FTSE -12 points at 7315
DAX +41 points at 12150
CAC +10 points at 5081
Euro Stoxx +9 points at 3457
The U.S. dollar firmed as the U.S. Secretary of Treasury Mnuchin walked against President Trump’s last week’s comments on the stronger U.S. dollar. Mnuchin said that ‘over long periods of time, the strength of the dollar is a good thing’ to the FT. His comments resuscitated the Federal Reserve (Fed) hawks on expectations that the Fed would not be placed under pressure to hold back fire regarding its ‘neutral’ policy stance.
The U.S. 10-Year yields recovered past 2.25% in New York. Gold slid to $1281 on the back of stronger U.S. dollar and firmer U.S. yields. The downside correction could extend to $1272 (Fibonacci minor 23.6% retracement in March-April rise). The critical support to the positive trend is eyed at $1257/1255 (major 38.2% retracement / 200-day moving average). The actual drawback in Fed June rate hike expectations could attract the dip buyers, especially on the back of rising global geopolitical tensions. The probability of a June interest rate hike fell to 50.2%.
The USD/JPY was better bid in Tokyo. The pair consolidated between 109.89/109.22 after rebounding from 108.13 on Monday’s session. Nikkei (+0.23%) and Topix (+0.39%) traded marginally higher.
After recording the biggest gains against the U.S. dollar on Monday, the Australian dollar has been the biggest loser in Sydney. The AUD/USD reversed five straight session of gains on stronger U.S. dollar and more than 3% slump in iron ore prices. The Reserve Bank of Australia’s (RBA) dovish minutes reinforced the downside move, as Australian policymakers highlighted the weaker-than-expected labour market conditions in their latest meeting.
The AUD/USD is preparing to test 0.7545/0.7540 (200 and 100-day moving averages respectively), if broken, could bring the 0.7500 mark (March support) on the radar, before a further slide to 0.7454 (50% retracement on December – March recovery).
In Turkey, the lira gave back the majority of post-election relief gains, as President Erdogan saw severe opposition on claims that the referendum has been held on unequal conditions. There are also rising concerns about the manipulation of the votes. The ‘yes’ camp lead the constitutional referendum by roughly 1.25 million votes, but there is an estimated number of 2 million voting ballots without the official stamp, yet approved by Turkey’s Supreme Electoral Council. The unpleasant picture currently holds investors back from investing in the lira.
The USD/TRY advanced toward the 2.72 mark on Monday. The major resistance is eyed at 3.75 (pre-election resistance), before the critical 3.80 level. A break above 3.80 should suggest renewed anxiety against the lira and could encourage a fresh attempt toward the 4.00 level. The Borsa Istanbul stocks closed 590.11 points higher on Monday. Sentiment remains sluggish.
As the UK and European traders are back from the Easter break, the attention is about to shift to the next critical political event in Europe, the French election. The first round of the French political election is due on April 26th. The popularity of the far-right (Le Pen) and the far-left (Mélenchon) candidates, both more or less against the European Union, weighs on the single currency. The EUR/USD is sold into the 1.0700 level, which stands for the major 38.2% retracement on March-April decline.
According to the latest opinion polls aggregated by Bloomberg, Marine Le Pen is given 22% chances of leading the first round of the election. UMP’s Francois Fillon advanced to 21% from 19% a month earlier, the independent candidate Emmanuel Macron retreated to 22%, while Jean-Luc Mélenchon stands at the fourth place with 18%. Although the first round race appears to be very tight, Marine Le Pen is not expected to clear her way to the Elysée, regardless of who she would face between Fillon and Macron in the second and the final round.
Cable extended gains to three-week high (1.2595) on Monday. The stronger pound weighed on the FTSE rolling index during the two-session Easter break. The FTSE is expected to open softer in London. Yet, the broad-based USD strength could send the pound below its 200-day moving average (1.2540) and help the FTSE above the 7345p resistance
Quick glance at technicals on LCG Trader:
DAX intraday: short positions below 12220.00 with targets at 12100.00 & 12069.50 in extension. Above 12220.00, upside potential to 12270.00 & 12300.00.
CAC 40 intraday: short positions below 5100 with targets at 5064.00 & 5045.00 in extension. Above 5100.00, upside potential to 5118.00 & 5140.00.
Dow Jones intraday: Long positions above 20490.00 with targets at 20600.00 & 20640.00 in extension. Below 20490.00 downside potential to 20450.00 & 20400.00
Gold spot intraday: under pressure. Short positions below 1290.00 (pivot) with targets at 1278.00 & 1271.60 in extension. Above 1290.00, upside potential to 1295.00 & 1302.00.
EUR/JPY intraday: long positions above 115.70 (pivot) wit targets at 116.55 & 116.85 in extension. Below 115.70, downside potential to 115.45 & 115.10. RSI is bullish and suggest further upside.