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Market Wrap
The NZDJPY is on a rip having broken out of a bullish consolidation pattern formed through the latter end of March into April. The obvious target to the upside is the 79.05 price level, where a double top price pattern formed between the end of February and mid-March resides. If you look at a currency strength indicator for today, the New Zealand dollar is strong against everything, with the Canadian dollar 0.1% weaker than the Kiwi.
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The ActivTrader sentiment indicator is towards the extreme side of the bear market sentiment, with 84% of traders shorting. This does not look like it will work out well for them.
The general price action seen today in the forex markets signals a couple of things, the US dollar is still not rallying, and that the commodities are benefitting. It also highlights that the flight away from safe havens into the risk-on commodity forex pairs, is signalling some speculative optimism still remains in the markets, even though the coronavirus pandemic continues to rip through Asia.
The markets are very jittery and thinly traded as we await the FOMC, and the algos were in play at the start of the London session and are probably the only things trading the pre-Fed announcement. The Nasdaq had a swift drop this morning as the news reading algos dropped the market on an Al Jazeera News outlet tweet, that cited a Russian spokesperson with regards to Russian manoeuvres, quoting “the West is delusional that Russia has retreated following the end of military exercises”, after a missile cruiser entered the Black Sea.
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As the London close passed the Nasdaq tested the lows of the US futures initial balance, grabbing some liquidity around the 13380 before marching higher towards the days VWAP. Now that the markets have tested the highs and lows of the US session’s initial balance, we are likely to trade within this range until the FOMC. Though the selling has begun quite heavily in the Microsoft shares which are currently -3.08% lower and with Apple & Tesla currently down -0.63% and -1.23% respectively, we could be in for a bearish ride this evening.
Canadian retail sales added to the bullish momentum in the CAD, coming in 4.8% versus exp. 3.7% with the previous reading at -1.2%.
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The US widened their Goods Trade Balance to -$90.59 billion but increased their Wholesale Inventories to 1.4% in March. The US dollar currently trades below the opening price as US Treasuries edged a basis point higher.
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Oil has made a move to the upside taken out last week’s high and could now test a few dollars higher if we assume they did not just sweep the swing highs. There was a smaller than expected build in the US EIA weekly crude stocks which are coinciding with a dip in production. Gasoline and Distillates also showed below expectation figures, as the Crude oil futures pushed $64 per barrel.
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