Financial market research and analysis

As the UK and European traders are back from the Easter break, the attention shifts to the next critical political event in Europe, the French election.

The first round of the French political election is due on April 26th. The popularity of the far-right (Le Pen) and the far-left (Mélenchon) candidates, both more or less against the European Union, weighs on the single currency. The EURUSD is sold into the 1.0700 level, which stands for the major 38.2% retracement on March-April decline.

According to the latest opinion polls aggregated by Bloomberg, Marine Le Pen is given 22% chances of leading the first round of the election. UMP’s Francois Fillon advanced to 21% from 19% a month earlier, the independent candidate Emmanuel Macron retreated to 22%, while Jean-Luc Mélenchon stands at the fourth place with 18%. Although the first round race appears to be very tight, Marine Le Pen is not expected to clear her way to the Elysée, regardless of who she would face between Fillon and Macron in the second and the final round.

The CAC 40 quickly reversed gains recorded at the open.


FTSE dives on strong pound and  cheaper oil, commodities

Cable extended gains to three-week highs (1.2595). The stronger pound weighed on the FTSE stocks at the London open. Mining (-1.70%) and energy stocks (-1.20%) lead losses, as even a broad-based USD strength couldn’t send the pound below its 200-day moving average (1.2540).

FTSE resistance is eyed at 7345p.


Mnuchin revived the USD-bulls

The US dollar firmed as the US Secretary of Treasury Mnuchin walked against President Trump’s last week’s comments on the stronger US dollar. Mnuchin said that ‘over long periods of time, the strength of the dollar is a good thing’ to the FT. He also added that Trump’s tax reforms are ‘not realistic’, hinting that the fiscal expansion plans are perhaps far beyond what is about to come.

His comments resuscitated the Federal Reserve (Fed) hawks on expectations that the Fed would not be placed under pressure to hold back fire regarding its ‘neutral’ policy stance.

The Dow Jones is called 19 points softer at 20617 at the US open.


Gold: is $1300 still on the radar?

The US 10-year yields recovered past 2.25% in New York. Gold slid to $1281 on the back of stronger US dollar and firmer US yields. The downside correction could extend to $1272 (Fibonacci minor 23.6% retracement in March-April rise). The critical support to the positive trend is eyed at $1257/1255 (major 38.2% retracement / 200-day moving average).

The actual drawback in Fed June rate hike expectations could attract the dip buyers, especially on the back of rising global geopolitical tensions, and drive the gold back to $1300 level and above.

The probability of a June interest rate hike fell to 50.2%.


Erdogan doesn’t care about the opinions of ‘Hans’ or ‘George’, yet…

The lira gave back the majority of post-election relief gains, as President Erdogan saw severe opposition on claims that the referendum has been held on unequal conditions. There are also rising concerns about the manipulation of the votes. The ‘yes’ camp lead the constitutional referendum by roughly 1.25 million votes, but there is an estimated number of 2 million voting ballots without the official stamp, yet approved by Turkey’s Supreme Electoral Council. The unpleasant picture currently holds investors back from the lira.

The USDTRY advanced toward the 3.72 mark on Monday. The major resistance is eyed at 3.75 (pre-election resistance), before the critical 3.80 level. A break above 3.80 should suggest renewed anxiety against the lira and could encourage a fresh attempt toward the 4.00 level. The Borsa Istanbul stocks closed 590.11 points higher on Monday. Sentiment remains sluggish.


Aussie to test 100, 200-dma versus the greenback

After recording the biggest gains against the US dollar on Monday, the Australian dollar has been the biggest loser in Sydney. The AUDUSD reversed five straight session of gains on stronger US dollar and more than 3% slump in iron ore prices. The Reserve Bank of Australia’s (RBA) dovish minutes reinforced the downside move, as Australian policymakers highlighted the weaker-than-expected labour market conditions in their latest meeting. The AUDUSD is preparing to test 0.7545/0.7540 (200 and 100-day moving averages respectively), if broken, could bring the 0.7500 mark (March support) on the radar, before a further slide to 0.7454 (50% retracement on December – March recovery).