FTSE -11 points at 7338
DAX -14 points at 12140
CAC -6 points at 5095
Euro Stoxx -5 points at 3463
The US dollar tanked after the US President Donald Trump said the currency is too strong, while mentioning that he would prefer the Federal Reserve (Fed) to keep the rates low. Trump’s comments hit the headlines a day after the Fed Chair Janet Yellen announced that a ‘neutral’ stance would be appropriate for the US’ monetary policy.
The US stocks remained under pressure as the reflation rally has paused, along with the US Congress’ stepping into a two-week break without any details regarding Trump’s ‘phenomenal’ fiscal policy.
The US 10-year yields nosedived to 2.22% for the first time since November 2016. The probability of a June interest rate hike eased to 60%.
Gold extended gains to $1288. Softer US yields could drive more capital into the yellow metal as the opportunity cost of being invested in non-interest bearing gold decreases. The next stop for gold buyers could be $1300. Support is eyed at $1265 (minor 23.6% retracement on March-April rise).
The USD/JPY extended losses to November levels as well. Nikkei (-1.08%) and Topix (-1.12%) had yet another negative session on the back of the stronger yen. In addition, the risk-off markets drove 586 billion yen in Japanese bonds and 441 billion yen in Japanese stocks on week to April 7. In contrary, Japanese investors sold 2’176.8 billion yen worth of foreign bonds. Sharp drop in US yields bring the 105 level back on radar for USD/JPY traders. Large option barriers trail from 108.50 to 110.00 for today’s expiry and could enhance the downside pressures.
The Aussie gained against all of its G10 counterparts in Sydney and has been the biggest gainer (+0.65%) against the US dollar following the solid March jobs report. Australian economy added 60’900 new jobs last month versus 20’000 expected by analysts. Last month’s read of -6’400 was also revised up to +2’800. Cherry on top, part-time jobs (-13’600) were replaced by full-time jobs (+74’500). The AUD/JPY rebounded from 82.00, offers are touted pre-82.62 (200-day moving average).
Chinese stocks outperformed their Asian peers, as China printed a strongly better than expected trade surplus in March. Chinese exports recovered 16.4% year-on-year from -1.3% printed a month earlier. The expectation was 4.3%. March trade surplus rose to $23.93 from $-9.15bn printed a month earlier. The yuan traded at the highest level against the greenback in more than two weeks.
German and French final inflation data will likely deliver no surprise to affect the price action on the single currency. The bounce in the EUR/USD could bump into resistance pre-1.0700 (major 38.2% retracement on March – April decline from 1.0905). Surpassing this level should signal a short-term bullish reversal and encourage further gains toward 1.0738 and 1.0777 (50% and major 61.8% retracement respectively).
Cable broke the 200-day moving average (1.2555) on the upside for the first time since the Brexit referendum (June 23rd, 2016). UK’s inflation and jobs data, released earlier in the week, justifies the positive momentum in the pound, which has clearly been amplified by the broad-based US dollar sell-off. Next key levels on horizon are 1.2580 (minor 23.6% retracement on Brexit and October 7th flash crash range), 1.2615 (Mar 26th high), 1.2774 (post-Brexit peak) and 1.3045 (major 38.2% retracement). Support remains intact at 1.2500/1.2495.
The FTSE 100 stocks failed to hold on their gains on Wednesday’s session and closed on a slightly negative note. Copper futures slid to $2.53/lb, lowest in three months. Strong Chinese data gave a slim positive spin to copper futures, yet the bias remains on the downside. The FTSE rolling index dived to 7315p overnight and the UK equity futures hint at a softer open in London.
Quick glance at technical on LCG Trader:
EUR/JPY: short positions below 116.60 with targets at 115.90 and 115.50 inn extension. Above 116.60, upside potential to 117.00 and 117.40.
Gold spot intraday: long positions above 1278.00 with targets at 1291.50 and 1296.00 in extension. Below 1278.00, downside potential to 1271.60 and 1267.00. Mid-term support at 1265.
Crude oil intraday: short positions below 53.30 with targets at 52.70 and 52.30 in extension. Above 53,30, potential upside to 53.47 and 53.75.