Financial market research and analysis

European stock markets opened upbeat, as individual stock news reversed the risk-off trading earlier in Asia.

Automakers lead gains in Frankfurt, after BMW (+1.40%) and Volkswagen (+1.58%) reported solid sales in March. VW’s brand sales increased by 2.5% year-on-year, as BMW’s brand sales surged more than 5% in March. Daimler’s (+2.18%) fourth quarter earnings before interest and tax nearly doubled compared to a year earlier, from 2.15 billion euros to 4 billion euros, as thanks to Mercedes’ new E-class, the company sold three times more than its competitor BMW.

French carmakers surged on the sector optimism; Renault (+1.47%) and Peugeot (+1.01%) joined the race.

Cheaper euro has been a supportive factor as well. The EURUSD remained offered below the 100-day moving average (1.0622) on rising political concerns ahead of the French presidential election. Stronger negative momentum suggests a further slide toward 1.0500/1.0495 (mid-term support).


GBP strengthens on solid wages growth in February

In the UK, energy stocks (+0.47%) were better bid as the WTI extended gains toward $54/barrel.

GBPUSD spiked to 1.2519 as average earnings grew by 2.3% in three months to February, faster than 2.1% expected. The unemployment rate remained unchanged at 4.7%. Solid read revived worries regarding the UK's rising inflationary pressures and boosted speculations that the Bank of England (BoE) could be constrained to tighten its policy sooner rather than later against its will.

The GBPUSD trades with positive intraday bias, which could encourage a further rise toward its 200-day moving average (1.2555). Intraday support is eyed at 1.2405/1.2397 (50 and 100-day moving averages respectively).


Gold tested $1280

 Gold soared to $1279.85 after clearing the $1260 resistance. The Relative Strength Index (RSI) stepped above 70%, the overbought territory. Pause is expected before considering a further rise toward $1300. Price pullbacks are expected to meet support at $1260 (minor 23.6% retrace on March-April rise).

Large call options at $1270/$1274 are due at today’s expiry, if exercised could give an additional boost to the yellow metal.


BoC to maintain bank rate unchanged

The Bank of Canada (BoC) is expected to maintain the bank rate unchanged at 0.50% at today’s monetary policy meeting. The Loonie is recovering from the sell-off caused by the plunge in oil prices in February. As the WTI is set to regain the $55/barrel, the USDCAD could extend the weekly slide to 1.3273 (50% retracement on February-March decline), before 1.3210 (major 61.8% retracement).


Yen gains positive momentum, Aussie under pressure

The USDJPY broke the 100.00-support and rallied on stops below the 200-day moving average (109.50). The pair hit the oversold market. Consolidation could be expected at the current levels yet the negative trend is supported by the meagre risk appetite due to geopolitical tensions across the globe. Large option barriers could cap the upside pre-110.00/110.20.

Nikkei (-1.04%) and Topix (-1.04%) were offered on stronger yen.

The Aussie remained offered as well, as the Westpac consumer confidence index turned negative in April.

Mixed Chinese inflation report triggered little enthusiasm in Australia. Chinese consumer price inflation printed 0.9% on year to March, slightly faster than 0.8% a month earlier, yet softer than 1.0% expected by analysts. Producer prices eased to 7.6% from 7.8% over the same period, yet the deceleration has been softer than the 7.4% expected. The data eased inflationary concerns in China, suggesting that People’s Bank of China (PBoC) wouldn’t be constraint to tighten the monetary conditions while the future of the US-China trade relationship remains uncertain. Yuan softened 0.15% against the US dollar in Shanghai.

The AUDJPY traded at the lowest levels since November, as the safe-haven inflows due to global geopolitical concerns pushed the carry traders to trim their positions. The AUDJPY broke the 200-day moving average (82.62) for the first time in five months and is technically oversold. The daily Relative Strength Index (23.6%) hints at deeply oversold conditions and suggest a short-term correction. Yet the upside is seen limited pre-200DMA. The 80.00 level is the next natural target for the AUDJPY shorts.

The AUDUSD is sold at 0.7500 level and above. The Kiwi (-0.30% against the US dollar), which is a popular carry destination, suffers from the increasing risk aversion as well.