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Intermarket:
• SP Futures 4166 (-0.06%)
• EUSTXX 4019 (+0.32%)
• Crude Oil 65.48 (+0.15%)
• US 10YR 1.64% (-1.59%)
• EurUsd 1.2131 (-0.12%)
• UsdJpy 109.33 (-0.01%)
• DAX 15428 (+0.14%)
Despite the strong recovery on Wall Street on Friday, European equities are set for mixed open today, after uncertainty was seen in Asia trade as Covid concerns have returned, with new infections rising in Japan and Singapore entering a 1 month lockdown. Taiwan and Singapore bourses posted sizeable declines, and Nikkei was also under some pressure. Bonds are slightly firmer, although the US 10YR remains soft at 1.64%. USD sought as haven in Asia trade. Oil up. Gold also firmer. Fortunately the Covid situation in Europe is improving, with UK moving to stage 3 of the reopening today.
Inflation debate remains top of mind as FOMC continues to reiterate “transitory price pressures” vs. a more lasting view from market participants. This is a growing concern for global equities which remain stretched.
In crypto-space, Ethereum continues to outperform while Bitcoin declined further after an Elon Musk tweet suggested TSLA could sell, or has sold, Bitcoin holdings. Elsewhere, China media warned of stricter crypto restrictions.
Looking ahead: today we get speeched from BOE’s Tenreyro and; we get the US Empire State numbers, and Fed’s Clarida and Bostic will be speaking.
Matters that Matter:
• Caution prevails amidst Asia Covid issues
• White House - Inflation a transitory phenomenon
• China’s industrial output growth slows in April, retail sales miss forecasts
• Nearly half of small UK manufacturers see recovery soon
• Free at last to hug and party: UK reopens for business
• Israel launches dozens of Gaza strikes as fighting enters second week
Majors Weekly View:
USDJPY
After attracting buyers from close to 107.50, prices have remained supported above the 13 weekly moving average. However, momentum has been switching in each of the past 3 weeks, highlighting indecision. As such, signals for this week remain bullish but with caution.
EURUSD
After the decline to 1.1700, prices have posted a strong recovery via 6 higher weekly highs. Prices remain just cautiously bullish this week however, as an initial dip towards the 26 SMA last week attracted buyers, but prices closed little changed.
AUDUSD
After the decline to .7530s, prices posted a strong recovery, with bullish signals posted in each of the past 5 weeks. In particular, the 13 SMA continues to act as support. However, prices attracted sellers from close to key resistance at .7871 last week and despite the late recovery, fail to inspire further longs at this juncture. As such, we suggest selling into rallies this week towards .7817 or .7857, with support at .7675.
GBPUSD
Prices posted the 2nd higher weekly high & low last week, reaching 1.4166. As such, signals continue to be positive for this week, targeting the February highs at 1.4238.
USDCAD
Signals in each of the last 5 weeks have continued to point lower and last week posted the 6th lower weekly low in a row. However, buyers returned from close to key supports at 1.2077, the week closing little changed. Alongside extended momentum readings, caution is advised but until the trend of lower weekly highs is broken, we maintain a bearish stance.
FX Weekly ATR Grid
Comment: Volatility remained at overall decent levels last week and broadly speaking we have started to trend upwards over the past few weeks across the board. Continuation trades most likely in GBP, AUD and NZD going into the week.
FX Relative Strength Grid
Comment: the strongest trends are currently GBP (bullish), CHF (bullish), JPY (bearish). The strongest momentum was seen Friday in CHF (bullish), NZD (bullish), GBP (bearish), JPY (bearish).