Financial market research and analysis

The US dollar tanked after the US President Donald Trump said the currency is too strong, while mentioning that he would prefer the Federal Reserve (Fed) to keep the rates low. Trump’s comments hit the headlines a day after the Fed Chair Janet Yellen announced that a ‘neutral’ stance would be appropriate for the US’ monetary policy.

The US stocks remained under pressure as the reflation rally paused, along with the US Congress’ stepping into a two-week break without delivering any further details regarding Trump’s ‘phenomenal’ fiscal policy.

The US 10-year yields nosedived to 2.22% for the first time since November 2016. The probability of a June interest rate hike eased to 60%.


German, French inflation at stable pace

German and French final inflation remained stable at 0.2% and 0.6% month-on-month in March and had no impact on the euro’s price action at the European open.

The USD-triggered bounce in the EURUSD could bump into resistance pre-1.0700 (major 38.2% retracement on March – April decline from 1.0905). Surpassing this level should signal a short-term bullish reversal and encourage further gains toward 1.0738 and 1.0777 (50% and major 61.8% retracement respectively).


Cable broke above the 200-dma, FTSE tests 7300p

Cable broke the 200-day moving average (1.2555) on the upside for the first time since the Brexit referendum (June 23rd, 2016). UK’s inflation and jobs data, released earlier in the week, justifies the positive momentum in the pound, which has clearly been amplified by the broad-based US dollar sell-off. Next key levels on horizon are 1.2580 (minor 23.6% retracement on Brexit and October 7th flash crash range), 1.2615 (Mar 26th high), 1.2774 (post-Brexit peak) and 1.3045 (major 38.2% retracement). Support remains intact at 1.2500/1.2495.

The FTSE 100 opened downbeat on stronger pound and softer oil, commodity prices. Mining stocks took over a bearish market from Asia, as copper futures slid to $2.53/lb, their lowest level in three months. Strong Chinese data gave a slim positive spin to copper futures in the Asian session, yet the bias remains on the downside.


Gold on its way to $1300, as investors are left with little to regret on falling US rates

Gold extended gains to $1288. Softer US yields could drive more capital into the yellow metal as the opportunity cost of being invested in non-interest bearing gold decreases. The next stop for gold buyers could be $1300. Support is eyed at $1265 (minor 23.6% retracement on March-April rise).

Randgold Resources (+1.21%) and Fresnillo (+1.55%) gained on firmer gold.


Yen, Aussie gained

The USDJPY extended losses to levels last seen on November 2016.

Nikkei (-0.68%) and Topix (-0.76%) had yet another negative session on the back of the stronger yen. In addition, the risk-off markets drove 586 billion yen in Japanese bonds and 441 billion yen in Japanese stocks on week to April 7. In contrary, Japanese investors sold 2’176.8 billion yen worth of foreign bonds.

Sharp drop in US yields bring the 105 level back on radar for USDJPY traders. Large option barriers trail from 108.50 to 110.00 for today’s expiry and could enhance the downside pressures.

The Aussie gained against all of its G10 counterparts in Sydney and has been the biggest gainer (+0.65%) against the US dollar following the solid March jobs report. Australian economy added 60’900 new jobs last month versus 20’000 expected by analysts. Last month’s read of -6’400 was also revised up to +2’800. Cherry on top, part-time jobs (-13’600) were replaced by full-time jobs (+74’500). The AUDJPY rebounded from 82.00, offers are touted pre-82.62 (200-day moving average).

Slump in iron ore futures capped the gains at 0.7600.


Chinese exports boomed, Yuan strengthened

Chinese stocks outperformed their Asian peers, as China printed a strongly better than expected trade surplus in March. Chinese exports recovered 16.4% year-on-year from -1.3% printed a month earlier. The expectation was 4.3%. March trade surplus rose to $23.93 from $-9.15bn printed a month earlier. The Yuan traded at the highest level against the greenback in more than two weeks.


TRY hit 100-dma, downside risks prevail

The lira extended gains against the US dollar. The USDTRY retreated to the 100-day moving average (3.6400) for the first time since September.

Political risks are looming before Turkey’s constitutional referendum due on April 16th. Risk of heavy volatility on Monday could encourage investors to trim their positions before the Easter holidays in order to avoid an eventual tow-side volatility at next week’s open.

We could see a pullback in lira’s recent gains moving into the weekly closing bell.