Lots of Macro this week –
-Better at the ending of the week than at its beginning
- At the end of the week, we’ll have some American macro data that is expected to be positive
o The outcome of the Italian government formation
- Unusual activities
- Possible second elections
So far, the market has been able to hold everything
– The increasing oil prices and its implications for inflation
o North Korea
– A petition for help to the IMF from Argentina
It is possible to affirm that the main reference the market currently holds is the 10-Year Treasury Note Yield, which is near the psychological 3% barrier, and in case it breaks it, there may be some tension. It gives the impression that even if T-Notes break this 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 especially 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 typical in periods of economic growth
- Even though oil prices are increasing, inflation remains very low
Only in the USA does it rebound a little bit. In Europe, it remains around 1.2 / 1.5. Hence, there is a lot of macroeconomic information this week.
- 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 adverse it will push the markets to continue the rebound.
- Consideration is increasing towards the second part of the year where it will show if the current events pushing the markets might continue, or new ones arise.
- For now, the general situation is accommodating.
US Dollar Index
Dollar Index is between two frontiers and has no clear direction. It has just recently rebounded from the 200-day EMA. Currently, it is in a neutral position until it breaks through either the bearish trend line or the bullish one. Until then, there will not be a clear position so, for now, we remain on the sidelines before getting into action.
After breaking through the multiple supports, EURUSD just retested the last one, confirming a continuation of the bearish trend. Hence, for now, it is better to hold the short position and expand profits after that recent confirmation of the retest.
After breaking the 200-day EMA, this pair has been going sideways retesting it multiple times. At the same time, it has just stopped from the recent bearish trend where it broke two strong resistances. So, after playing for a couple of days with the 200-day EMA and other solid resistances, the situation of reversal is highly probable. Therefore, we’re looking forward to taking a long position in the next days after reaching the nearest support.
After following our previous conclusion about a bull rally, USDJPY has not yet reached its top, which leaves space for a small reward, but a secure position to take a bite of the last part of this rally. After touching the strong resistance, we may consider taking a short position.
For now, there is no clear path as Oil reached our target of $70. So, after a huge rally, it just touched a resistance created from its own bullish trend that can contribute to Oil taking a rest after the recent rally. In case this happens, we´ll look to take another big long position in Oil.
After confirming our forecast of a long run bouncing back from the long-term support, and breaking short-term resistance, DAX may take a step back now. The reason is to retest the latest resistance break becoming support. After confirming this, we can take a long position to capture the continuation of the bull run after the retest.