Analyst Articles – Forex News 24

EURUSD Price Outlook Steered by US Dollar Sentiment and Data
Correction Lower May Be Short-Lived
EURGBP Price Outlook – Grind Higher Slowing Down
Swedish Krona, Norwegian Krone Tense Up Ahead of US, EU Data
BRL, Ibovespa May Rejoice as Pension Bill Survives First Vote
Crude Oil Price Chart Flashing Early Bearish Reversal Warning
USD/PHP Uptrend Ahead? USD/SGD Aims for Range Ceiling, Breakout?
Dollar Short of Breakout, SPX Hits New Technical High, Earnings Stir Trade Wars
AUD Plummets on Australian CPI – Aussie Eyeing US-China Trade War
AUD/USD May Turn on Channel Support. S&P 500, US Dollar, Yen Climb

EURUSD Price Outlook Steered by US Dollar Sentiment and Data

Posted: 24 Apr 2019 03:26 AM PDT

EURUSD Price, Chart and Analysis:

EURUSD bulls and bears battle around 1.12 handle.
Weak German Ifo is the last EU data release this week.

Q2 2019 EUR Forecast and USD Top Trading Opportunities

EURUSD remains under pressure from an ongoing combination of weak Euro-Zone data releases and US dollar strength. The pair slipped below 1.1200 yesterday and trade either side of this level currently. The latest German Ifo release missed expectations, sparking a small sell-off, but buyers seem to be picking-up offers around 1.1200 for the time being. The Ifo release was the last Euro-Zone data of the week, leaving short-term EURUSD direction in the hands of the US dollar.

The current US dollar strength may come under pressure from two upcoming releases. On Thursday the first look at US durable goods orders with expectations for a pick-up in March to 0.8% from a prior -1.6%, while on Friday the first look at US Q1 GDP is released at 12:30 GMT with expectations of 2.2% annualized q/q growth. Any miss would push the US dollar lower from its current lofty levels.

DailyFX Economic Calendar

The EURUSD chart remains bearish over the medium-term but may find some support around current levels/recent lows. The area between 1.1176 and 1.1187 is important as a break below would expose lows not seen since late-July 2017. Below here, 1.1022 comes into play. To the upside, 1.1300 ahead of 1.1325.The CCI indicator shows the market touching oversold conditions.

Euro Fundamental Outlook: EURUSD Crumbles on Euro-Zone Growth Fears

EURUSD Daily Price Chart (April 2018 – April 24, 2019)

Retail traders are 65.4% net-long EURUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes give us a stronger bearish contrarian bias.

We run several Trader Sentiment Webinars every week explaining how to use IG client sentiment data and positioning when looking at a trade set-up. Access the DailyFX Webinar Calendar to get all the times and links for a wide range of webinars.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

2019-04-24 10:15:00

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Correction Lower May Be Short-Lived

Posted: 24 Apr 2019 01:28 AM PDT

Crude oil price, news and analysis:

Gulf OPEC members are reportedly ready to raise output if demand is there, and US crude inventories have risen by more than expected.
That has sent crude oil prices lower but they will likely increase again once the correction is over.

Oil prices ease gently

The price of US crude oil is correcting lower Wednesday after a Reuters report, quoting "sources", that Gulf members of the Organization of the Petroleum Exporting Countries are ready to increase their production – albeit only if the demand is there. The news agency reported that Saudi Arabian output will rise and that producers such as the Saudis could fill any gap in supplies.

Moreover, data Tuesday from the American Petroleum Institute showed a larger-than-expected rise in US crude stockpiles of 6.9 million barrels in the week to April 19. Official data from the US Department of Energy, due at 1430 GMT Wednesday, will now be watched closely for confirmation.

However, the decline in oil prices has been modest and they will likely resume their climb once the correction is over.

US Crude Oil Price Chart, Five-Minute Timeframe (April 23-24, 2019)

Chart by IG (You can click on it for a larger image)

Longer-term, oil prices remain within the upward channel on the charts in place since late December last year and a rise back to the channel resistance line around $66.66/barrel is now a reasonable target.

US Crude Oil Price Chart, Daily Timeframe (December 11, 2018 – April 24, 2019)

Chart by IG (You can click on it for a larger image)

Resources to help you trade the markets:

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you:

— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

2019-04-24 08:00:00

EURGBP Price Outlook – Grind Higher Slowing Down

Posted: 24 Apr 2019 12:52 AM PDT

The DailyFX Q2 2019 Forecasts are now available to download including our forecasts for GBP and EUR.

EURGBP continues to move slowly higher and continues to eye the 38.2% Fibonacci retracement level at 0.87180, just before the March 21 'spike' high at 0.87233. If the pair can break and close above here – and it will probably take a fundamental shift to confirm this – then the pair will run into heavy resistance around 0.87940, where the 50% Fibonacci resistance crosses with the 200-day moving average.

On the chart an interesting 'dragonfly doji' was made on April 23, a candle formation that may give EURGBP a short-term uplift. The long tail/lower shadow on the candle shows that while sellers tried to push the price lower, buyers stepped-in and took control of price action. The low made at 0.86355 may well be a short-term base.

EURGBP bears may point to the overbought nature of the market with the CCI indicator still trading either side of 100, an indication of a potentially overheated market. The ATR indicator at the bottom of the chart shows how tight trading ranges have become since early April with an average daily range of just 43 pips. While this shows how tight the market has become, it may also be an early warning that any fundamental market shift may cause an out-sized market reaction when stops get taken out.

EURGBP Levels to Note:

To the upside – 0.87180, 0.87233 and 0.87940.

To the downside – 0.86355, 0.86240 and 0.85910.

EURGBP Daily Price Chart (September 2018 – April 24, 2019)

IG Client Sentiment Datashows how retail investors are positioned in a range of currencies and asset markets and how daily and weekly positional changes shift sentiment. See how this affects EURGBP.

What is your view on EURGBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

2019-04-24 07:31:00

Swedish Krona, Norwegian Krone Tense Up Ahead of US, EU Data

Posted: 24 Apr 2019 12:15 AM PDT

TALKING POINTS – GERMAN IFO, US ECONOMIC DATA, RIKSBANK, BREXIT

SEK and NOK eyeing upcoming key US, EU economic data
Brexit-induced risk caused USD-Nordic crosses to spike
Swedish Krona traders bite nails before Riksbank rate decision

See our free guide to learn how to use economic news in your trading strategy!

On Tuesday, Brexit-induced risk aversion sent the US Dollar and Japanese Yen higher at the expense of GBP. Greenback-Nordic crosses subsequently spiked and caused USD/SEK to close 0.64 percent higher above critical resistance. The pair is now on its way to re-test a 17-year high not reached since March 7. USD/NOK broke through descending resistance and avoided re-testing the bottom lip of the upward-sloping support channel.

Want to know more about USD/SEK, USD/NOK price action? See myweekly technical outlook here!

The Swedish Krona and Norwegian Krone will now be eyeing today's release of key economic indicators from both sides of the Atlantic. In Europe, Germany will be publishing its IFO reports – a measure used to gauge sentiment – which, if in line with broader European growth trends – will likely show weakness. This is a crucial point of concern due to the country's function as a key growth-node in the region.

Riksbank Deputy Governor Martin Floden has also expressed concern about slower growth in Germany, citing an overall reduced level of European demand as key source of growth for the export-driven Swedish economy. Lately, the Riksbank's inflation forecasts have been overestimating the actual level of heat in the Nordic economy. Policymakers are intending to raise rates in September, though the current economic outlook suggests a rate hike may not be tenable – at least any time soon.

Want to know more about the outlook for the Sweden's economy and the Krona? See my weekly fundamental outlook here!

In the US, MBA Mortgage applications are due, with the previous report showing a 3.5 percent contraction. The importance underlying this indicator is rooted in its inflation-inducing nature. Following the acquisition of a home, a series of purchases are made, that when iterated across multiple individuals, creates a strong consumption-driven boost to economic activity.

An uptick in inflationary pressure might then provide greater impetus for the Fed to raise rates which would then impact USD-Nordic crosses. It is worth noting, however, that the central bank has stated that it intends on holding rates through-year end, with the open possibility of a hike or a cut in 2020. The decision would be predicated on the domestic growth conditions and if the economy could endure a state of tightened credit.

The Riksbank rate decision is gradually approaching, with less than 72 hours until the announcement and commentary. SEK traders for this reason may look past some economic indicators due to the sheer magnitude of the upcoming event risk.

Chart of the day: USD/SEK, USD/NOK, GBP/JPY, DXY

NORDIC TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

2019-04-24 06:30:00

BRL, Ibovespa May Rejoice as Pension Bill Survives First Vote

Posted: 23 Apr 2019 10:25 PM PDT

TALKING POINTS – BRAZILIAN REAL, IBOVESPA, PENSION REFORM, BOLSONARO

Pension reform survives first congressional vote
Ibovespa, BRL to rise when Brazil markets wake?
What are the next steps for passing the reforms?

See our free guide to learn how to use economic news in your trading strategy!

The Brazilian Real and Ibovespa will likely find a boost early into Wednesdays' trading session following the announcement that Bolsonaro's pension reforms survived the first round of voting. After eight hours of debate, the Constitutional and Justice Committee in the lower house voted 48 to 18 in favor of granting constitutional legality to the pension reforms.

The major step forward will likely reinvigorate hope that the government may yet be able to pass the pension reforms before 2020. However, there remains an arduous journey ahead for the bill with anticipations that progress may be slow, and the key piece of legislature may be watered down by the time it is signed into law. Many economists and policymakers believe the future of Brazil rests on these reforms.

Want to know why? See my updated Brazilian Real, Ibovespa outlook here!

The disorganized government still has to contend with a fractured Congress where the difficulty of gaining cross-party support is compounded by Bolsonaro's reluctance to cooperate out of a concern it could lead to compromise and corruption. There is also a lingering concern about a possible trucker strike over increased diesel prices which has the potential to disrupt market activity and further weigh on sentiment.

Looking ahead, Brazilian assets will continue to find themselves caught in a tug of war between fear and hope over the ability of the government to pass the reforms. For the past few months, the performance of the Real and Ibovespa has moved in almost complete lockstep with developments over the controversial bill. When trading BRL, keeping up to date on these reforms is crucial to maintain a well-informed trading strategy.

How Does Brazil’s Legislature Work?

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

2019-04-24 05:00:00

Crude Oil Price Chart Flashing Early Bearish Reversal Warning

Posted: 23 Apr 2019 09:46 PM PDT

CRUDE OIL & GOLD TALKING POINTS:

Crude oil price chart flashing early bearish warning, earnings flow in focus
Selling pressure may be compounded if EIA inventory data echoes API print
Gold prices fall as US Dollar gains overpower drop in Treasury bond yields

Crude oil prices extended Monday's impressive surge to touch a six-month high. The move appeared to be sentiment-driven, with the WTI benchmark racing higher alongside US stocks in early Wall Street trade. The rally fizzled as the equities upswing stalled midday however, with prices retreating into the close to erase more than half of the intraday rise.

APIweekly inventory flow data helped drive the afternoon retreat. It claimed that US stockpiles added a hefty 6.86 million barrels last week. Official EIA statistics due today envision a meager 810.7k rise. An outcome closer in line with API's estimate might weigh on oil prices. The ongoing flow of first-quarter corporate earnings releases is likely to remain in the spotlight however.

Another busy day on the reporting docket will see outcomes from 43 constituents of the bellwether S&P 500 index cross the wires. Notable names shaping global business cycle bets ahead of the opening bell on US exchanges include Caterpillar and Boeing. If the tone of these announcements rekindles worries about the ongoing slowdown in broad-based economic growth, oil prices may fall amid risk aversion.

GOLD PRICES DOWN AS US DOLLAR GAINS OVERPOWER BOND YIELDS DROP

Gold prices fell as the US Dollar powered higher despite the risk-on move in the stocks space. In fact, sentiment was on the defensive across most other benchmark assets. The Greenback rose alongside the similarly defensive-minded Japanese Yen and US Treasury bonds in what appeared to be a response to worrying Brexit developments. That tarnished the appeal of anti-fiat alternatives like the yellow metal.

The move is notable in that it showed the influence of the US currency overshadowing a supportive a supportive drop in bond yields, a move that was itself a consequence of the downbeat mood outside equities. This hints that continued de-risking bodes ill for the metal, a theory that may soon be tested as earnings reports continue to flow in.

See the latest gold and crude oil forecasts to learn what will drive prices in the second quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are resting atop support in the 1260.80-63.76 area, with a break below confirmed on a daily closing basis exposing the 1235.11-38.00 zone. Alternatively, a turn back above support-turned-resistance at the neckline of a Head and Shoulders (H&S) chart pattern – now at 1281.83 – sets the stage for test above the $1300/oz figure. The H&S setup broadly implies a downside objective at 1215.00.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices put in a Shooting Star candlestick below resistance in the 66.09-67.03 area, hinting at indecision that may precede a reversal lower. Negative RSI diverse bolsters the case for a downside scenario. A daily close below trend line support at 62.42 exposes initially exposes 60.39. Alternatively, a breach of resistance paves the way to challenge the $70/bbl figure.

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

2019-04-24 03:30:00

USD/PHP Uptrend Ahead? USD/SGD Aims for Range Ceiling, Breakout?

Posted: 23 Apr 2019 09:09 PM PDT

ASEAN Technical Outlook – USD/PHP, USD/SGD, USD/IDR, USD/MYR

USD/PHP may be readying up for a new uptrend next
USD/MYR uptrend is taking a break under resistance
USD/SGD aiming for range ceiling as USD/IDR rises

Trade all the major global economic data live as it populates in the economic calendar and follow live coverage for key events listed in theDailyFX Webinars. We'd love to have you along.

USD/PHP Technical Outlook

The Philippine Peso weakened against the US Dollar after support held above 51.59, sending USD/PHP prices reversing above a falling resistance line from the middle of March (red line on chart below). This occurred amidst a surge in crude oil prices on Iranian supply disruption fears. PHP is aiming for a close above near-term resistance at 52.12. If cleared and confirmed, this may open the door to testing 52.55 in the medium-term. Feel free to follow me on Twitter @ddubrovskyFXfor more timely updates on ASEAN currencies.

USD/PHP Daily Chart

USD/MYR Technical Outlook

Extensive weakness in the Malaysian Ringgit seems to have taken a pause. USD/MYR's uptrend since late March was unable to clear the psychological barrier at 4.1448, as noted in last week's outlook. This does come after confirming closes above the descending trend line from November (blue-dashed line below). Clearing resistance will be needed to confirm uptrend extension. But, the close under the near-term rising support line from early April (rising red line below) warns of a turn lower towards the next barrier at 4.1070.

USD/MYR Daily Chart

USD/SGD Technical Outlook

Meanwhile, the Singapore Dollar is coming under pressure from its US counterpart as USD/SGD remains in prolonged consolidation mode since the beginning of this year. Recent price action hints that the Singapore Dollar may weaken further towards range resistance at 1.36155. If cleared, this may overturn the dominant downtrend from November. Afterall, the pair has managed a close above the falling trend line from then (red line on chart below). Otherwise, near-term support appears to be at 1.3516.

USD/SGD Daily Chart

USD/IDR Technical Outlook

The Indonesian Rupiah appears to be aiming for another retest of the well-defined falling resistance line from December. This comes after near-term support at 14010 held, stemming USD/IDR declines after closing under the rising trend line from February (red-dashed line below). If resistance is broken, this may open the door to testing the psychological barrier just under 14340. Otherwise, support appears to be above 13848.

USD/IDR Daily Chart

**All Charts Created in TradingView

Read this week's ASEAN fundamental outlook to learn about the underlying drivers for these currencies!

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

2019-04-24 03:30:00

Dollar Short of Breakout, SPX Hits New Technical High, Earnings Stir Trade Wars

Posted: 23 Apr 2019 08:29 PM PDT

Volatility Talking Points:

The DXY Dollar Index put in for another test of well-worn resistance at 97.75 but the currency wouldn’t put in for its breakout yet
A charge to new record highs from the Nasdaq draws a pacing contrast to the S&P 500 while global indices are still dithering
US earnings is a top theme with Microsoft, Caterpillar and Boeing ahead; but recognition of trade wars should raise traders’ attention

Do you trade on fundamental themes or event risk? See what live events we will cover on DailyFX this week (BOC rate decision, Australian CPI and US GDP) as well as our regular webinar series meant to help you hone your trading.

Which is More Important to Risk Trends: Earnings or Trade Wars?

There is often a dubious approach in the markets whereby participants evaluate the shape of the fundamental and speculative landscape in a way that fits prevailing trends. That is in contrast to evaluating the backdrop independent of the ‘animal spirits’ and perhaps discovering where a market has moved dangerously off course from what would generally be considered ‘value’. Arguably one of the most popular benchmarks for risk trends nowadays remain the US indices, and they paint a picture of confidence with borderline mania. Looking for fuel to that fire, we could tap the potential of US earnings as one of the few high-profile themes currently active – growth concerns are on hold for Friday’s GDP update and central bank support is now a passive theme after the first quarter rebound. Procter & Gamble was the most prominent American corporation reporting this past session and revealing the strongest sales in eight years, but the markets still judged the stock’s prospects harshly. Twitter’s beat was taken at face value, but it is not counted among the trendsetting tech companies. Boeing and Caterpillar before the bell Wednesday will better reflect the US economy as Dow components while Microsoft and Facebook will represent unmistakable tech titans.

Chart of S&P 500 (Daily)

S&P 500

While there is an important signal of US financial and economic health to be drawn from these reports along with the manipulation it manages for speculative appetite, we should also consider their capacity to offer insight into broader macroeconomic themes. One such theme that was clearly stirred Tuesday through earnings was trade wars. Motorcycle manufacturer Harley-Davidson reported further declines in profit as tariffs resulting from the United States’ trade wars (in different stages) with China and the EU took their toll. It is worth recalling that President Trump called for a boycott of the American company’s products last year when it announced plans it would manufacture some of its bikes in Taiwan to avoid some of the tariff burden. This earnings season, the US President commented in a tweet that the burden on HOG was unfair and that “we will reciprocate” against the EU. Add that to the tally of threats with the possibility of a general tax on autos and auto imports that his administration is considering after receiving its report from the Commerce Department and the more recent evaluation of an $11 billion tax in retaliation for perceived unfair subsidies afforded by the EU to plane manufacturer Airbus. Speaking of, Boeing and CAT will offer critical views of trade wars themselves.

S&P 500 Earns a ‘Technical’ All-Time High While the US Dollar Backs Down from Breakout

Despite the uneven backdrop for earnings and themes like trade wars, there was little hesitation for US equities. Indices in the world’s largest economy were broadly higher through the day. That said, there was a difference in progress and pace depending on the sectoral weightings of the specific index. This disparity was in full display with the remarkable performance from the tech-heavy Nasdaq. Having already moved to record highs last week, the return of European and APAC liquidity Tuesday would add considerable heat to the rally. From its sister S&P 500, the day’s advance brought it back to its highs and earned a ‘technical’ record reflected in the highest close – but not an intraday top. From the blue-chip Dow, we are still 0.6 percent from a record high close and 1.1 percent from the intraday mark. From this relationship, a general trend – which we have discussed before – emerges. US equities relative to the rest of world (S&P 500 to VEU) shows a strong preference for US assets. The same performance disparity is apparently relative to emerging markets, junk bonds, carry trade and more risk assets. From this, we see a pull for speculative performance (momentum, progress) rather than a universal search for ‘value’ on discounted, economic-dependent assets. Remember that in your evaluation of follow through on risk trends.

Chart of Ratio of Nasdaq to S&P 500 (Daily)

Ratio of Nasdaq to S&P 500

Where the breakout for US equities was a point of debate, there was no mistaking the Dollar’s shortcoming at resistance. The ICE’s DXY Dollar Index moved up to make a fourth major test of a 97.75 ceiling. Faced with the decision to make a serious commitment to a bullish run, the Greenback would hold the line and tentatively retreat. This doesn’t register as a full-scale reversal back into a very mature range, but it has certainly raised the scrutiny over the currency’s fundamental drive moving forward. What is fueling bulls to not only forge a break higher but keep it rising? Data this past session lacked for gravity, though the housing starts figures were strong. Earnings and relatively growth considerations are not showing through in targeted assets, the competitive monetary policy environment is not improving in the USD’s favor and there certainly isn’t an absolute demand for total safe haven. This won’t prevent further bullish progress for a break say for EURUSD below 1.1200 or USDJPY above 112.20, but it will work against the development of reliable momentum.

Twitter Poll on Dollar

Watching for Volatility from the Canadian, Australian and New Zealand Dollars

The Dollar isn’t the only major struggling with clear motivation. The Euro seemed to show little regard for the unexpected worsening of Eurozone consumer confidence or the improvement in the debt to GDP ratio for 2018 (from 86.8 to 85.1 percent). In the background, worry over Italy’s pressure on European unity was revived when the leader of the member economies’ finance ministers voiced concern over the country’s trajectory and credibility, yet the jump in Italian 10-year bond yields resulted in no material Euro response. In similar measure, the Brexit-focused Pound was unmoved by reports that some in the UK government were pushing Prime Minister May to offer a clear timeframe for her stepping down from the top spot as well as suggestion that the she would put forward the same withdrawal agreement – that had been rejected three times before – as soon as next week. I am not waiting with bated breath for a clean break from the Sterling and will eye moves like that from GBPUSD with a high level of dubiety.

Chart of EURGBP (Daily)

Chart of EURGBP

In contrast to these fundamentally put-upon majors, we have less restricted and single-tracked currencies to consider. Take for example the Canadian Dollar. The Bank of Canada (BOC) rate decision is on deck for Wednesday. The policy group is not expected to change its official standing but that isn’t the high-water mark for market movement. If there is anything in the central bank’s rhetoric that signals any risk of a future cut has been washed away, the Loonie could rally. Of course, with only a modest probability of a cut before year’s end priced in, it could also spark a significant decline. The Australian Dollar faces a similar type of evaluation but with greater extremes in preset forecast. According to swaps, the RBA is most likely among the major central banks to cut before year’s end. If data like the 1Q CPI reading raises that prospect, there is only so much more discount that can be added to the currency’s current standings. On the other hand, a scenario that reduces – or obviates – a cut can leverage a greater bullish move. Consider that for pairs like AUDUSD, AUDJPY and AUDCAD. If your aim is to get further away from fundamentals, the New Zealand Dollar is a close AUD cousin that has lost more significant ground and could muster a speculative appetite. The Swiss Franc is in a similar situation with a tumble that has now forced further USDCHF and EURCHF bullish breaks, but its own fundamental participation is severely lacking. We discuss all of this and more in today’s Trading Video.

Probability of Major Central Banks Hiking Rates Versus Cutting Rates According to Swaps (Daily)

Probability of Central Bank Hikes to Cuts Through End of 2019

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-04-24 01:46:00

AUD Plummets on Australian CPI – Aussie Eyeing US-China Trade War

Posted: 23 Apr 2019 06:38 PM PDT

AUD plunged following the release of worse-than-expected year-on-year CPI data. The sentiment-linked asset will now be closely watching the upcoming US-China trade talks.

2019-04-24 01:31:00

AUD/USD May Turn on Channel Support. S&P 500, US Dollar, Yen Climb

Posted: 23 Apr 2019 04:46 PM PDT

Asia Pacific Market Open Talking Points

Currencies and equities diverged today from a sentiment perspective
S&P 500 hits record high, US Dollar rose despite more Fed rate cut bets
AUD/USD drops to rising channel support, may rise on Australian CPI

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We'd love to have you along.

FX News Tuesday

The highly liquid US Dollar and anti-risk Japanese Yen were the best-performing majors on Tuesday. These currencies can do well during times of market pessimism, yet the S&P 500 closed at a record high as it rose over 0.8% in its best day in over three weeks. Better-than-expected earnings reports sent shares from Twitter (+15.71%), Lockheed Martin (+5.66%) and Hasbro (+14.23%) rallying.

However, US front-end government bond yields fell and fed funds futures showed an increase in dovish Fed monetary policy expectations. Meanwhile, the sentiment-linked Australian, Canadian and New Zealand Dollars weakened. Ahead of the Bank of Canada rate decision later in the day, trader position hints of a bearish bias in USD/CAD.

Want to learn more about how sentiment readings may drive the Canadian Dollar? Tune in today at 00:00 GMT for a livesession as I cover how sentiment can be used to identify prevailing market trends!

Taking a closer look at this trading dynamic also reveals that there was a sharp depreciation in the British Pound in the lead-up to the Wall Street market open on the chart below. Around that time, a report from the National Post showed that UK Prime Minister Theresa May was facing increased pressure to depart, creating greater uncertainty over who would replace her with Brexit delayed until October 31.

Divergence Between Fed Rate Cut Bets and Wall Street

Chart Created in TradingView

Wednesday's Asia Pacific Trading Session

The Australian Dollar will be awaiting local first quarter inflation data where CPI is expected to slow to 1.5% y/y from 1.8% in the fourth quarter of 2018. Lately, Australian economic news flow has been tending to outperform relative to economists' expectations. This suggests that the health and vigor of the economy may be understated. As such, this may lead to an upside surprise and bolster the Aussie.

Another development that may boost the pro-risk AUD and NZD is if Asia Pacific equities echo the rosy performance on Wall Street. But that seems unclear at this moment given the diverging performance between equities and FX from a sentiment perspective over the past 24 hours. S&P 500 futures are flat at the time of this writing heading into Tokyo Stock Exchange open.

AUD/USD Technical Analysis

So far this week, AUD/USD has spent most of its times falling towards rising channel support as anticipated. Now, it sits right on the floor as the former descending resistance line from January (blue-dashed line below) caught the wick. As such, AUD/USD is in a good position to rebound towards resistance in the event of a supportive inflation report that may cool RBA rate cut bets.

AUD/USD Daily Chart

Chart Created in TradingView

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

2019-04-23 23:00:00