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Favourable Conditions for the Bulls

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Weekly Update (May 7th – 13th)

Macroeconomic Outlook

Lots of Macro this week

–          Better at the ending of the week than the beginning

  • At the end of the week,  we have some American macro data that is expected to be positive

o   The outcome of the Italian government formation

  • Strange activities
  • Possible second elections

So far, the market has been able to hold everything

–          From an increase in oil prices and its implications for inflation

–          Geostrategy

o   Syria

o   Russia

o   North Korea

–          The petition for help to the IMF from Argentina

It is possible to say that the reference the market currently has is the 10 Year Treasury Note Yield, which is near the psychologic barrier of 3%, and in case it breaks it, there may be some tension.

It gives the impression that even though the T-Notes break the 3% barrier and the Bund passes 0.7% or 0.8%, the markets will hold everything together.

  • The economic cycle is still really powerful
  • Business results are evolving really well

o   An example of that is in the USA where they are evolving to 25% when it was expected to be only 17%

  • There is a huge volume of mergers and acquisitions

o   Which is typic in periods of economic growth

  • Even though oil prices are increasing, inflation remains really low

o   Only in the USA does it rebound a little bit

o   In Europe remains around 1.2 / 1.5

Hence, this week there is a lot of macroeconomic information.

  • American Industrial Production is expected to rise from 0.5 to 0.6
  • A degree of utilisation of productive capacity which is forecasted to rise to 78.4 from the previous 78.0
  • GDP in Europe and Germany are expected to remain strong
  • Japanese GDP is expected to be -0.1%
  • The Italian government coalition would not be that bad as long as it avoids another election

So, at the beginning of the week, results are more or less neutral and by the end, it will provide a better outlook with American indicators.

  • The context is that when circumstances, in general, are not negative it will push the markets to continue the rebound.
  • Consideration is increasing towards the second part of the year where we will see if the current events that are pushing the markets continue, or new ones arise
  • For now, the general situation is accommodating

Technical Outlook

US Dollar Index

 

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