Some of the war premium in oil and gas eroded as the Russian president didn’t declare war in his victory day speech. Retired Russian Colonel Mihail Hodarjonok said on Russian state TV channel 1 that that mobilization wouldn’t accomplish much, since Russia’s weaponry is outdated and can’t compete with modern NATO-supplied weapons and equipment Ukraine has. Traders probably concluded from Hodarjonok’s comments that Russia isn’t powerful enough to escalate the war against Nato or even Ukraine. As a result, the price of oil dropped 5.7% and the price of natural gas almost 14%. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
After an extended move to the downside, the US T-Bond futures became oversold and snapped back in yesterday’s trading. This brought the yields lower and eased the pressure on the major dollar counterparts. This softness in dollar bids has helped gold and silver to take some of their recent losses back in today’s trading. Bitcoin failed to attract buyers at the 32950 level after I warned yesterday that due to strong risk aversion sentiment there was a risk of further downside in bitcoin. Stocks moved deeper globally and the energy markets followed as fears of the global recession took hold of them.
In today’s report trade ideas, analysis and key technical levels on
- AMZN – Downtrend breakout in the trend direction
- Gold – Created a medium-term market top
- BTCUSD – At a key support level but risky
Get live updates on my analyses and trade ideas here: https://t.me/TIOmarkets_Announcements
XAUUSD rallied a bit but then ran into resistance around 1865. This together with the weak technical picture and bearish fundamental backdrop suggests that the price of gold could trade lower. I posted a short trade idea in the TIOmarkets Telegram group with targets fairly nearby. My first target is at 1857.64 and the second target is at 1852.45. The alternative scenario is that the price of gold rallies above the 1865 threshold level and moves to 1871.50. So far the price has been ranging and there’s been no decisive selling which is a risk factor for the bears. If gold manages to push past the most recent high (with some strength) the market has created an inverted H&S formation and could move to 1880. However, this scenario is only valid when the market has cleared the 1865.42 resistance.
BTCUSD broke the key support level at 32950 I talked about yesterday. I warned yesterday: “But with the current risk aversion sentiment being rather strong the risk of further downside remains”. It was my view also that if the support is broken then it’s likely that the market moves down to 28600. This hasn’t happened yet and today’s price action at the 32950 is quite important in this regard. The market has rallied back to the vicinity of the level. If the market fails to penetrate the level the probability of a move to the 28600 level increases. On the other hand, should there be a decisive rally above the level the market is likely to rally eventually to 37400.
AMZN continued to trade lower. I wrote yesterday (here) how the stock broke decisively a key support level (2870) on April 29th as the company reported a massive negative earnings surprise (Reported: -7.56, Estimate: 8.35). After the initial shock AMZN was trading in a sideways range until it broke out of this continuation formation on Friday. The stock opened below Friday’s low and rallied back to the level but that’s where selling started again and the stock kept on trending lower. The move was about 90 dollars (or 4%) per contract traded so those of you that paid attention to the levels from my report yesterday had a great opportunity to make some points in this market! Based on technical projections the stock could move to the 2000 – 2030 range.
Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
|The Federal Reserve||Fed hiked by 0.5% in May but according to Powell 0.75% hikes are off the table.|
|Stimulus||The Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe.|
|Yields||The US 10-year treasury yield has risen to 2.187% as investors sell the bonds and adjust to the expected rate hikes.|
|Employment||The March nonfarm payrolls increased by 431K while the analyst consensus had predicted 492K new jobs. The unemployment rate dropped to 3.6% and average hourly earnings were in line with expectations (0.4% vs. 0.4% expected).|
|Inflation||The annual headline inflation reading for March came in at 7.5% (7% prior). This was the highest CPI print in 40 years. The core CPI (all items less food and energy) was confirmed at 6.0% (5.5% previous).|
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The Next Main Risk Events
- EUR – ECB President Lagarde Speaks
- USOIL – OPEC Meetings
- USD – CPI m/m
- USD – Core CPI m/m
- NZD – Inflation Expectations q/q
- GBP – Prelim GDP q/q
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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