Market Overview
Traders can breathe a sigh of relief as risk appetite has been given a boost this morning as President Xi of China has looked to calm nerves with a speech on his vision of China and global trade. Xi operates in a very different way to that of the blustering President Trump.
In his speech at the Boao Forum for Asia, President Xi took the opportunity to advocate China in becoming more open, breaking down trade barriers and protecting international companies’ intellectual property. These are all things that President Trump should welcome and the financial markets are giving President Xi the thumbs up.
Risk appetite has picked up again overnight which is driving Treasury yields higher, safe haven assets such as gold and the yen lower, and equities also increasingly positive. There are though still issues negatively impacting on markets to consider though, with political risk surrounding President Trump over Robert Mueller’s investigation; but also how the world’s major countries respond to the appalling chemical attack in Syria. However, for now, there is more of a risk positive bias that is helping sentiment this morning. Will the bulls be given a chance to build on it?
Wall Street closed well off the highs of the session but still managed to close with gains, with the S&P 500 +0.3% at 2616, whilst Asian markets have responded favourably to President Xi’s speech, with the Nikkei +0.5%. The European markets are also decently higher in early moves, with the DAX once more performing on a risk positive session. In forex, there is a risk positive look to trading, with the yen being the primary underperformer, whilst the higher risk commodity currencies such as the Aussie and Kiwi are gaining good ground. In commodities, the improvement in sentiment is a drag on gold this morning, around $4 lower, whilst positives for global trade are supportive for oil.
US inflation is on the agenda again this week and if CPI on Wednesday is the main course, then the PPI today is the appetiser. US PPI is at 13:30 GMT with the headline PPI expected to show a tick higher to +2.9% (from +2.8%) with core PPI up to +2.6% in March (from+2.5% in February).
It will also be worth for sterling traders to watch out for Bank of England chief economist Andy Haldane who speaks at 10:30 BST this morning.
Chart of the Day – USD/CHF
Dollar/Swiss has been trending higher in a recovery for the past seven weeks during which time the market has posted a series of higher lows and higher highs. The move has even broken a four month downtrend in a move that has seen the momentum indicators become increasingly positively configured. However, on Friday the market posted a bearish engulfing candle (bear key one day reversal) to leave a key high in place at 0.9650 as the market turned lower following the payrolls report. The move continued lower to form another bear candle yesterday which closed at the low of the day. The question is now whether this is another correction within the recovery trend or something more significant. The uptrend comes in at 0.9520 today whilst the rising 21 day moving average will be an interesting gauge as a basis of support around 0.9530. Watch the RSI which is quickly dropping back, a move below 50 would be a bear signal near term signal now. With the past three corrective moves in the uptrend finding support around key old levels, the reaction low at 0.9520 will be watched also. The hourly chart shows the bull momentum has now been lost and there is a lower high around a pivot at 0.9610 as initial resistance.
A second positive candlestick in a row has improved what had previously been an increasingly corrective outlook within the medium term 400 pip consolidation range. However the bulls need to kick on again today in order to take on a far more positive bias. There needs to be a close above the resistance at $1.2345 which is the early April lower reaction high. For now the momentum indicators have ticked higher, with the bull cross on the Stochastics arguably a buy signal, so there is now an upside momentum developing. However this move needs confirmation that the bulls are confident to break through near term resistance. So $1.2345 is key today. The support at $1.2210 is also gaining importance now as a higher low above the key range low at $1.2155. The hourly chart reflects the improving outlook and configuration, with $1.2260 initial support.
Cable has seemingly once more used the support of the five month uptrend as a basis for the renewed push higher. Friday’s decisive bull candle has swung momentum positive again with another positive session yesterday which has taken the market above the near term resistance at $1.4100 to re-open $1.4245. The move has now left another higher low at $1.3965 and is now beginning to find traction in the momentum indicators once more. The Stochastics are now looking to tick higher again, whilst the RSI is also around two week highs. An early consolidation has formed in the market today, but the bulls will be looking to use weakness as a chance to buy now. The hourly chart shows positive configuration and a mini band of support $1.4075/$1.4100 to use as a near term buy zone. Initial resistance at $1.4200 is protecting $1.4245.
As risk appetite improves surrounding global trade the yen loses some of its appeal. This seems to be the case, with Dollar/Yen finding support even though the dollar has come under pressure across other majors. The technical breakout last week which broke the series of lower highs continues to see a gradual improvement in the outlook. Leaving the first higher low at 105.65, a couple of negative candles have pulled the market back again. However there is a band of support shown on the hourly chart between 106.60/107.00 which could now be the source of the next higher low as the market has rebounded again this morning. This support has also come in around the topside of the old short term downtrend channel. The bulls now need to regather themselves to see whether this is going to build into a medium term consolidation below all the overhead resistance 107.50/107.90 or whether it builds into a base pattern for a sustained recovery. Momentum is threatening to lose its impetus and needs another shot in the arm. A breakout above 107.50 would certainly help.
Gold
Can the bulls now build on a second positive candle that was posted yesterday? The daily chart does not look great right now as the recent neutralisation of the momentum indicators reflect the struggle for direction that is faced in the gold market right now. Swings of risk-on/risk-off have pulled gold back and forth, once more overnight it seems as though improved risk appetite is pulling the gold price back lower again. There is no short or medium term trend to speak of and the market is continuing to buzz between support at $1321 and resistance at $1348. Much in between is just noise right now. This is also all playing out on the hourly chart too with little direction. Initial support at $1326.60 with the overnight high at $1338.
WTI Oil
A strong start to the week as risk appetite has improved again (surrounding the US/China trade dispute). This rebound formed a strong bull candle yesterday which has left support at $61.80 and maintains the integrity of the seven month uptrend. The bulls will now look to try and string together a second consecutive positive candle, something that has not been seen for almost three weeks. The early signs today are encouraging, with a positive open that is now breaking the resistance of a two week downtrend formation. However the daily chart shows a need to post a closing break above the lower reaction high at $64.10 which would then begin to improve the momentum of a renewed uptrend. The hourly chart shows more detail to this, with the bulls gaining confidence on a move above the barrier of the $63.75/$64.25 pivot band resistance. A close above here would suggest confidence for a sustained recovery. Initial support at $63.20.
The past couple of weeks have shown a market beset by choppy trading but with little overall direction. Yesterday’s initial rebound looked to improve the outlook only for a late session drop back to leave many questions unanswered. Although the futures are again higher for today’s session, much more still needs to be done for a recovery to again be trusted. The resistance of the pivot between 24,445/24,670 is gaining strength and if there were to be another failure under that barrier is would then bolster the resistance of what is now a ten week downtrend (comes in around 24,700 today).The momentum indicators retain their corrective configuration which continues to suggest that rallies remain a chance to sell. This will continue whilst the pivot band and downtrend resistance remain intact.
DISCLAIMER: This report does not constitute personal investment advice, nor does it take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such.
All of the views or suggestions within this report are those solely and exclusively of the author, and accurately reflect his personal views about any and all of the subject instruments and are presented to the best of the author’s knowledge. Any person relying on this report to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability.