BCR Weekly Outlook (29 April 2019)


Posted on: 2019-04-29 (Day) By BCR Weekly Outlook


 

Key Events for this week (29/04 – 03/05)

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Tue 30/04 09:00

EUR

Euro-zone GDP

0.2%

0.3%

 

 

 

The euro-zone is suffering a slowdown, with Italy in recession and Germany flirting with it. The fresh report for Q1 2019 will shed some light on how bad the situation is. Quarterly growth stood at a meager 0.2% in both Q3 and Q4 2018. A similar level is likely now.

Tue 30/04 12:30

CAD

Canadian GDP

0.3%

0.1%

 

 

 

Canada publishes its GDP report on a monthly basis. After two disappointing months, the economy rebounded with a growth rate of 0.3% in January. The data for February will provide some insights about how Q1 is developing.

Tue 30/04 14:00

USD

US CB Consumer Confidence

131.4

---

 

 

 

The Conference Board’s gauge of consumer confidence is back down despite a stable economy. It stood at only 124.1 points in March after 131.4 beforehand. The read for April may be slightly better.

Thu 30/04 22:45

NZD

New Zealand Jobs Report

0.1%

1.0%

 

 

 

The small South-Pacific nation releases its jobs figures only once per quarter, making every publication quite impactful. This release comes just before the critical RBNZ meeting, where Governor Adrian Orr may decide to slash interest rates. The report for Q4 2018 was disappointing with a minimal growth rate of 0.1% in total employment and an increase in the unemployment rate from 4% to 4.3%.

Wed 01/05 12:15

USD

US ADP Non-Farm Payrolls

129K

180K

 

 

 

The ADP NFP report for private sector jobs does not always correlate that well with the official NFP released two days later, but it always moves markets. The data for March disappointed with an increase of only 129K, but the government data proved better. A more significant increase is likely now.

Wed 01/05 14:00

USD

US ISM Manufacturing PMI

52.4

52.4

 

 

 

ISM’s forward-looking figure beat expectations in March with a score of 55.3, indicating OK growth in the small, but important sector. Another increase is likely in April. It is important to note that the number also serves as a hint towards the NFP.

Wed 01/05 18:00

USD

Fed decision

2.5%

2.5%

 

 

 

The Federal Reserve completed its dovish shift in its all-important March meeting by signaling that it will not raise interest rates this year. In addition, they announced an early end to the balance sheet reduction program, ending already in September. Since then, some members have also opened the door to cutting interest rates. The upcoming May meeting does not feature any new forecasts but does officials may provide fresh insights about the economy, local and global. The recent upbeat GDP data from China and the delay of Brexit may provide some relief but the slow growth in Europe is an issue. Domestically, comments about the fall in inflation, the strong jobs report, and recent OK jobs figures are of interest. Reporters will likely ask Fed Chair Jerome Powell about the next move in rates and his answer will garner a lot of attention.

Thu 02/05 01:45

CNH

Chinese Caixin Manufacturing PMI

50.8

51

 

 

 

After a few worrying months, this independent measure of China’s economic motors jumped back above the 50 line, indicating expansion. Stimulus, mostly via credit and 5G investment, seems to work. The data for March may be too close to the Chinese New Year, and the fresh figure for April may provide a clearer picture.

Thu 02/05 11:00

GBP

UK Rate Decision

0.75%

0.75%

 

 

 

The Bank of England is still on course to raise interest rates, had it not been for the high level of uncertainty due to Brexit. Does the delay in the UK’s exit from April to October provide more certainty and raises the chances of a rate rise? Or does the ongoing delay limit the chances of any change? The BOE is expected to leave its interest rate unchanged at 0.75% but the contents of the meeting minutes and the crucial Quarterly Inflation Report will be eyed. Carney’s answers to reporters’ questions will also be of high interest.

Fri 03/05 09:00

EUR

Euro-zone inflation

0.8%

---

 

 

 

The final read of inflation for March confirmed the slowdown also in price development: only 1.4% on the headline and deterioration to 0.8% on core figures. The preliminary data for April, published now, will feed into the next ECB meeting. The central bank has already taken its dovish tilt. Will it go even further?

Fri 03/05 12:30

USD

US Non-Farm Payrolls

196K

180K

 

 

 

The monthly US jobs report always triggers excitement but market volatility has waned of late. The data for March saw a return to normality after a confusing report in February. The US economy gained 196K positions but wages rose by only 0.1% m/m and slowed down to 3.2% y/y. As usual, jobs are aplenty, but the pay is not going anywhere fast. The jobless rate stood at 3.8%.

Fri 03/05 14:00

USD

US ISM Non-Manufacturing PMI

56.1K

57.2K

 

 

 

The second publication from ISM comes out after the jobs report and therefore, does not serve as a hint. Nevertheless, the forward-looking gauge if of high interest. Contrary to the manufacturing sector, the services sector disappointed with only 56.1 points in March. It likely improved in the read for April.

 

 

 

You May Always Concern U.S. Dollar and XAUUSD (GOLD)

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              97.045             98.057             96.915             97.754

Weekly Gain/Loss       0.73%

Key Resistance            98.000             98.500

Key Support                 97.500             97.000

 

The US Dollar index formed a Marubozu candlestick in the weekly chart after it broke the psychological level at 97.000 and 97.500, the US Index settled at 97.754. It closed above 97.500 and it may be the sign of another attempt to the level of 98.000 and 98.500 in the near future. The Fed is expected to keep interest rates on hold at the outcome of its two-day meeting on Wednesday. At its March meeting, the Fed indicated that it will hold off from hiking rates for the rest of the year amid expectations for a slower pace of economic growth. The meeting is coming after Friday’s data showing that growth the U.S. economy unexpectedly accelerated in the first quarter. However, the expansion was boosted by gains in trade and inventories, which may unwind. The 98.00 handle will be the key point for US Index and any breakthrough might catalysts the index to hit 98.500 and 99.000. Having said that, the failure of it to breakthrough it, we would see another Bearish wave towards, 97.000 and 96.50, it looks unlikely.  Meanwhile, keep an eye to the spotted trendline in H4 chart, any breakthrough will give catalyst its direction to the south and 97.00-96.00 will be the next target.

 

 

XAUUSD (Gold)

 

Weekly OHLC              1276.67           1288.44           1266.17           1285.63

Weekly Gain/Loss       0.70%

Key Resistance            1290.00           1310.00

Key Support                 1270.00           1240.00

 

Gold markets broke down during most of the week but had a very strong turned around to reach towards the bottom of the trend line as on the chart. (It should be noted that this trendline is much more visible on the daily chart, and in fact suggests a potential head and shoulders pattern.) With that being said, it’s a very interesting trading. If a daily close well above the $1290 level, possibly even the $1300 level in order to start buying at this point. There is going to be a significant amount of resistance, and at the slightest hint of US dollar strength, we could see gold rollover. The alternate scenario is that it continues to go higher and if it were to take out the highs of the last couple of weeks, then it’s likely the market goes looking towards the $1350 level. For the longer-term trader, it looks likely to be a very difficult time. However, if looking at the daily chart and see a very bearish candle, that would justify the head and shoulders pattern that shows itself on the daily chart and could send this market down to $1225. It’s very likely that the US dollar is going to have its say when it comes to where this market goes, and it should be noted that the greenback has been very volatile as there are a lot of concerns about global growth and the like. Ultimately, pay attention to this chart and the US Dollar Index to trade successfully.

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.12438           1.12615           1.11092           1.11485

Weekly Gain/Loss       -0.85%

Key Resistance            1.1200             1.1250

Key Support                 1.1100             1.1050

 

The Euro broke the 1.12 level to the downside, showing signs of US dollar strength. By doing so, it looks very likely that it is going to continue to drop from here, perhaps reaching down to the 1.10 level which is much more supportive. It is believed that most of the signals will occur on the shorter-term charts though, as the 1.12 level above should be resistance. That’s an area that if we see exhaustion on short-term charts, we can start selling. However, if it were to break above the 1.1250 level, then a longer-term long position could be triggered. Should be a massive amount of resistance at the 1.15 level above, so keep that in mind. It is unsure whether it can break down below the 1.10 level, at least not in the initial move. That is an area that will continue to attract a lot of attention, and quite frankly with the ECB being as loose as it is, it’s very likely that the Euro will continue to struggle. If it were to break down below the 1.10 level, that would be extraordinarily negative. It’s unlikely that the level gets broken, but if it does expect a “flush” much lower. The move higher of course would be much slower as it would climb the proverbial “wall of worry.”

 

 

GBPUSD

 

Weekly OHLC              1.29923           1.30188           1.28652           1.29181

Weekly Gain/Loss       -0.57%

Key Resistance            1.29500           1.30000

Key Support                 1.29000           1.28500

 

The British pound broke down significantly during the week, slicing through the 1.30 level, showing signs of extreme weakness. This makes sense because quite frankly there’s no reason to think that the British pound is going to rally while it is still debating what’s going to happen with the Brexit. At this point, the Brexit is delayed, and while that stabilizes the situation, there is no good news to push the pound higher. At this point, the sellers will continue to push this market. It’s not until it turns around and break above the 1.31 handle that buying will be the choice, and even then, it would only look for a simple return to the consolidation. In general, the British pound will rally significantly but that’s not until it gets some type of conclusion to the Brexit deal and some type of certainty, which of course is what markets desperately want most of the time. In general, it is believed that the next few months might be a bit soft for Sterling. The US dollar strength also is working against the market here as well.

 

 

AUDUSD

 

Weekly OHLC              0.71478           0.71509           0.69873           0.70419

Weekly Gain/Loss       -1.48%

Key Resistance            0.70700                       0.71000

Key Support                 0.70000                       0.69700

 

The Australian dollar broke down significantly during the week, crashing towards the 0.70 level. It ended up forming a hammer on Thursday, and then continue to climb a bit on Friday. With that, the 0.70 level has held up yet again, as it is crucial on longer-term charts. There is plenty of support extending down to the 0.68 handle, so that without a doubt the easier trade is to take a long position. It would be very difficult to short this market, unless of course we sliced through the 0.68 handle significantly. Ultimately, the upside is going to be somewhat difficult to break above, but if it can break above the 0.7250 level, the market should continue to go much higher, perhaps reaching towards the 0.75 level. Overall, it looks as if it is forming a bit of a “rounded bottom”, but that can take ages to turn and shoot to the upside. This market is highly sensitive to the US/China trade relations, and therefore if it gets some type of good news out of there, the market should throw money directly at the Australian dollar as Australia is a major supplier of raw materials to the Chinese. As the Chinese go, so does the Australian dollar. It’s a proxy for the manufacturing coming out of the mainland and China, so obviously all of those things will come into play here. Quite frankly, it’s got almost nothing to do with Australia itself.