Financial market research and analysis

Asian stock indices traded south. The sell-off in oil, metals and commodities deepened and increased the anxiety across the global financial markets. Japan was closed.

Hang Seng (-0.84%) and Shanghai’s Composite (-0.78%) declined. Energy (-2.01%) and mining stocks (-1.07%) led losses on heavy headwinds in oil and commodity markets.

The FTSE was handed over a fairly bearish market. Energy and mining stocks started the trading session at the bottom of the FTSE 100, while Pearson (+15.50%) rallied on restructuring plans.

The early results from the UK’s local elections suggested a solid victory for the Tories; Labour lost some more blood, as UKIP collapsed. As such, PM Theresa May is set for a greater majority in June 8th snap election, in line with the opinion polls.

The GBPUSD is well bid above the 1.2900. It could be just a matter of time before the 1.30-offers are taken out. The key resistance is eyed at 1.3044 (major 38.2% retracement on post-Brexit decline). Above this level, Cable will step in the mid-term bullish consolidation zone.


Oil, metals and commodities hammered

Crude extended losses below $45 for the first time since OPEC announced to cut output on November. Fears that the OPEC’s output reduction plans would not suffice to reduce the global supply glut weigh on the price of a barrel. The sell-off deepens as OPEC keeps silent.

Dip-buyers are expected to intervene into the $40 level for a minor correction, given that the oil market has stepped into the oversold territory (14-day RSI at 22%). From a technical perspective, the negative trend that started on April 11th will be intact below $47.78 (major 38.2% retracement on April – May sell-off). An intermediate resistance is eyed at $46.30 (minor 23.6$ retrace).

Copper recorded the biggest two-day loss since July 2015, iron ore futures plunged nearly 15% over the last three sessions, as the Bloomberg’s industrial metals index traded at the lowest level since January.

The slowdown in Chinese manufacturing activity is one of the major catalysts for the commodity sell-off. According to Caixin manufacturing PMI (50.3 versus 51.3 expected & 51.2 previously), the Chinese manufacturing activity unexpectedly slowed in April. A future read below 50 would signal an unpredicted contraction in the world’s biggest emerging market. Barclays’s analysts stated that there is no need for panic, the data does not hint to a recession just yet.


NFP data is the major highlight of the day

The US dollar index sits at the bottom of the two-week range, as traders attention shift to the US labour data.

The most eagerly watched NFP data (nonfarm payrolls) is due today and the expectation is 190’000, a touch superior to the 12-month average of 188’000. A solid read could revive the short-term USD bulls, while a second month of disappointment should dent the USD appetite before the weekly closing bell and help the euro and the pound fighting the 1.10 and 1.30 resistances respectively.

We warn that the hawkish Federal Reserve (Fed) expectations may have shattered the upside potential in the greenback and the enthusiasm on an eventually strong read could be short-lived. The pricing in the market already factors in 93.9% chances of a June Fed rate hike.


US stocks set for a softer open

US House passed the Obamacare repeal and replace bill , yet several key Senate Republicans said that they would overrule the narrowly approved bill and write their own, as a sign that the game is not yet over and the repeal and replace plans will continue to be an headache for Trump and his team.

As a result, news failed to wet investors’ appetite, as many were actually preoccupied with derailed oil and commodity prices.

It is worth highlighting that in times of bearish market, the correlation between the Dow Jones and oil prices increases. Therefore, headwinds in energy and commodities could weigh on the US traders’ sentiment, as it has been the case in the Asian and European sessions.

The Dow Jones is expected to open 40 points softer at $20’911 in New York.


Markets declared Macron President before Sunday’s results

The final round of the French presidential election is the major highlight of the weekend. According to the latest Reuters news, Emmanuel Macron is expected to gather 62% of votes versus 38% for Marine Le Pen. Provided that the Macron-win is fully priced in, the impact on the euro should be limited on Monday.

If everything goes in line with expectations, Macron’s triumph could cause a minor rally on Monday. However, the kneejerk enthusiasm could rapidly turn into a buy-the-rumour-sell-the-fact pattern.

The market is no longer questioning who will be the winner, yet by how much Marine Le Pen will be defeated. Therefore, a better-than-expected outcome in favour of Le Pen, though insufficient to drive her the Elysée Palace, could eventually temper the enthusiasm.

Marine Le Pen is given little-to-no chance to succeed on Sunday’s run-off. If however she wins, traders should be ready to a carnage in the euro markets on Monday. A low probability Le Pen victory could easily brush off five figures in the euro-dollar.


Update: AUD hits target, negative bias hint at further losses

The AUDUSD hit the 0.7384 target. Stronger trend and momentum indicators suggest a further extension of losses. The March-May negative trend should see a minor resistance at 0.7408 (23.6% retracement on March – May decline) and a major resistance at 0.7522 (38.2% retrace).