Currency and Stock Markets. Daily Insights

stoch

Active Member
#31
US 10Yr bond auction could weaken USD support


Brisk recovery of risk assets on Tuesday, during which the Nasdaq recaptured almost half of the correction since February, gave way to more measured moves on Wednesday. Modest inflow into longer-maturity Treasury bonds caused the yield to retreat from local high of 1.6% to 1.54%. Yesterday's auction of 3-year Treasury notes was a moderate success allowing bond investors to collectively breathe out:







However, bond yields resumed modest upside on Wednesday which apparently curbs optimism in risk assets and offers solid support to US currency. SPX and Nasdaq futures sway near opening, European equities also lack buying pressure. The Dollar sell-off on Tuesday drove the currency’s index to the lower bound of the current ascending channel. Potential break in the trend channel today or tomorrow could put an end to the short-term bullish USD move:





Three key events that will determine the way forward in the near term are US inflation report, the $38 billion 10-year bond auction due today and the 30-year bond auction due tomorrow. Weak demand for long-term Treasury debt may cause new volatility in rates, which in turn could limit advance in equities, however, strong rebound of risk assets on Tuesday indicates that investors discount that risk. Tomorrow will be followed by an auction for 30-year bonds, which will be of interest for the same reasons. Key indicators that need to be monitored are bid-to-cover ratio (an indicator of strength of the demand), foreign sector demand and the actual yield at which the securities were sold.

US consumer inflation is expected to accelerate to 1.7%, core inflation to 1.4%. The focus is on core inflation as the broad inflation could easily beat forecast due to higher fuel prices and cold winters in several US states which implies more spending on heating. An upward deviation from the forecast in core inflation will likely support upward trend in the USD and will probably initiate additional sales in gold, since in such a case, instability may reemerge in the Treasury market, where recent sell-off were caused by rise in inflation expectations and real rate. Recall that the markets are now worried about a possible spike in inflation due to a combination of pro-inflationary effects from a real economic recovery + fiscal stimulus from the government. Therefore, investors are now especially sensitive to inflation data.





Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#32
OPEC turns dovish on 1Q, 2Q oil demand, bond yields are on the rise again. Will stocks’ sell-off continue?



Oil prices were under pressure on Friday thanks to stronger USD, rising US oil inventories and negative short-term outlook in the OPEC monthly report. The organization expects oil demand to grow stronger in 2021 than previously thought, however, pessimism about the first two quarters increased.

Rising worries about short-term demand outlook appears to be the key reason behind extension of current output curbs in early March. According to the OPEC estimates, the demand for hydrocarbons will be noticeably weaker in the first half of the year than previously expected, but it will rebound strongly in the third and fourth quarters. The OPEC, apparently, counts on massive easing of lockdowns by that time:






An additional constraint is created by prospects for increasing production outside OPEC - by 370K b/d in the second quarter. It seems clear that the OPEC is likely to take a pause in increasing production for another couple of months, probably till the end of this quarter. Oil prices have already taken into account extension of curbs, so further near-term growth prospects will depend on how much the mass vaccination outpace expectations in key economies-consumers of oil and resumption of activity in China after the Lunar New Year (after relatively weak PMI for January and February).

Technically, the uptrend in oil has been extremely steep. Quotes drifted away significantly from key moving averages with the divergence from 200-day moving average increasing to the highest level since 2008:





Price last met MAs in November 2020 - when the markets hit a turning point - the vaccine was announced. Prices are now near their 2-year highs. In addition, the market entered a phase where key positive catalysts on demand and supply side have been priced in, which leaves little room to extend rise. In my opinion, the market is at best poised to enter on a sideways trend for 1 – 1.5 month.


EURUSD


Downtrend risks in EURUSD have risen markedly since the ECB meeting on Thursday. The recent rise in EU bond yields did worry the regulator, since Lagarde said the ECB will significantly increase PEPP asset purchases in the next quarter. In contrast, the Fed said that nominal interest rates rose in response to growth in the economy, so no intervention was needed. The resulting divergence in policy of the Fed and the ECB is a signal for further selling of EURUSD. In addition, epidemic curves and pace of vaccinations in the EU cause worries about the outlook for economy reopening. Take, for example, the reports about slow pace of vaccinations and expectations of a third wave of the epidemic in the EU. In my opinion, the pair has every chance to drift lower to 1.18 by the end of March:







Weaker-than-expected February US inflation and strong demand at the Treasury auctions failed to contain the rise of bond yields. On Friday, the sell-off on the sovereign debt markets resumed - 10-year bond yields in the US, Germany, Great Britain and Australia renewed uptrend. There is a risk of a new bearish retracement in equities and a wave of strengthening in the Dollar. Today and the beginning of next week, risk assets and gold are likely to stay in corrective mode, pushing USD back above 92.00, as it is not yet clear what could stop the renewed sell-off in bonds.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#33
EURUSD: tactical retreat continues on growing EU risks


In the past few weeks, risk assets were shaken up by wild moves in interest rate markets. The surge in volatility was caused by the dump of fixed income assets, primarily by the outflow from sovereign debt markets of developed countries. Although intensity of the sell-off eased on Monday, further upside in yields is likely if incoming data continue to point to quickening economic rebound. Consequently, risk assets remain vulnerable to potential downside caused by yield spikes, as increasing base interest rates feed into other credit markets as well, pushing up borrowing costs for firms. More expensive liquidity means higher risks:





In this regard, the main event of the week will be the Fed meeting on Wednesday. It seems that the Central Bank made it clear that the rise in yields is normal, however investors still expect the Fed at least to signal that it is ready to support the market (as the ECB did last week). The upcoming meeting in this sense will not be an exception.

Particular attention should be paid to the Central Bank decision on extension of temporary exemption from the so-called supplementary leverage ratio (SLR). If the Fed does not extend the exemption, US banks will have to look for extra liquidity to bring capital adequacy ratios to the required levels. It is believed that they will do this by selling Treasuries from balance sheets. We all know what happens when Treasuries are sold a lot and quickly. Yes, equity markets collapse.

To the day ahead the data highlights include US retail sales report. It is one of the biggest catalysts for short-term market volatility. Better-than-expected monthly growth of sales should add fuel to the US reflation story, adding bearish pressure on Treasury market, which may in turn affirm USD positions against other majors. Markets expect retail sales to nudge down by 0.6% and it is reasonable to expect that due to high-base effects. Recall that January growth was 5.3% and it should be difficult for retail sales to make additional gain.

It will also be interesting to see what happens to consumer inflation in the EU. The CPI report is due on Wednesday. Risks are skewed towards a weaker reading than the forecast (1.1%) as we saw some reports last week indicating that the EU made tactical retreat extending lockdowns due to the threat of a "third wave" and slow pace of vaccination. In general, coronavirus situation in the EU remains tough, which is reflected in the weakness of European currency. Therefore, it may be worth to expect a negative inflation surprise and downside in Euro after the release. By the way, the latest COT data showed that speculators trimmed long positions in the euro, so fast rebound in EURUSD looks unlikely. Risks are on the side of weaker euro against USD for the next couple of weeks due to Central bank’s policy discrepancy, slowdown caused by extension of lockdowns and risk of fading inflation impulse:






Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#34
B] Key takeaways from the Fed meeting for equity markets[/B]


The Fed meeting was not convincing enough to stop the rise in market rates. The yield on 10-year US Treasuries again renewed its local peak, exceeding 1.7% on Thursday. Acknowledging that GDP and inflation will grow at faster pace than previously forecasted, the Fed generally left its forecasts for a first rate hike unchanged - no earlier than 2024. QE at the current volume of $120 billion / month (80 billion Treasuries + 40 billion MBS) will continue until there is "significant progress in achieving unemployment and inflation targets."

The Fed significantly raised its forecast for GDP growth - from 4.2% to 6.5% (Q4 2021 compared to Q4 2020), and inflation - from 1.8% to 2.2%. Nevertheless, the dot plot showed that the majority of FOMC members would not have voted for a rate hike before 2024. That is, the opinion of the majority, compared to the last meeting, has not changed. The number of FOMC participants awaiting an increase by the end of 2023 increased from 5 to 7, and those who would vote for an increase by the end of 2022 - from 1 to 4 participants.

The situation is not easy for the Fed. On the one hand, recent economic data trumpet expansion and market participants demand that the Fed admit it by hinting at an earlier rate hike. We see this through the rise in market interest rates, growing inflation premium in bonds, various inflation swaps, etc.:




If the Fed pretends that early rate hikes are out of the question, inflation expectations will accelerate growth (low Fed rate + strong economy = high inflation). On the other hand, if the Fed hints at earlier QE tapering or a rate hike - the expectation that the Fed will start selling bonds from the balance sheet earlier => another jump in yields upward (“the Fed will soon join the bond sale”). In both cases, rising market interest rates (borrowing costs) will slow recovery. It would seem, why not then declare that it is still not so rosy and low rates are justified? This would contain the rise in bond yields, but it could sow anxiety among market participants and derail the recovery as well due to wrong guidance. In general, Powell has to carry out a difficult balancing work at press conferences - to combine recognition of expansion, uncertainty about the future and, as it were, leave the possibility of an early increase in rates.

The US economy is currently experiencing an increase in consumer spending and the number of jobs in the US, but on the other hand, the economy is still 9.5 million fewer jobs than it was a year ago. The unemployment rate shows an incomplete picture, as it does not take into account the unemployed who are not looking for work. So, for example, if unemployment in the United States fell from 10% to 6%, the labor force participation rate recovered from a minimum of 60.2% (May 2020) to only 61.4%, which is below the pre-crisis level of 63.4%. And if we look at the share of the employed in the working-age population (an even broader indicator), then it recovered even worse after the crisis:





In my opinion, the Fed would like to see this figure at 60% before starting to normalize policy. The catch is, it's hard to predict when this will happen. With fiscal incentives - maybe this year. Then the markets will have to prepare for a rate hike. This is why markets tend to get ahead of the curve now.

As a result of the meeting, one thing became clear - long-term rates will continue to grow, which will neutralize the positive effect of fiscal stimulus on stock markets. Waves of sales in bonds, which, apparently, will still occur, since the path of yields upward is open, will cause, according to the well-known scenario, corrections in the stock markets as well. Growth is likely to be, but not as smooth as we would like.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#35
Oil, USD and Gold: trading ideas for the week ahead


Relief in the equity markets after the Fed meeting was short-lived - yet another spike in Treasury rates knocked down oil, growth stocks. Nasdaq lost 3.02%, the biggest daily drop in several months. Oil closed with 7.6% loss, with maximum decline reaching 9%. Oil market rout was the most intense since October last year.

Markets are increasingly nervous about the situation with coronavirus in the EU countries, where lockdowns, disastrous for economic activity, are either reintroduced or extended. Increasing incidence rate in Germany does not let the government to ease restrictions, with third lockdown in sight as hinted by the local Ministry of Health today. The outlook for economy reopening deteriorates. The recent backwardation in term structure of Brent and WTI (when short-range contracts are more expensive than long-range contracts), which indicated strong current demand, is either decreasing or turning into contango (short-range contracts become cheaper than long-range contracts). Basically, time spreads in oil indicate a pause in the uptrend.

On the daily chart, the drop was picked up exactly on the 50-day DMA:





In the short term, the former uptrend line (point 61.50) will already act as a barrier to growth. After such a strong fall, the shock to buyers is unlikely to pass quickly - the most likely development of the market is a sideline movement with a retest of $60 round support before the market gathers strength and continues to rise as there are plenty of reasons for this.

The dollar should also contribute to the moderate dynamics of oil. The fact of the approval of fiscal stimulus has been priced in, but it remains uncertain how much households will spend in consumption and how much will go into savings. In the data, this will manifest itself gradually. What has not been fully taken into account in asset prices is the high rate of vaccination in the United States, which will allow the lockdown to be completely lifted earlier than previously thought. We all know what consequences such expectations have for the Treasury market (continuing increase in nominal rates). By the way looking at weekly timeframe it becomes clear that the Treasury rates are at their historical low, so the recent increase is a drop in the ocean, so to speak. The growth in February-March on the scale of decades is just a minor rebound from the all-time bottom. Further expansion of interest rate differential (US rates minus other countries rates on fixed income) may turn more capital flows into US assets which is a factor in the demand for the currency.

Technically, the steep uptrend of the dollar broke off the week before last - the index went into the range, 91.40 - 92.00, the Fed could not help. Exit from the range in my opinion is upwards, we can consider the target 92.50 (the previous March high):





In gold, the main driver is related to the reasoning above - real interest rates in the US. This is the opportunity cost for gold (what we miss in terms of return with the same level of risk when we choose to hold gold). The real rate is rising and based on US growth forecasts, the coming consumer boom will be higher this year. Therefore, all upward movements of gold, within the framework of close correlation with the real rate, are rebounds in the downtrend:




Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#36
These moves in asset prices should put investors on alert


Risk assets were sold off moderately on Tuesday while there was a solid interest in debt assets, which is evident from synchronous fall of yields on sovereign debt of developed countries. This distinguishes Tuesday pullback from the dips that we saw earlier in February in March – in contrast, they were fueled by sharp sell-off in bond markets, i.e., rise in yields. If we assume that the idea of post-pandemic recovery still remains a dominant market theme, rising bond prices together with falling stocks should put us on alert, as the pattern belongs to classic risk-off environment. So maybe investors started to doubt about recovery? Looks reasonable, considering that oil has spookingly grown a second leg down, and small-caps, which have experienced a renaissance since November, were sold aggressively:





The yields on sovereign debt in developed countries began to decline at about the same time:





Oil prices bounced down from the trendline after the breakout, in line with the idea described earlier:





Based on the widespread pullback movements in assets or asset indices, which were used to bet on the recovery, we can conclude that recovery euphoria gives way to more cautious markets. At least in the near-term. A key ingredient of continuation of recovery is a clear timeframe of lockdown lifting in the key economies, which markets currently lack for. With recent developments in vaccination programs and lockdowns, expected dates of getting key positive catalysts were delayed again. In my opinion, the case of consolidation in one week – one month horizon strengthens. On the technical side, some equity indices are currently playing with key resistance areas with little fundamental backdrop to expect true breakouts. Also, strong performance of equities relative to bonds let us expect a significant quarterly rebalancing of large funds which buy stocks and bonds. The rebalancing will obviously lead to paring down share of equities in portfolios and increasing exposure in well-fallen bonds.

The risks that sell-off will develop into a full-fledged bear market are small. The main recovery impetus is still in stock and has not been used up. This is the complete removal of lockdowns and release of pent-up demand. For example, it can be seen that forecasts of leading central banks and oil agencies have the biggest optimism in the third-fourth quarter of 2021 – they anticipate that the bulk of social restrictions will be lifted by that time giving essential boost to consumer mobility.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#37
Oil and EURUSD set to rebound next week but it may hide a selling opportunity


The news continues to be full of headlines that discourage risk appetite. Among them – a new all-time high in daily Covid-19 cases in Poland and gloomy forecast for the course of the third wave from the German Ministry of Health without additional restrictions. Nevertheless, risk assets are successfully developing a technical rebound on Friday. Why technical? First, the intraday growth is moderate, not exceeding 1% in the main indices. Secondly, a fairly spoiled news background can be fixed only by a decline in infection rates, which obviously will not happen overnight. The peak of pessimism in this regard has not been reached. Thirdly, the quarterly rebalancing of large funds, during which they will have to reduce the weight of shares in portfolio and increase the share of cheap bonds, has not yet been completed.

The blockage of the Suez Canal counterbalanced the virus story, causing prices to rise. Risk-on in the commodity market then spread to risk assets. But let’s keep in mind that supply chain disruptions are temporary. As soon as the movement in the channel recovers (1-2 weeks), the market will again be absorbed by fears of fragile demand due to the third wave, which will certainly not go anywhere by that time.

As for the technical picture for oil, a series of recent dips have invalidated the bullish trendline that has been running since November 2020. The breakout has led to a shift in sentiment in the short term, resulting in a short-term bearish channel:




The story with the blocking of the channel increases chances of a short-term rise in oil, however, the main resistance in this rise may be located at around 60.50 (the upper border of the channel). It should be borne in mind that on April 1, OPEC will again decide how to adjust production in response to the deteriorating market conditions. In my opinion, OPEC has already surprised by leaving the restrictions at the same level at the last meeting, so on April 1 there will be disappointment.

EURUSD has reached the target proposed in yesterday post - the lower border of the current trend corridor. I expect the pair to rise next week to the level of 1.183-1.185 (a repetition of the previous scenario with testing 1.1955), followed by a drop back below 1.18:





The catalysts for the weakening could be data on inflation and the German economy or worsening epi curves or new measures in the EU to contain the virus.



Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#38
Strong March NFP suggests more US data surprises to come


The US jobs market data in March were really impressive. Given momentum effect in the labor market and still incomplete recovery in consumer mobility, payrolls growth April may top 1 million. It means the odds of more economic surprises in the US from the key macroeconomic areas are quite high, which justifies elevated market expectations about US assets and USD performance. We cannot rule out that US labor market can achieve pre-pandemic levels by the end of the year which will certainly trigger premature Fed tightening. For now, it remains a tail risk.

The solid report on the US labor market for March indicated the growth of jobs by 916K against the 660K forecast. The payroll readings for the previous two months were revised upwards by 156K. Employment in the private sector rose by 780K, while the currently not very indicative unemployment rate fell to 6%.

Employment growth overtook the forecast thanks to warm weather which additionally boosted mobility and some economic sectors like construction, strong vaccination program in the US and economy reopening efforts from individual states, which boosted consumer sentiment, business climate, activity and labor demand.

Improved weather helped construction sector to boost hiring by 110K, continuing easing of restrictions led to an increase in jobs by 280K in the leisure and hospitality industry. Public sector employment increased by 136K. However, in no industry has demand for labor recovered to pre-crisis levels.

Expectations for the jobs market performance in April are high due to two reasons. Firstly, consumers mobility still has room to recover. Secondly, it’s reasonable to expect that recovery will continue given positive trend in reopening and non-stop supportive government measures. The following shows the dynamics of restaurant reservations for some key states, as well as the number of security checks at airports:


Source: ING

It can be seen from both charts that all the curves (with the exception of Miami table reservations) are still below the pre-pandemic level, so recovery still has a room to go. Consequently, the demand for labor should continue to grow.

Despite the positive NFP update, there are 8.4 million fewer jobs in the US economy than it was before the pandemic. The Fed has signaled that it will not raise rates until 2024 until there is substantial economic progress. Given their lukewarm attitude towards rising inflation, it is clear that they want to see jobs return to pre-crisis levels.

Officials' comments make it clear that unemployment is now giving false signals due to the large number of demotivated workers. Now only 57.8% of the working population is employed:


This is very low and, in some respects, comparable to the employment rate of the 1980s. To reach pre-crisis levels (labor force participation rates above 60%), the labor market should add at least 6 million jobs.


Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 

stoch

Active Member
#39
Upbeat soft data in the EU fuels tactical retreat of USD



Indices of activity in manufacturing and services sector in the EU indicated a welcomed expansion in March. However, it came with a decent delay due to lockdown extensions. Compared to the pace of recovery in the US, it’s still just a minor uptick. Nevertheless, it was enough for Euro to break a series of falls as there was a bunch of risks associated with extended lockdown which were priced in the European currency. The March data eased concerns about worst-case scenario for the EU and helped to downplay impact of slow vaccinations and lockdown pressure on business sentiment. EURUSD is developing a rather rapid upward movement, while USD index broke the main uptrend channel which casts doubts on immediate continuation of the advance:





Improving demand for Treasuries also played against the US currency. The yield on 10-year notes continues to decline after reaching a local peak of 1.774% on March 30. In my view it’s just another break in the broad downtrend. Labor market data, ISM indices, in particular the components of new orders and expectations, consumer mobility indices call to prepare for new surprises in April, so the positive impact of the flight from long-date Treasuries on the dollar should still remind of itself in the near future.

The recovery in the Eurozone was quite synchronous: Markit pointed to the growth of business activity in Germany, Italy, Spain and Ireland, both in services and in manufacturing. Together, these four countries account for three quarters of the Eurozone's economy. Firms see a surge in orders in the United States against the backdrop of the lifting of restrictions, so they are too very optimistic about the near future.

Today, clues about the further behavior of the dollar should be looked for in the minutes of the Fed meeting for March. Expectations are modest – reiteration of the mantra of ultra-easy monetary policy despite all the optimism taking place in the data. Still, there are fears that the dynamics of inflation will cause discomfort among officials. Therefore, if there is even a slight bias towards hawkish policy, even a hint of an earlier curtailment of QE, it will certainly resume the growth of Treasury yields and support the dollar. In general, it is too early to write off strong dollar.

On the other hand, the risks of weak vaccination rate in the European currency may be eliminated by news refuting the connection of the Astra Zeneca vaccine with blood clots. This will signal a recovery in vaccination rates - a key component of expectations that immunization targets will be met earlier and mobility will recover faster.

From a technical point of view, the upward correction in EURUSD may hit the 1.1930 - 1.1960 zone before we could start discuss resumption of USD rally:










Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
 
#40
Upbeat soft data in the EU fuels tactical retreat of USD



Indices of activity in manufacturing and services sector in the EU indicated a welcomed expansion in March. However, it came with a decent delay due to lockdown extensions. Compared to the pace of recovery in the US, it’s still just a minor uptick. Nevertheless, it was enough for Euro to break a series of falls as there was a bunch of risks associated with extended lockdown which were priced in the European currency. The March data eased concerns about worst-case scenario for the EU and helped to downplay impact of slow vaccinations and lockdown pressure on business sentiment. EURUSD is developing a rather rapid upward movement, while USD index broke the main uptrend channel which casts doubts on immediate continuation of the advance:





Improving demand for Treasuries also played against the US currency. The yield on 10-year notes continues to decline after reaching a local peak of 1.774% on March 30. In my view it’s just another break in the broad downtrend. Labor market data, ISM indices, in particular the components of new orders and expectations, consumer mobility indices call to prepare for new surprises in April, so the positive impact of the flight from long-date Treasuries on the dollar should still remind of itself in the near future.

The recovery in the Eurozone was quite synchronous: Markit pointed to the growth of business activity in Germany, Italy, Spain and Ireland, both in services and in manufacturing. Together, these four countries account for three quarters of the Eurozone's economy. Firms see a surge in orders in the United States against the backdrop of the lifting of restrictions, so they are too very optimistic about the near future.

Today, clues about the further behavior of the dollar should be looked for in the minutes of the Fed meeting for March. Expectations are modest – reiteration of the mantra of ultra-easy monetary policy despite all the optimism taking place in the data. Still, there are fears that the dynamics of inflation will cause discomfort among officials. Therefore, if there is even a slight bias towards hawkish policy, even a hint of an earlier curtailment of QE, it will certainly resume the growth of Treasury yields and support the dollar. In general, it is too early to write off strong dollar.

On the other hand, the risks of weak vaccination rate in the European currency may be eliminated by news refuting the connection of the Astra Zeneca vaccine with blood clots. This will signal a recovery in vaccination rates - a key component of expectations that immunization targets will be met earlier and mobility will recover faster.

From a technical point of view, the upward correction in EURUSD may hit the 1.1930 - 1.1960 zone before we could start discuss resumption of USD rally:










Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
interesting

i am quite new in the topic
which sources do you use to find an actual info ?
 

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