Currencies and stocks are stable due to lack of important economic data and a meeting of heads of central banks may shake markets
A lack of negative headlines on the trade spat between China and the US enabled stocks and currencies to settle. Global central bank heads meeting at the annual ECB conference in Sintra, Portugal acknowledged that rising global trade tensions threatened economic expansion. However, this did not alter their respective policy stances. The Dollar Index (USD/DXY) settled at 95.10, near an 11-month peak. Wall Street stocks were mixed.
Outlook: A simple case of no news is good news for the markets and the panic subsided. For now. Federal Reserve Head Jerome Powell, speaking at a panel discussion at the ECB Forum in Portugal said that the case for further gradual rate hikes remains strong. Powell acknowledged that US companies are increasingly concerned on US trade policy. The US 10-year bond yield was up 4 basis points. Emerging Market currencies and assets steadied following losses due to trade fears.
Trading View: Markets will consolidate today with traders keeping a wary eye out on any headlines. Data released yesterday saw Germany’s PPI beat forecasts while US Existing Home Sales were below expectations. Otherwise, the calendar was bare.
Today sees the Swiss National Bank and Bank of England policy rate meetings. The outlook and assessment of Mark Carney and his colleagues on the UK economy will of interest today.
New Zealand’s Q1 GDP, just released, matched forecasts.
Events and economic data releases today: Swiss National Bank Libor Rate, Monetary Policy Assessment and Press Conference, Bank of England MPC Official Bank Votes, Official Bank Rate and Monetary Policy Summary, US Philadelphia Fed Manufacturing PMI and Weekly Jobless Claims.
The Dollar Index (USD/DXY) rose to an 11-month high of 95.299 before settling at 95.10, up 0.09%. Immediate resistance lies at the recent high of 95.30. The next level of resistance is at 95.50 which should hold. Immediate support can be found at 95.000 and then 94.70. Expect the Dollar Index to consolidate between 94.70-95.20.
EUR/USD – managed to rally to 1.1600 after bouncing off its lows at 1.1538. EUR/USD closed at 1.1582 in New York. ECB head Mario Draghi indicated that the ECB could extend its bond-buying program. Draghi, speaking at the ECB forum, said it was too early to tell how threatened tariffs would affect monetary policy. Today sees Bundesbank President Weidmann speaking on the challenges for the Euro at a joint Bank of France and Bundesbank conference in Paris. EUR/USD has immediate resistance at 1.1600 and then 1.1630. Immediate support lies at 1.1560 and then 1.1530. Likely range today 1.1550-1.1610. Prefer to sell rallies
USD/JPY – rallied to close higher, up 0.25% at 110.35. The Dollar fell to an overnight low of 109.85 on risk aversion due to the trade news. US yields rallied off their lows with the 10-year yield up to 2.94% from 2.89% on Tuesday. The Dollar will continue to trade in a range with good support coming from rate differentials. Any escalation of the trade spat between the US and China will pressurise USD/JPY. Immediate resistance lies at 110.50 (overnight high was 110.45). Next resistance is at 110.80. Immediate support can be found at 110.00 and then 109.70. Likely range today 109.70-110.70. Prefer to sell rallies.
AUD/USD – The Aussie had a good bounce off 0.7337 lows on Tuesday to a high of 0.74088 last night. The Aussie settled lower at 0.7370, down 0.28%. Resource currencies were lower. The Kiwi was down 0.64% at 0.6865 while USD/CAD rose to 1.3315. Resources were lower. RBA Governor Lowe, speaking at the ECB conference in Sintra, Portugal, said that inflation might be lower than the RBA would like. AUD/USD has immediate resistance at 0.7400 and then 0.7425. Immediate support can be found at 0.7350 and then 0.7330. The Aussie does look soft, as it often does near its short-term base. Don’t forget that the speculative community is still short Aussie. Emerging Market currencies steadied. The Dollar fell against the CNH after the PBOC signaled it would tolerate a strong Yuan. Which is mildly support for the Aussie. Likely range today 0.7355-0.7415. Prefer to buy dips.
GBP/USD – Sterling has been trading heavy due to a combination of Brexit uncertainty and an overall stronger US Dollar. Tonight’s BOE meeting is not expected to see any changes in policy stance. However, the assessment and view of Mark Carney and his colleagues on the economy will be monitored. Not long ago, Sterling was bid on speculation of a rate hike in today’s meeting. A slowdown in the economy (data continuously missed forecasts) changed all of that. British PM May won a vote in Parliament and averted a rebellion which would have undermined her authority. Traders will see whether this leads to a more favorable Brexit deal with the EU. The Pound closed at 1.3180 after falling to a low of 1.3148. Immediate support lies at 1.3150. The next support level comes in at 1.3130 and then 1.3100. Immediate resistance can be found at 1.3200 and then 13220. Likely range today 1.3150-1.3250. Look to trade this range.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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