Financial market research and analysis

FTSE opened upbeat as the barrel of WTI trades near the $50 and the pound failed to consolidate gains above the $1.30 level following yesterday’s positive breakout.

Health care (+1.01%) and energy (+0.70%) stocks lead gains in London.

Cable consolidates between 1.2927 and 1.2079, after having slipped below the 1.29 mark on what has been described as a flash crash on Thursday.

The short-end of gilt curve remains too flat to encourage a mid-term positive breakout against the greenback. Failure to break above the major technical resistance could trigger a further pullback in GBPUSD. Short-term supports are eyed at 1.2824 (minor 23.6% retracement on March – May rise) and a distant 1.2687 (major 38.2% retrace).


Euro reverses losses on solid German PPI

The bearish intra-day reversal in EURUSD was due to the broad based USD recovery. EURUSD traded shortly below the 1.1100 mark in Asia, after hitting a fresh post-Trump high at 1.1172 yesterday.

The sentiment in the single currency improved into the European open amid the German producer prices grew at a faster-than expected pace in April (+0.4%), pushing the year-on-year inflation to 3.4%, the highest since end of 2011.

Greek parliament approved more austerity measures for the next three years in exchange of a probably light debt relief.

Decent call options trail from 1.0950 to 1.1170 at today's expiry and could underpin gains before the weekly closing bell. Support to the positive trend stand at 1.1028 (minor 23.6% retrace on April - May rise), 1.1000 and 1.0940 (major 38.2% retrace).


US futures buoyant, US stocks markets set for a flat open

The US dollar appetite is slightly better on news that the former FBI Director Comey’s congressional testimony on May 3rd seemed to oppose the accusations of Russian intervention in Donald Trump’s presidential campaign and the outcome of the election.

Better-than-expected US initial jobless claims and solid Philadelphia Fed business outlook (38.8 in May versus 18.5 expected and 22.0 printed a month earlier) helped the US dollar and the US stocks gaining some ground in New York. The Dow Jones closed the session 56 points (+0.27%) higher, as the S&P500 rebounded after bottoming at $2’352.

The US equity futures are buoyant and the US stock markets are set for a flat open.

In the dirt of breaking news, the Dow could extend recovery toward $20’755 (50-day moving average).


BRL tumbles, MXN rebounds on surprise Banxico hike

Brazilian stocks tumbled by 8.80% and the real plunged by 7% on bribery accusations regarding the newly elected president Michel Temer, following the former President Dilma Rousseff’s long and painful impeachment process just a year ago. Coffee futures traded at a two-week low on expectations that further real depreciation could flood the markets with additional supply. Soybean futures tanked.

The Mexican peso erased losses accumulated on Brazilian turmoil after the Banxico surprised the markets by raising the interest rates by 25 basis points. The peso remains highly sensitive to the US and global risk sentiment as well as oil prices. The key USDMXN support stands at 18.45 (April low), if broken, should increase the appetite toward 18.15, the Trump election day low.


Oil nears $50

Oil markets are edging higher in the continuation of the OPEC-trade. Markets currently price in nine-month extension in OPEC/Russia production cuts and the $50 level has been a reasonable target for those who took the oil recovery bet. Additional rise toward the $53/$55 is expected to be bumpier as it would certainly require deeper output cuts and/or any positive surprise at the May 25 meeting.


Loonie firmer before inflation, retail sales data

Rising oil prices are supportive of a further recovery in the Loonie. The USDCAD is testing the 1.3597 (minor 23.6% retracement on January – May rise) before the inflation and retail sales data due today. The Canadian inflation may have improved to 0.5% month-on-month in April, from 0.2% printed a month earlier. As a result, the headline inflation may have accelerated to 1.7% year-on-year from 1.6% and the core inflation may also print a rise to 1.4%y/y from 1.3%. Retail sales data is expected to reverse the previous month’s 0.6% contraction. Solid economic data, combined to firmer oil prices could encourage an extension of the current USDCAD move toward the 1.3477 (major 38.2% retrace).