Daily Market Outlook, May 3, 2022

Daily Market Outlook, May 3, 2022 Overnight Headlines RBA Lifts Rates By 25bps, Just Weeks Out From Election Australia’s Weekly Consumer Confidence Tumbles Amid Rate Jitters New Zealand Government Raises Debt Ceiling, Sets Surplus Limit USTR Tai: All Tools On Table To Beat Inflation, Tariffs Not Top Of List Italy Approves €14Bln Of Stimulus Measures As Growth Outlook Weakens US Dollar Approaches 20-Year Highs With The Fed Meeting In Focus Treasury 30-Year Yield Climbs Past 3% Ahead Of Fed Rate Decision US Tsy: Q2 Borrowing F'cast Assumes End-Of-June Cash Balance Of $800Bln Oil Holds Above $105 As Demand For Fuels Offsets China Lockdown EPA Sends Biofuel Blending Mandate Rule To White House For Final Review EU Plans To Issue Detailed Guidance On Russia’s Rubles-For-Gas Demand Germany Warns EU To Expect Economic Cost From Russian Oil Embargo Alibaba Recovers After Report On ‘Ma’ Briefly Erased $26 Billion Citi’s London Trading Desk Behind European ‘Flash Crash’The Day Ahead The Reserve Bank of Australia (RBA) delivered a larger-than-expected hike in interest rates at its May policy meeting. The ‘cash rate’ was lifted by 25bp to 0.35%, more than the 15bp expected by financial markets. This is the first time in almost 15 years that Australian policy rates have been lifted during an election campaign, with RBA Governor Lowe signalling that further increases were likely in the months ahead. A number of Asian equity markets remain closed for holidays, however, having opened sharply lower – the Hang Seng has now recovered back into positive territory. Elsewhere, equity market performance is relatively mixed ahead of the US Federal Reserve’s latest policy announcement tomorrow. Yesterday, a key measure of US factory gate sentiment – the ISM manufacturing index – unexpectedly dropped sharply as growth of new orders and output eased back in April. In part, the moderation in activity also reflected a rise in supply issues, related to the war in Ukraine and lockdowns in China, with US factories reporting longer lead times and further increases in prices. This backdrop of potentially moderating growth amid an uncomfortably high rate of inflation is symptomatic of trends across a number of major economies, albeit to varying degrees. Central banks face the challenge of how to manage this divergence. The US Federal Reserve and Bank of England will deliver their latest policy announcements this week with both expected to hike interest rates. However, their guidance on further policy moves may show differences in their perceptions of the relative risk of higher inflation versus lower growth. The Fed begins its two-day meeting later today ahead of its announcement tomorrow. Data wise, the calendar is light with only March readings for factory orders, durable goods orders (final) and JOLTS job openings due. Similarly, there is a dearth of key releases due across Europe. In the UK, the final reading of the April manufacturing PMI is not expected to be materially revised from the ‘flash’ estimate of 55.3, which was broadly unchanged from the March outturn. The US dollar has trimmed some of yesterday’s gains but nevertheless continues to hold close to levels seen during the height of the pandemic in Q2 2020. 10-year US Treasury yields have also broken above the 3% mark for the first time since December 2018 in the run up to tomorrow’s policy announcement. With no major economic data releases due today, expectations for tomorrow’s meeting are likely to be a key driver of market moves today.FX Options Expiring 10am New York Cut USDJPY - 129.60/70 880m. 127.00 860m. NZDUSD - 0.6770/80 465m. USDCAD - 1.2670/80 549m. Technical & Trade ViewsEURUSD Bias: Bearish below 1.0950 Bullish above Gently bid as risk currencies rally against USD EUR/USD opened -0.32% at 1.1508 after USD rose against most currencies After trading at 1.0507 it tracked higher led by rallies in AUD and NZD EUR/USD traded to 1.0526 and is settling around 1.1520 into the afternoon Trading was quiet and market was thin due holidays in most of Asia EUR/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment A break above the 10-day MA @ 1.0647 is needed to ease the downward pressure Support is at last week's low at 1.0469 and break targets 2017 low at 1.0340 Eur/USD may consolidate ahead of key FOMC meeting on WednesdayGBPUSD Bias: Bearish below 1.30 Bullish above. GBP/USD could be building for a deeper drop Longs at risk as a bearish continuation forms on the dailies Daily RSI is still bumping along sideways below the 30 line 14-day negative momentum has increased but also looks stretched Recent price extremes provide trigger/squeeze points, 1.2412-1.2613 Weekly bear trend still very much alive too Some mixed signals but advantage bears and our 1.2515 long vulnerableUSDJPY Bias: Bullish above 125 Bearish below Touch softer, but the primary uptrend remain strong -0.1% in a low key 129.86-130.20 range with Tokyo starting a 3 day holiday No significant Japan market related news - USD, UST yields and risk lead Two consecutive inside days, with horizontal Tenkan and Kijun lines Setup suggests short term range, though May 4 FOMC may provide volatility Friday's 129.32 low, and last week's 131.25 high are the initial key levels Longer term 5, 10 and 21 day, week and month moving averages head higher Unusual and powerful trending signals - 126.26 Kijun line is key support Long term targets 135.04/20 monthly highs in February and January 2002AUDUSD Bias: Bullish above .7300 Bearish below RBA hikes 25 BPs to 0.35% and sends AUD/USD higher AUD/USD opened little changed at 0.7052 after Wall Street rally underpinned After trading at 0.7047 it zipped higher when commodity currencies rallied E-mini futures rose over 0.50% and encouraged AUD, NZD and CAD buying AUD/USD traded to 0.7100 where offers at that level capped Heading into the RBA decision the AUD/USD was trading around 0.7090 RBA surprised many with a 25 BP hike to 0.35% and AUD/USD popped to 0.7140 RBA indicated in statement that more rate hikes are forthcoming The AUD/USD traded as high as 0.7147 before easing to 0.7120 Resistance is at the 10-day MA at 0.7182

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Market Update – May 3 – USD Holds, Stocks Recover, Hawkish surprise from RBA

USD continues to hold onto recent gains, Stocks bounced back from Fridays crash but the the VIX remains over 30.0 and the RBA increased interest rates by 25 bps, not the 15bp most were expecting, to 0.35%.  US ISM Manufacturing PMI – missed significantly at 55.4 vs. 57.5 & 57.1 last time. Yields jumped higher with the 10-yr over 3.00% at one point. Gold slumped over 2% as yields rose, and Oil rose over $5 following news of EU threats (with Germany apparently in agreement) to cut Russian energy imports and ‘more Russian banks’ to leave SWIFT. Asian markets mixed and European Futures all higher.

• USDIndex holds at highs ahead of the FED’s “nailed on” at least 50bp hike tomorrow, trades at 103.55
• Equities – USA500 +23 (0.57%) at 4155. – US500FUTS at 4158 now. FB, AMD & NVDA all +5%, TSLA +3.77% (Musk looking for additional sources of funding fro TWTR takeover.  BP beat expectations profits at $6bn
• Yields moved higher 10-yr closed at 2.996%, having breached 3.00%, & trades within a tick of that level today. 
• Oil  & Gold both had a volatile session –  USOil tested down to $100.00 before reversing to $106 on the EU news, trades at $104.60 now. Gold slumped from  $1920 zone on Friday to $1854 yesterday and struggles at $1858 now.
• Bitcoin pivots through $38.5k capped at $39K & supported at $38k.  
• FX markets – EURUSD down to 1.0500, USDJPY pivots at 130.00, and Cable holds over 1.2500 at 1.2515.   AUD spiked from 0.7030 to 0.7147.

Overnight  RBA’s Lowe: “Further increases in interest rates will be necessary over the months ahead”. (Last rate hike was 2011)

Today German Unemployment, EZ PPI & Unemployment, US Factory Orders and New Zealand Unemployment, Speech from ECB’s Lagarde. Earnings – AMD, Pfizer, Starbucks,  BNP Paribas, Deutsche Post and Uniper. JPY & China closed.

Biggest FX Mover @ (06:30 GMT) AUDCHF (+1.10%) Rallied from RBA surprise. Lows yesterday at 0.6850 to 0.6985 highs (resistance) today. MAs aligned higher, MACD signal line & histogram moving higher, RSI 71, OB but rising, H1 ATR 0.0018, Daily ATR 0.0075.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.

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May Fed meeting may trigger Dollar sell-off and here is why

Bearish pullback in the major USD rally failed to gain traction on Monday as buyers stepped up with bids ahead of the Fed meeting on Wednesday, at which the Central Bank is expected to raise rates by 50 bp and outline a plan to sell assets off the balance sheet. The dollar index (DXY), having corrected from a 5-year high of 104 to a 103 handle, looks set to retest the multi-year high.European indices fell by inertia on Monday on concerns that Friday US equity sell-off which erased 3.5% on average will extend to today’s price action. Goldman said that the room for further decline appears to be limited, pointing to the extreme level of bearish sentiment, the end of buyback blackout period and the upcoming rebalancing of pension funds in favor of equities as the key reasons to expect a U-turn. US indices opened higher today helping to relieve concerns that the sell-off will continue this week. The US fixed income market is in a good mood, investors did not rush to buy bonds on Friday despite the surge in risk aversion, today the yields are again pressed against the main resistance levels (3% on 10-year and 2.75% on 2-year Treasuries): The EU economy, in contrast, continues to upset Euro bidders: consumer confidence, economic and industry sentiments fell short of modest forecasts in April. The German PMI in the manufacturing sector indicated a slowdown in the pace of output and new orders, the corresponding index fell into contractionary territory for the first time since the first half of 2020 (when lockdowns were in full swing):Retail sales in Germany were also disappointing in April, the growth amounted to -0.1% against the forecast of 0.3%.For the ECB, the problem is that the negative data is combined with record inflation expectations from both sellers and consumers. Some ECB officials have already hinted that they are ready to vote for a rate hike in July, if the rest of the Governing Council members go over to the side of the hawks and begin to prepare the markets for this, we can expect EURUSD to find at least some meaningful support.Otherwise, there will most likely be a new low for the pair, especially if the Fed does not deviate from the previously indicated course at the upcoming Fed meeting. This is the interest rate at 2.75% at the end of this year (remember the last Dot Plot). But in my opinion the markets are expecting too much. In light of the uncertainty surrounding the Ukraine conflict, the risks of stagflation spilling over to the US, and China's economic woes, the Fed will likely re-evaluate the pace of tightening and communicate this unequivocally to markets. Short-term risks for the dollar, given the extreme overbought levels at which it is currently located, are skewed towards the downside. EURUSD is poised to rebound from 1.05 with the target of 1.06-1.0650:

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Three stocks that should profit from demand for cleaner and greener living

A professional investor tells us where he’d put his money. This week: Chris Versace of the Cleaner Living ESG-S ETF, picks three fast-growing green stocks

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Franchise Brands – from pizzas to plumbing and pets

Franchise Brands, a new venture from the team behind the growth of Domino’s Pizza in the UK, is on track for success, says Bruce Packard.

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GBPUSD: Weekly Review 02-06 May 2022

The escalation of the war in Ukraine and, the prospect of a slowdown in China’s growth following the renewed COVID-19 lockdowns have created a significant disadvantage in risk appetite. Future global growth indicators indicate further decline and geopolitical challenges show no signs of decline. GBPUSD managed to limit last week’s losses, having closed the market with an increase of +0.98% on Friday. However, throughout April, the Pound struggled to move higher, with its largest weekly and monthly declines since June 2021. The strengthening US dollar and international factors are the main drivers of the recent fall in the GBPUSD exchange rate, with the pair testing a new 21-month low at 1.2410 last week, below the key psychological 125.00 level.

Retail sales fell -1.4% last month, while the February drop was revised to -0.4% at the first official indication that rising energy and food costs are offsetting costs that should flow to other parts of the economy. In addition, an IHS Markit Flash PMI survey in April showed that activity in the UK boarding service sector declined sharply.

The BOE is expected to continue its trend of interest rate hikes in each session with another 25 basis points increase later this week. At the last meeting, the hawkish rhetoric seemed to be cooling off, but as inflation continues to warm,  the market expects six interest rate hikes this year, with two already applied. The monetary policy report will accompany the decision with new forecasts and a press conference, lead by Governor Bailey.

Technical Overview

The rise from 1.1408 was completed at 1.4247 and the current dynamic, may be the beginning of a longer-term downtrend. The price of the asset is now stuck at the revaluation level of 61.8% around 1.2500. As long as the resistance 1.3160 ​​is maintained, deeper falls will test 1.2250 and 1.2072.

GBPUSD,H4.

The overnight bias earlier this week was neutral and likely to consolidate. The uptrend will test 1.2750 and will remain limited below the round number of 1.3000. On the downside, a break of 1.2410 will first target support at 1.2250. In general, the medium-term downtrend is not over yet, although the downtrend has stopped after some gains over the weekend; as shown by the oscillation histogram which is lower in the middle line, the asset price remains below Kumo and EMA200.

Click here to access our Economic Calendar

Ady Phangestu

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.

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Twitter Buyout Hurts Tesla

Last week, the richest person in the world, Elon Musk, confirmed acquisition of Twitter Inc for a total of $44B. To close the deal, Musk committed his own money ($21B), secured borrowings and at the same time offloaded some Tesla stocks.

Latest news reports that the Tesla CEO  sold $8.5B worth of the company shares, consequently “leading to the company dropping below its $147B valuation.

The takeover may divert some of Musk’s attention from his existing businesses including Tesla, which raises investors’ concern. While Musk has the authority to restructure Twitter the way he wants after the acquisition (for example, tweet monetization, easing content moderation, adding an edit button, job cuts, etc), some are worried that this could bring him into conflict over free speech with the government in China, in the end hurting Tesla’s business in the country.

In the latest earnings report, Tesla’s CFO Zach Kirkhorn reiterated long delivery wait times and limited production, especially in China, following Covid shutdowns. Despite rising costs, the company will keep prices of its vehicles unchanged for six months to a year. Consequently, current headwinds may not benefit the company’s profit margin in near term.

Technical Analysis:

Technically, the #Tesla share price plunged and broke the 100-day SMA following news that Twitter Inc. accepted Musk’s acquisition offer. The company share price closed the week at $872.08, about 32% lower than the second LH ($1152.64) formed early this month. $894 (FR 38.2%) serves as the nearest resistance. A rebound above this level would suggest the company share price to extend higher towards the 100-day SMA ($960) and $1028 (FR 23.6%). Otherwise, if bearish pressure persists, support levels to watch include $786.50 (FR 50.0%), $679 (FR 61.8%) and $525 (FR 78.6%).

Click here to access our Economic Calendar

Larince Zhang 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.

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Market Update – May 2 – USD hold gains, China data dives, Stocks tank

USD continues to hold onto recent gains, Stocks crashed (NASDAQ -4.17% Friday to close a miserable April and register its biggest daily loss since September and a weekly loss of -3.9%), Asian markets weaker (many closed die to Eid holidays) and European FUTS down over 1.5%. (UK closed today). Yields jumped higher and VIX soared over 7% to 31.30. Oil & Gold both rallied and then gave up all their gains. Weekend data – Chinese Manu & Services PMI’s (47.4 vs 49.5 & 41.9 vs. 48.4) the worst in 2 yrs as lockdowns grip the economy. Berkshire Hathaway invested over $51bn in Q1 inc. Chevron (over $21bn), Occidental ($10bn), HP ($4.2bn) &  Alleghany ($11.6bn.  US House speaker, Pelosi visited Ukraine promising support ‘until fight is done’. 

• USDIndex cooled to under 103.00 on Friday, closed at 103.18, and is back to 103.45, now. April opened at 98.29, a near 5% gain. 
• Equities – USA500 -155.57 (-3.63%) at 4131. – US500FUTS at 4145 now. AMZN   -14.05%, INTEL -6.94% MSFT & NFLX -4%, APPL -3.66%.  Nasdaq lost -13% in April (worst since 2008 Fin. Crisis) S&P500 has lost -13% in 2022 (the worst Jan-April since 1939). 50% of S&P500 companies have reported this Earnings season and 81% have exceeded expectations (average 66%). But Outlooks (partic. from AZMN & APPL) have weighed. Volatility is back too, Jan-April there were 33 days with +/- 2% daily moves, in all of 2021 there were just 24.   
• Yields moved significantly higher 10-yr closed at 2.887%. Up 1.96% today, at 2.942 
• Oil  & Gold both had a volatile session moved higher and then reversed to trade lower today. USOil tested to $108.00 on Friday but trades at $103.85 now. Gold tested $1920 zone Friday and trades at $1885 now, below key $1900 handle.
• Bitcoin declined from $40k on Friday to sub $38k to test $39k now.  
• FX markets – EURUSD down to 1.0525,  USDJPY cup from 129.40 to 133.30 now and Cable recovered to 1.2550 now from 1.2410 lows on Friday.  

Overnight –  JPY – Consumer Confidence missed 33 vs 34.9 and Final Manu PMI in line at 53.5.

Week Ahead – The focus remains on inflation and the much anticipated response from the FOMC, RBA and BOE this week, while the markets price in action from the ECB down the road. The advent of month-end, a holiday in Japan on Friday, and the UK also shut on Monday accelerated some profit taking on Wall Street after the early rally. It looks as though many are sidelined into the weekend and ahead of the FOMC where there is a lot of uncertainty over the aggressiveness of the Fed’s normalization path, and the BOE’s ambiguity. Hiking rates too much too quickly would only increase the risk of a stagflation scenario and the BOE’s current policy is already much closer to neutral than the ECB’s. The week also sees NFP, and employment data from Canada, Europe and New Zealand.

Today –  German Retail Sales, US ISM Manufacturing, EU Energy Ministers meeting, (Hungry would veto sanctions on Russian energy) Earnings from Italgas, Holidays in UK, China and many Asian countries.

Biggest FX Mover @ (06:30 GMT) USDJPY (+0.49%) Rallied from lows under 1129.40 Friday to 130.45 highs today. Next resistance 130.50 MAs aligned higher, MACD signal line & histogram moving higher, RSI 54 & rising, H1 ATR 0.0031, Daily ATR 0.01571.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.

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Avoid China’s stockmarket – here’s what to invest in instead

China’s stockmarket is not a good place for investors to be. But you can't just ignore the world's second-largest economy, says Dominic Frisby. Here, he picks an alternative China play.

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Bitcoin Likely to Hit the Key Levels Soon

Bitcoin is slowly approaching the supporting zone formed between the levels 36000 and 37000, and the broken downtrend. It seems that Bitcoin might pull back from the supporting zone and jump.Gold has pulled from the level of 1880.00. It is currently heading North. Now, gold might face the resistance at the level of 1975.00 away from which it might pull back and drop.The US stock index S&P500 has entered the supporting zone formed between the levels 4100 and 4150. The index is likely to pull back from the supporting levels and jump. Although the asset might also break the support, this is less likely to happen.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/bitcoin-likely-to-hit-the-key-levels-soon"
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AJ Bell's new app aims to make investing a Dodl

Dodl, AJ Bell’s new app-based investment service, is cheap – although a wider range of investments would be welcome, says David Prosser.

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Financial calendar – what to expect in the week of 2-6 May

A selection of economic events to watch out for in the coming week, including a decision from the Federal Reserve on raising US interest rates, and German retail sales figures.

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Alex Jones: America’s top crank goes bust

Alex Jones is the world’s loudest and most prolific conspiracy theorist. Now his claims have failed to stand up in court and his Infowars website has filed for bankruptcy.

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Why new technology will pump up inflation

New technology will make it easier to sneak through price rises without anyone really noticing, says Matthew Lynn.

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