Financial market research and analysis

Dollar-pound quotation nearing the 1.30 hurdle and softer commodity prices dented the appetite in the FTSE stocks in London. Mining (-0.75%) and energy stocks (-0.45%) lead gains at the open.

Tensions between London and Brussels rise. FT reported that the costs of the divorce could reach $100 billion based on the EU demands. Brexit Secretary David Davis responded saying that the UK will not pay this amount. The EU’s chief negotiator Michel Barnier is expected to reveal more details today.

The pound remains strong despite the rising Brexit tensions, as the UK is focused on Thursday’s local elections and June 8th snap election, where PM Theresa May will be seeking to consolidate and eventually to extend her power at the heart of the government. Many believe that a stronger support for Theresa May could result in more favourable Brexit negotiations for the UK.

Cable remains well bid with 1.30 targeted as the next stop. The key resistance is eyed at 1.3040 (major 38.2% retracement on post-Brexit sell-off), if surpassed, would signal a mid-term bullish reversal in the pound against the greenback.


Apple falls nearly 2% on extended trading, as iPhone sales fell 1%

Apple announced one percent year-on-year fall in iPhone sales in the first three months of 2017; though the actual sales printed 1% increase in revenues as clients opted for the more expansive iPhone 7 Plus. CEO Tim Cook suggested that the slowdown in sales could be partly due to clients waiting for the new iPhone 8.

Good news is that the contraction in iPhone sales was offset by 18% revenue increase from Apple services, such as iCloud, App Store and Apple Pay.

Still, investors were disappointed as Apple missed estimates on revenue and forecasts for the fiscal 3Q and preferred trimming their positions in the after-hours trading.

The rising competition in China, which caused 14% decline in revenues from the world’s biggest emerging market, and Samsung’s return to the race with its well-noted Galaxy S8 raise questions regarding the much expected iPhone 8’s ability to foster a suitable revenue growth in the coming quarters.
Apple shares retraced nearly 2%, the CFDs retreated to $146.80 after the stock traded at an all-time high of $148.09 on Tuesday.

Despite the kneejerk sell-off, loses could remain limited on Apple's promises to redistribute a part of its $257 billion cash holdings at the end of the quarter. The company announced $50 billion in buy-backs and a higher dividend of 63 cents, up from 57 cents and slightly better than 62 cents expected by analysts.

Nearly 80% of analysts surveyed by Bloomberg maintain a positive view on the Apple stocks and 18% remain on hold for an average 12-month target price at $156.74.


US stocks called softer at the open, Facebook to announce 1Q results

Nasdaq 100 rolling index withdrew on Apple disenchantment, after renewing record for the second consecutive day on Tuesday.

The S&P500 tested the $2’400 offers for the second straight day. The Dow Jones remained slightly shy of the $21’000 hurdle.
The Dow is expected to open 35 points softer at $20’915 in New York, the Nasdaq is set to give back 10 points to $5’625 and the S&P500 is seen 6 points lower at $2’385.

Facebook will announce 1Q results after the market close and could reveal solid revenue and earnings growth.


US focus on ADP employment report and Fed decision

The ADP employment report and the Federal Reserve (Fed) policy decision are the major macro highlights of the day for the USD traders.

The US economy may have added 175’000 new private jobs in April versus 263’000 printed a month earlier. Due on Friday, the consensus for the nonfarm payrolls (NFPs) is 190’000 versus 98’000 in March.

The Fed is expected to maintain the status quo. The FOMC’s accompanying statement will be the major focus as investors will be seeking any hints or details regarding the Fed’s interest rate policy outlook, the balance sheet shrinkage plans, and whether the portfolio normalization would interfere with the speed of the rate normalization.

The Fed is expected to proceed with two to three more interest rate hikes in 2017.

The probability of a June rate hike stands at 67.1% before today’s decision.

Due to the lack of details, we expect the Fed to refrain from reshuffling its policy in accordance with Donald Trump’s major tax reforms and expansive spending plans. The US dollar remained little changed on Donald Trump tweet citing that the US government ‘needs a good "shutdown" in September to fix mess’.


Gold, yen at critical levels against the greenback

Gold tests support at $1257/1252 (major 38.2% retracement on March – April rise / 200-day moving average). Breaking below this critical support zone should suggest a short-term bearish reversal and encourage a further slide toward $1245 (50% retrace) and $1233 (major 61.8% retrace). Inability to fight back dip-buyers would hint at a price recovery with a reasonable target at $1270.

The USDJPY is fighting back the resistance pre-112.15 (major 38.2% retracement on December – April decline). Surpassing this level would signal a short-term bullish reversal and encourage a further rise toward 112.50 (100-day moving average) and bring the 115.00 mark back on the radar. The US yields and the US dollar appetite will be determinant in the USDJPY’s trajectory for the rest of the week. Strong US jobs data and hawkish Fed expectations could underpin the positive momentum in USDJPY; 112.45/112.50 call options are waiting to be exercised at today’s expiry. Meanwhile, a softer policy stance from the Fed and a second month of disappointment regarding the US nonfarm payrolls could dent the appetite and limit gains at the current levels.


Macron to face Le Pen at tonight’s televised debate

Emmanuel Macron will face Marine Le Pen in a televised debate before the final round of the presidential election due on May 7th. Latest news hint that 60% of the far-left Mélenchon’s supporters would not vote for Macron. Still, the opinion polls suggest that roughly 60% of French voters would like to see Macron as their next President.

The EURUSD stagnates a touch below the 1.10 mark. The Macron-win being fully priced in, the euro risks would be on the bearish side, if Marine Le Pen displays a better-than-expected performance at tonight’s debate.

We remind that the latest fraud allegations and the plagiarism scandal weigh on the anti-EU candidate’s popularity before the Sunday’s final decision.