friday, European Commission’s Head of Task Force Michel Barnier said that a joint decision between the EU and UK would be taken on 30 June on whether the Brexit transition period will be extended. EUR/USD’s next support level is at 1.00800 and the next resistance level is at 1.10000. With the poor flash PMI data released last week, look for selling opportunities of EUR/USD.

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 market Imminent May futures contract expiry didn’t help Gold prices inched higher through the session and remain well supported despite a break of their recent uptrend US 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 POINTS Gold 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 ECONOMY The 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.