Market Overview
Donald Trump’s ability to move markets with a tweet continues as market sentiment has picked up once more this morning after an upbeat assessment from the president over the trade dispute. However this simply continues this phase of newsflow driven trading which has hampered markets with weeks of conflicting reports coming out over the US trade tariffs.
Taking a step back, this lack of clarity over the ultimate direction continues to stymie major markets and as such the reaction is becoming ever more muted on forex markets. The market focus was on payrolls on Friday but that will be quickly forgotten as Donald Trump has once more been the focus. Suggestions on Friday of tariffs on a further $100bn of Chinese goods have been followed up by Trump tweeting that China would 'ease its trade barriers' and then about friendship between the two countries’ presidents.
It is becoming apparent that traders are becoming increasingly immune (or is that bored into submission) with the back and forth of this trade dispute, with market reaction ever more muted. However that may not be the case with equities which saw Wall Street falling sharply again on Friday, whilst futures are pointing to a decent rebound today. All the while though, major markets such as EUR/USD in the forex space, and gold, are struggling for direction. Treasury yields dropped back on the payrolls report on Friday and the dollar has lost some of its near term traction.
Wall Street closed strongly lower on Friday with the S&P 500 -2.2% at 2604, however Asian markets have reacted higher with the bounce on Wall Street futures, with the Nikkei +0.5%, whilst European markets are also decently higher in early moves.
In forex, there is a mixed look to trading, with uncertain moves on the dollar although an improvement in risk appetite is pulling the yen weaker.
As such, in commodities, there is a slightly lower gold price whilst oil has rebounded.
There are no major economic releases due today.
Chart of the Day – GBP/JPY
The yen is increasingly threatening to become an underperformer across the majors and this is allowing sterling to take a far more positive outlook on GBP/JPY. There has been something of a choppy consolidation in the past couple of weeks, but the market has been forming a recovery trend channel since early March and with a run of positive candles to end last week the bulls are now breaking higher. A breakout of resistance between 150.60/150.90 looked to be coming on Friday but could not be sustained into the close. However the bulls are having another go today and are now looking to open the upside. The move is being confirmed on the RSI which pushed to a two month high on Friday, whilst the MACD lines and Stochastics were also increasingly positively configured. There is a run of higher lows in recent weeks, using old pivots at 146.90 and subsequently 148 as a basis of support. The bulls will now be looking up use any intraday corrections into 149.85/150.60 as a basis of support to buy into. The next resistance for the recovery is at 152.00 and then 154.00.
EUR/USD
The risk of a downside break from the medium term trading range diminished on Friday as the market pulled higher from $1.2210 to post the most positive candlestick in almost two weeks of downside drift. This move has subsequently bolstered the support of the three month range low at $1.2155. The momentum indicators on the daily chart also continue to reflect a market in consolidation mode, with a lack of any real decisive direction. The hourly chart shows how Friday’s rebound (on the Non-farm Payrolls report) has broken an eight day downtrend but unless there is a push above $1.2345 there would be just a continuation of the lack of direction. There is a minor pivot around $1.2260 initially as support above $1.2210.
Friday’s solid positive candle has simply negated an almost equal and opposite negative candle from Thursday. The move has just unwound the market back above $1.4000 once more and up to the resistance at $1.4100. Although Cable is struggling to make decisive headway, unlike EUR/USD, there is at least some semblance of a bullish picture, with the market trading above moving averages which are all rising, and whilst the integrity of a five week uptrend was compromised last week, a larger five month uptrend is also still intact. The momentum indicators are positively configured on a medium term basis, but now need to pick up again near term after a short period of indecision. A closing break above $1.4100 could give the bulls the encouragement to kick on again towards $1.4245, however as we come into the European session today, $1.4100 is still a barrier. The positive certainly comes from the support now in place at $1.3965 which is no at the 5 month uptrend today. This suggests there is a base for the bulls to work from now. The hourly chart does though show the shackles are still on.
The bulls spent much of last week looking to change the negative outlook that has been such a drag on the pair over recent months. A positive improvement was seen as the market has started to turn the corner, to build higher lows and higher highs, but also start to breach resistance. However Friday’s bear candle on the weaker than expected payrolls report has resulted in a slip back again. The resistance in place at 107.50 will grow in importance the longer it remains intact. The bulls have made ground but this could now simply become a ranging formation, without a sustained recovery. The resistance between 107.65/107.90 is key still. Momentum indicators have improved but on a medium term basis this remains a move to unwind, rather than a sustained recovery (at the moment). The hourly chart shows a band of support now 106.65/107.00 which is being tested and needs to hold to prevent the sellers regaining control again. The higher low at 105.65 is now key support near term.
Gold
Taken in aggregate, the run of candles last week has done very little for overall market direction. With Friday’s positive candle simply unwinding the selling pressure of Thursday, we come into the new trading week none the wiser. Support at $1321 remains intact as a key near term level that is preventing a retreat towards the range lows between $1300/$1310. However, equally, resistance overhead at $1348 is also seemingly safe for now. The daily momentum indicators are reflective of this neutral phase of trading (within a sideways trading band), coming with the RSI, MACD and Stochastics lines all but flat around their neutral points. The hourly chart is also giving little or no directional indication. A move above $1335 opens $1348 again but for now the market is crying out for a decisive push.
WTI Oil
There is still a corrective drift in the market which is a concern the bulls who are struggling to hang on to the seven month uptrend support. Friday’s negative candlestick was actually the 7th bear candle of the past 9 sessions but also continues what is a developing two week downtrend. The concern is that this mini downtrend is also negatively affecting momentum indicators which show the RSI, MACD and Stochastics all in corrective decline. This all points to a market increasingly selling into strength on a near term basis as the pressure grows on the 7 month uptrend (which is at $62.25 today). A move that breached last week’s low at $62.05 could not be held into the close on Friday but suggests that the momentum of the correction is gathering pace. Below $61.80 re-opens the support around $60 again. The hourly chart shows the resistance of the $63.75/$64.25 near term pivot band grows by the session.
The sellers returned on Friday once more as the US President once more threatened to ramp up again on Friday. Newsflow trading is a difficult game, but technically the Dow remains in the downtrend that has been forming since the January high. The downtrend comes in at 24,735 today. Falling over on Friday has left near term resistance at 24,622 but more pertinently, there is an increasingly prevalent five week pivot range broadly in a 200 tick band between 24,450/24,650. This will act as a barrier to a recovery now. The momentum indicators struggled to reflect improving traction and once more the RSI falling over around 50 will be a concern. Initial support comes in the range 23,700/23,900 with 23,345 the key low still.
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