Even though the IMF downgraded its global economic forecast yesterday equity investors decided the US stock market was a buy. The main Wall Street equity indices staged their best rallies in over a month. The Nasdaq ended up 2.2% leading the DJIA (1.45%) and SPX (1.61%) higher too. Market participants were encouraged by positive earnings but also liked the dovish Fedtalk by Charles Evans and Raphael Bostic. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
Commodity currencies are still in the lead as risk sentiment has improved. JPY has recovered a bit in today’s trading but it’s still the second weakest among the main dollar rivals and trading about 1.7% lower than at the time of London open yesterday. In terms of macroeconomic news releases nothing much has happened since my previous report. JPY remains under pressure due to expectations related to interest rate differentials between the US and Japan and commodity currencies have traded higher as the recent risk aversion has pushed them too low and too fast. Today’s key risk event is the CPI release from Canada.
NZDUSD rallied to my first target (at 0.6767) in the Asian session today. I shared the trade idea here: t.me/TIOmarkets_Announcements/1000 yesterday afternoon. The idea benefitted from the overall improvement in risk sentiment. NZDUSD is trending higher in 15 min chart. If this trend continues the T2 level at 0.6792 could be reached today. Alternatively, the uptrend is violated and the pair consolidates further between today’s high and 0.6714.
NFLX fell off the cliff (-26%) after the company reported that due to inflation, the Russian war on Ukraine and strong competition it lost subscribers for the first time in over 10 years. The company sees deeper losses ahead which has prompted it to consider a free advertising-based model to attract more customers. Since Netflix warned in January that subscriber growth was weak the stock has lost almost 50% of its market value.
Recent trade ideas
Gold traded to my targets. I posted this trade idea on the TIOmarkets Telegram channel (bit.ly/Gold_scalping_trade_idea) and the price rallied to my targets before it quite soon started to sell off. Now gold is bouncing higher from trendline support. The nearest key resistance is the 1982.60 level and the nearest support is at 1972.70.
GBPJPY also hit both targets. I shared the idea here: bit.ly/GBPJPY_long. This idea benefitted from JPY weakness seen today and now the GBPJPY pair is trading near the bull channel high. The nearest key price level is at 165.41.
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||Several FOMC members support 0.5% rate hike in May. The Fed is prepared to taper by $60B of treasuries and $35B of mortgage back securities per month.|
|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 non-farm 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 January 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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- CAD – CPI m/m
- USD – Existing Home Sales
- NZD – CPI q/q
- USD – Philly Fed Manufacturing Index
- USD – Unemployment Claims
- GBP – BOE Gov Bailey Speaks
- EUR – ECB President Lagarde Speaks
- USD – Fed Chair Powell Speaks
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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