A difficult week
It has been another difficult week in the markets, and this has been primarily down to the difficulty in assessing what the trade standoff between the US and China mean for the markets. The week started off with the market taking fright as additional tariff threats were voiced by the US, leading to a sharp sell-off in equity markets. However, much of that rhetoric was rowed back on leading to a significant bounce back actually making pre-fright highs before the SP500 started to sell off again. This simply means that there is no overriding directional bias in either direction making this market very choppy and difficult to trade.
Gold
As a result, the Gold market responded by initially strengthening due to the fear related to the equity story but then reversed those initial gains and now trades right in the middle of significant support and resistance levels which can be clearly seen from the chart below, these significant levels are $1,357 and $1,310, so all eyes will be on these levels over the coming days and weeks to see what is next for the yellow metal.
Oil
The Crude-Oil market responded to these major global developments by initially selling off but then after seeing a bit of erratic price action we continued to see a continuation to the down side, closing the week below the $62 level. However, from a technical perspective, the situation regarding the crude oil market is an interesting one. We can see from the chart below that we have been in a consistent up trend since mid-June 2017, reaching a high of $66 towards the end of Jan 2018. Since this time, this market has clearly struggled to break the $66, creating a double top end of March. So over the last two weeks, this market has bounced back to its lower trend line. The next few days will be interesting to see whether the support level holds and we see another attack at the $66 level or will this support level break, and we see prices pushing down to a potential structural failure below the $60 level which would put major pressure on this market to the downside. At this crucial point, it’s hard to see whether buyers or sellers will win out.
So just to recap, over the course of the last 5 trading days, US officials made very strong statements about the need for trade tariffs to be introduced only for US officials to then row back on some of its rhetoric, as a result, market nerves were calmed, and Monday’s fear related move was subsequently reversed. The S&P rallied and then retraced, and the gold and crude oil markets came off.
US Dollar
The USD, however, has been impacted by recent events but to a lesser degree. As you can see, from the chart below, the dollar index has been in a period of consolidation since mid-Jan. These, unfortunately, for the time being, are the market conditions in which we are trading the USD. The two major prices to keep an eye out for over the coming days and weeks is the 99.880 to the up side and 88.416 to the down side. A move in either direction would be significant for this market.
EURUSD
EURUSD continues to trade within a range. Today’s weaker NFP numbers perhaps suggest that the pair might move higher next week given the fact too that from a technical perspective, the pair is trading closer to the lower end of its range as can be seen from the chart below.
USDJPY
USDJPY has been firmer this week, however, watch the key pivotal resistance area next week around 108.20. This was the breach that confirmed a bearish range breakout back in February.
The US Dollar paired earlier gains during Friday’s London session after data showed the US economy adding new jobs at less than half the pace economists had expected for the March month. The important Non-Farm Payrolls figure grew by just 103,000 during the recent month, which is down from 313,000 in February and far below the economist consensus for a reading of 188,000.
Separately, the unemployment rate held steady at 4.1% for the month when markets had been looking for a 10-basis point fall to 4.0%. Household incomes grew by 0.3% during the recent month, which is up from the 0.1% seen in February and in line with the consensus forecast of economists.
Price action largely noted limited volume in the week leading up the non-farm payroll figure but saw initial volatile swings before the USD began to weaken over the course of Friday afternoon and evening.
Trade of the week – Long GBP/USD
With the US caught up with trade issues with China causing confusion among other countries and added uncertainty across the US Dollar Forex Pairs, perhaps the best technical trade may look GBP support with better than forecast UK economic data.
With the GBP showing strength over the USD in April for the last 13 consecutive years running, speculators are now looking at this trend for the best potential buying opportunity. With good news for the pound with UK PMI slightly higher than expectations, Friday trading is seeing the pound trade up with a touch and bounce from the greater bullish trendline of 2017. The discussion now seems to favour the pound is seemingly defying the expectations of Brexit doom.
