Risky assets traded without a clear direction yesterday as market participants didn’t take strong market views before today’s ECB meeting and US CPI data on Friday. The ECB Press Conference and the rate decision are the key risk events today. The rate is expected to stay unchanged but traders are looking for cues on how the central bank will conduct its monetary policy in the future. This could bring about some additional volatility today. Volatility equals trading opportunities therefore, make sure you are prepared by depositing trading funds to your account and by planning your trades well. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
In today’s report, I provide you with trade ideas, analysis and key technical levels on
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DAX has broken the bull channel low but is trading at a higher important daily support level (14263). If the market bounces higher from here, it could trade significantly higher but first, the bulls need to conquer the 14518 resistance. On the other hand, a decisive break below the 14227 – 14263 range. l could take the market down to the 13868 – 14102range. The ECB press conference could have a role to play in DAX today. There’s likely to be higher volatility around this risk event. The key S&R levels for DAX today are 14102, 14353 and 14460.
DJ traded aimlessly up and down yesterday and made trading a little challenging. The market, however, eventually moved to my targets. The T2 level turned out the be well-placed as it was roughly the day’s low. The market is trading in a descending triangle formation and has to eventually break out in either direction. This gives us two measured move targets for swing trades, 31930 on the downside and 33804 on the upside. For intraday trading today, the nearest key S&R levels are 32625, 32818, 33204 and 33320. If the 1.0709 support breaks, the market is likely to move to 1.0675 where we have the SMA(50).
USOIL – Once again oil put in another higher high in this uptrend. This market has provided bulls with wonderful trade entries lately. Now the nearest key support levels are at 115.68, 117.74 and 119.11. The next major resistance level is at 123.87
EURUSD rallied to a descending trendline yesterday and has since lost some momentum. The market has been moderately bullish over the last two days but now we need to see what the ECB’s LaGarde has to say and then re-evaluate the market. Therefore I will only give you the nearest key S&R levels that should help you to trade the potential volatility created by the ECB press conference. Here they are: 1.0627, 1.0654, 1.0709, 1.0748 and 1.0786.
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 been drifting lower since early May as equity investors have moved over to T-Bonds in search of safety.|
|Employment||The May non-farm payrolls increased by 390K (436K previous) while the participation rate was confirmed at 62.3% (62.2% previous). The unemployment rate remained unchanged at 3.6%.|
|Inflation||The US annual inflation growth for April slowed down and came in at 8.3%. This represented a 0.2% drop from the 41-year high of 8.5% in March. It was, however, above the analysts-predicted number of 8.1%.|
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The Next Main Risk Events
- EUR – Main Refinancing Rate
- EUR – Monetary Policy Statement
- EUR – ECB Press Conference
- USD – Unemployment Claims
- CAD – BOC Gov Macklem Speaks
- CAD – Employment Change
- CAD – Unemployment Rate
- USD – CPI m/m
- USD – Core CPI m/m
- USD – Prelim UoM Consumer Sentiment
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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