Financial market research and analysis

UK’s manufacturing and industrial production unexpectedly contracted for the second month in a row.

Soft data revived the Bank of England (BoE) doves and backed the idea that the inflation alone may not be a sufficient reason to raise the interest rates in the UK.

Cable sold off to 1.2430 as a knee-jerk reaction, the intra-day trend turned bearish for an eventual extension of losses toward 1.2420 (major 38.2% retracement on March rise) and 1.2405 (100-day moving average).

On the upside, the 1.25 offers are expected to remain intact, as the positive momentum is currently losing pace. 


FTSE flat near 7300p

The FTSE opened downbeat; mining stocks pulled the markets lower in London.

Rio Tinto (-2.16%), Glencore (-1.49%), Anglo American (-2.29%)

Gold miners and energy stocks outperformed, yet couldn’t offset the risk-off traders.

Gold miners gained on the back of firmer gold prices. Randgold Resources rallied past 2.50% as the yellow metal traded at the highest levels since the US presidential election.

The barrel of WTI crude rallied to $52.94 following the US strike on Syria, as a response to the Syrian gas attack on civilians earlier this week.

Royal Dutch Shell (+1.09%) and BP (+0.48%) were among the leading gainers in London.


US labour data, Dudley’s speech in focus

The US nonfarm payrolls (NFP) and Fed Dudley’s speech are the major talking points in the US.

The US economy is expected to have added 174’000 nonfarm jobs in March, versus 235’000 reported previously. The expectations are soft, given that the last 12-month average stands at 185’000. On a side note, the ADP report, released on Wednesday, surprised on the upside. Although the correlation between the ADP and the NFP figures are not statistically significant, there could be a positive surprise in the US data before the weekly closing bell.

In addition, Fed’s Dudley will speak later in the session. After the March minutes mentioned the Fed’s will to start shrinking the size of its balance sheet, Dudley warned that the latter could be a ‘substitute for short-term rate hikes’ and warned that the balance sheet strategy could bring the Fed to decide whether ‘to take a little pause in terms of raising short-term rates’.

As such, Dudley could dent the short-term USD appetite if he gives any hint regarding the timing or the size of the balance sheet reduction.

The US equity futures pared early losses and are set for a flat open in the US.


Gold cleared the 200-dma resistance

Gold broke the 200-day moving average ($1260) on the upside and extended gains to $1269.

The positive breakout could gather further momentum toward $1280. Softer US yields are also supportive of the yellow metal. The US 10-year yields slipped below 2.30% in New York for the first time since November 30th.


USDJPY weighs on the 110.00 mark

Safe haven inflows fed into the yen. The USDJPY tested the 110.00 mark on the downside for the third session since March 26th.

Softer US yields and safe haven inflows could keep the yen bid into the weekly closing bell. Decent option barriers trail below 112.00 at today’s expiry and could further weigh on the pair. Stops are presumed below the 110 mark and could send the pair toward its 200-day moving average (119.40) if broken.

On the data front, Japanese average earnings slowed to 0.4% year-on-year in February from 0.5% printed a month earlier. Soft data read kept the Bank of Japan (BoJ) doves alert.

Nikkei (+0.36%) and Topix (+0.65%) traded in the green, as the USDJPY rebounded after hitting 110.13 earlier in the session.

From a technical point of view, the Nikkei is moving toward 18’325, the critical 38.2% retracement on post-Trump reflation rally, which should distinguish between the current positive trend and a mid-term bearish reversal.

If the USDJPY hold the ground above the 110 level, dip-buyers could seek dip-buying opportunities in the current downside correction in the Japanese stock markets.


Trump said to ‘have developed a friendship’ with China’s Xi

The meeting between US’ Trump and China’s Xi appeared to be a positive step for China-US relationships. According to the latest news, China could offer the US companies a better access to its market, especially in agriculture and automobile sectors. Time will tell whether Xi’s visit to Mar-a-Lago could melt the ice away and soften Trump’s sharp tone vis-à-vis China.