Fundamental updates by Solid ECN

Solid ECN

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Mar 3, 2022
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EURUSD​

The European currency is relatively stable against the US dollar during trading in the Asian session and is consolidating near local highs from May 5. The day before, the instrument showed active growth, which allowed leveling the results of Wednesday's "bearish" trend and brought the euro to a high at around 1.0600. EUR/USD was supported yesterday by expectations of the imminent end of quarantine due to the coronavirus in Shanghai, which will allow many enterprises to resume normal operation and have a positive effect on the dynamics of foreign trade. In turn, yesterday's macroeconomic data from the US put moderate pressure on the positions of the US currency. Initial Jobless Claims for the week ended May 13 increased from 197 thousand to 218 thousand, which was higher than market expectations by 18 thousand. Philadelphia Fed Manufacturing Index declined sharply in May from 17.6 to 2.6 points, while analysts expected the decline to only 16 points. The Minutes of the European Central Bank (ECB)'s meeting released the day before also contributed to the moderate growth of the single currency. In the report, the regulator pointed to the increasing risks associated with a sharp growth in inflation in the region, but at the same time maintained optimistic forecasts for both Q3 and Q4 of 2022. Also, many members of the ECB board are gradually speaking out in favor of tightening monetary policy. Analysts consider the rate hike at the end of summer or early autumn as most likely.

GBPUSD​

The British pound is traded with mixed dynamics against the US currency during the morning session, consolidating near 1.2450. On Thursday, the pound showed active growth, which allowed it to fully recover from the decline last Wednesday. Moreover, GBP/USD briefly rose above 1.2500, having updated local highs from May 5. The growth of the instrument was facilitated by the weakening of the US currency, which came under pressure against the backdrop of weak macroeconomic statistics from the US. In addition, by the end of the week, corrective moods are intensifying. In turn, the fundamental picture on the market is changing slightly, and investors are still disappointed by the statistics released this week from the UK on the dynamics of consumer inflation. In April, the Consumer Price Index in annual terms accelerated from 7% to 9%, which fell short of the average market forecasts by only 0.1%. On a monthly basis, inflation in the UK also accelerated from 1.1% to 2.5%. Today traders are focused on British statistics on the dynamics of Retail Sales. At the moment, investors are taking a lead from the statistics on GfK Consumer Confidence. In May the index fell from -38 to -40 points against the forecast of -39 points.

AUDUSD​

The Australian dollar is moderately declining against the US dollar during the Asian session, again testing 0.7000 for a breakdown. After active growth the day before, which allowed the instrument to renew local highs from May 9, corrective moods are again strong, and traders are in no hurry to open new purchases without the appearance of additional drivers. Also, the Australian dollar remains under moderate pressure after the publication of an ambiguous report on the labor market. The Employment Rate in Australia in April increased by only 4 thousand after an increase of 20.3 thousand in the previous month. Analysts were counting on an acceleration of positive dynamics to 30 thousand. The Full-Time Employment accelerated from 19.9 thousand to 92.4 thousand; however, a sharp reduction in Part-Time Employment by 88.4 thousand did not allow the final level to record a record growth. The Unemployment Rate remained at 3.9%, while the Participation Rate decreased slightly from 66.4% to 66.3%. The Australian dollar, in turn, is supported by upbeat news from China, where from June 1, the exhausting multi-week quarantine in Shanghai is expected to end, which significantly undermined the pace of Chinese economic recovery.

USDJPY​

The US dollar shows mixed dynamics against the Japanese yen in Asian trading, consolidating near 127.70 and settling near the local lows of April 27. Demand for the yen is gradually increasing as interest in risk decreases; however, the dollar in this sense is also able to provide significant competition. Moreover, many investors prefer the American currency, since the difference between the interest rates of the US Federal Reserve and the Bank of Japan is high and will only increase in the future. In turn, inflationary risks in the two countries remain disproportionate. While the US regulator is extremely concerned about containing the growing price pressure, the Japanese one can afford to keep a wait-and-see attitude, managing only the quantitative easing program. Today's statistics on inflation in Japan reflected the increase in the National Consumer Price Index in April from 1.2% to 2.5%, which was significantly higher than market expectations at 1.5%. National CPI excluding Food and Energy in the country accelerated by 0.8%, while a month ago, analysts recorded its decline by 0.7%.

XAUUSD​

Gold prices are consolidating after active growth the day before, which brought the instrument to new local highs from May 12. XAU/USD is testing 1840.00 for a breakout; however, the market activity remains quite low. The macroeconomic calendar on Friday is relatively empty, and therefore, significant changes in the dynamics of the instrument should not be expected. Experts attribute yesterday's growth in gold to the weakening of the dollar against the backdrop of the publication of disappointing macroeconomic statistics from the US. In particular, Initial Jobless Claims for the week ended May 13 increased from 197 thousand to 218 thousand. Philadelphia Fed Manufacturing Index fell from 17.6 to 2.6 points in May, with a slight correction forecast to 16 points. Existing Home Sales fell 2.4% in April, while investors expected a 0.7% decline.​
 

Solid ECN

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Mar 3, 2022
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EURUSD
The European currency starts the new week with moderate growth against the US dollar, again testing 1.0600 for a breakout and settling near the local highs updated last Thursday. Moderate support for the single currency at the beginning of the week is provided by the weakness of the US dollar, which came under pressure amid a noticeable correction in the yield of US Treasury bonds. Last Thursday, analysts recorded a decline in the yield of 10-year bonds to a three-week low of 2.77%, while earlier during the month the bonds showed a yield of 3.2%. In turn, pressure on the euro is exerted by the soft monetary policy of the European Central Bank (ECB), or rather the growing gap between the rates of the European regulator and the American one. Representatives of the ECB are beginning to speak out in favor of the idea of launching a rate hike program, but the official position of the Bank is still quite cautious. However, it is unlikely that the ECB will be able to remain on the sidelines for a long time, and the point here is not in the competition of rates or exchange rates. Inflation in the eurozone is growing at a record pace, and here the European regulator is at risk of following the path of the US Federal Reserve, which for a long time considered record price growth to be only a temporary phenomenon.

GBPUSD
The pound shows the uptrend in trading in tandem with the US currency during the morning session, testing the level of 1.255 for a breakout and updating local highs from May 5. The strengthening of the British currency at the beginning of the week is facilitated by the growth of corrective sentiment for the US dollar against the backdrop of a noticeable decrease in the yield of US Treasury bonds. Also, traders are still taking a lead from relatively optimistic macroeconomic statistics from the UK on Friday, which turned out to be significantly better than negative forecasts. In April, Retail Sales added 1.4% after falling by 1.2% a month earlier, although analysts had expected a decline of 0.2%. In annual terms, the indicator showed a sharp drop of 4.9% after increasing by 1.3% in March, while preliminary market estimates suggested a more active decline of 7.2%. Retail Sales excluding Fuel increased by 1.4% MoM, but decreased by 6.1% YoY, while the forecast was for a contraction of 0.2% MoM and 8.4% YoY. Today, statistics on housing prices in the UK were released. Rightmove House Price Index increased by 2.1% in monthly terms and by 10.2% in annual terms, which turned out to be slightly higher than the previous values at the levels of 1.6% MoM and 9.9% YoY.

NZDUSD
The New Zealand dollar is showing solid growth against the US dollar during the Asian session, building on the strong "bullish" momentum that was formed last week. NZDUSD is testing 0.6450 for a breakout, updating local highs from May 5. The instrument shows an uptrend against the backdrop of a correction in the US currency, which, in turn, reacts sharply to a decrease in the yield of US Treasury bonds. Also, the positions of the New Zealand dollar are strengthening on the news from Shanghai, where the authorities plan to lift the previously imposed quarantine restrictions from June 1. At the same time, the macroeconomic background from New Zealand remains rather neutral. Data released on Friday showed a slowdown in Credit Card Spending in April from 3.4% to 1.1%, which was worse than analysts' average forecasts of growth of 1.6%. Exports from New Zealand in April slightly decreased from 6.48 billion to 6.31 billion dollars, but against the backdrop of a sharper drop in imports from 7.06 billion to 5.73 billion dollars over the same period, the country's Trade Balance increased in April by 584 million after a decline of 581 million dollars a month earlier. Traders are waiting for the results of the meeting of the Reserve Bank of New Zealand (RBNZ), which will be announced on May 25, counting on another increase in interest rates by 50 basis points.

USDJPY
The US dollar is traded against the Japanese yen with a downtrend during the Asian session, once again testing the level of 127.50 for a breakdown. USD/JPY is located near the local lows of April 27, maintaining momentum for further development of the downtrend in the short term. The development of "bearish" trend is facilitated by corrective sentiment in the US currency, associated with a drop in the yield of US Treasury bonds. Investors also fear a further deterioration in inflation in the country, despite the fact that the latest data on consumer prices in the US reflected the possible passage of the peak of growth. One way or another, the policy of the US Federal Reserve has not changed much so far, and at its next meeting the regulator plans to raise the interest rate by another 50 basis points. In turn, the Bank of Japan maintains a wait-and-see attitude, preferring to limit itself to managing the quantitative easing program. Friday's statistics on inflation for April in Japan reflected the growth of the National Consumer Price Index by 2.5% after increasing by 1.2% a month earlier. Market forecasts assumed an increase of only 1.5%.

XAUUSD
Gold prices continue to show moderate growth at the beginning of the new week, updating local highs from May 12. The instrument is testing 1850 for a breakout, showing no clear signs of a weakening trend. The main factor in the growth of gold at the moment remains the weak dollar, which came under pressure after the publication of not the most optimistic macroeconomic statistics last week. In addition, investors are reacting negatively to the sharp decline in US Treasury yields. This week, market participants are waiting for the publication of the minutes of the last meeting of the US Federal Reserve, hoping to receive clear evidence of the continuation of the "hawkish" monetary policy. Also on Thursday, updated data on the dynamics of US GDP for Q1 2022 will be published. The previous estimate reflected the fall of the US economy by 1.4% in annual terms.​
 

SOLIDECN

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Nov 16, 2021
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US stock indices rose on Tuesday, buoyed by improving risk appetite following China's decisions.

China decided to reduce the duration of health isolation imposed on travelers as part of its anti-Covid operations.

Now investors are following the Federal Reserve's statements closely, with some officials hinting at even higher US rate hikes than expected to control inflation.

Dow Jones rose 0.6% as of 14:07 GMT to 31,614, as S&P 500 rose 0.3% to 3914, while NASDAQ slipped 0.1% to 11,509.​