Date Tuesday May 11, 2021
Drivers
Yesterday, the tech-dominated Nasdaq dropped 2.5%, its worst day since mid-March after a downbeat session on Wall Street, prompted by worries about rising consumer price pressure in the US economy. Commodity prices keep rising, and it seems that investors are now worrying about sharply higher inflation again, which explains the US Dollar weakness across the board as “safe sectors” like utilities, consumer staples, and real estate rising.

In China, a higher-than-expected increase of 6.8% in the annual PPI caused stocks in Asia to tumble. Although, the US dollar is off the lows ahead of US JOLTs figures.

The German ZEW Economic Sentiment is projected to show an increase in business confidence as the vaccination rate in Europe picks up. UK Prime Minister Boris Johnson announced additional loosening of measures yesterday, we therefore expect GBP/USD rally to continue with net leg up to 1.42.

The US FDA approved the use of the Pfizer vaccine to adolescents aged 12 to 15. Reaching children would help achieve herd immunity.

200-Day Moving Average may trigger profit booking on Gold ahead of US CPI due tomorrow, however extra gains remain on the table with the key pivotal $1860 level as short-to-medium term target

Market Updates

EURUSD Market sentiment is still improving supported by the rapid vaccine rollout in the Eurozone, with ZEW economic sentiment figures for Germany and the Eurozone, due later this morning, to confirm our view. Technically, the EURUSD is still on an uptrend supported by the 50-period MA on the hourly chart as the rally is expected to have another leg up to retest our resistance at 1.2170.

GBPUSD Cable hit a resistance at 1.4150 then flipped on profit booking as the RSI signaled near overbought conditions. Earlier this morning, UK retail sales showed a 39.6% jump in April, however so far, the strong figure has not impacted the Pound. BoE Governor Bailey is set to speak about the UK’s economic outlook later in the day, which may provide GBP with another boost higher. A sustained move above 1.4150 to target the next resistance level at 1.42.

USDJPYThe Japanese Yen attempted another rally higher nearing the ¥109 resistance where sellers are expected to reappear as the US Dollar weakness continues in the near to medium term from a technical perspective.

FTSE 100FTSE weakness continues following a downbeat session on Wall Street overnight, prompted by worries about rising consumer price pressure in the US and inflation concerns reappearing. A break below support at 7030 will trigger an acceleration to the downside with the 200-period MA around 6935 as next support level.

DOW JONESIt seems that investors are now worrying about rising prices and sharply higher inflation again with commodity prices rising non-stop, ahead of US CPI numbers that are due out tomorrow. A strong number tomorrow will prompt renewed selloff, however on the hourly chart, the Dow Jones index remains supported by the 200-period moving average.

DAX 30The Dax-30 ended yesterday’s session on a bearish reversal bar, as rising commodity prices spurred inflation fears, dragging US tech stocks, and their European peers, into the red. Risk-off sentiment feeling strong in early trade today, with Asia in the red while China’s Index dropped around 30% from 2021 highs. ZEW survey to be released out of Germany, with 15090 as next support target.

GOLD4th consecutive close in the green for Gold, though failing to breach the 200 period SMA on the daily chart, trading in a range between $1830/$1840 support / resistance levels, with all eyes today on JOLTS Job Openings data along with Fed William’s speech. A higher-than-expected figure will spark risk aversion and fresh bullish momentum on gold, especially after a very weak NFP print last week.

USOILA quiet trading session for WTI Crude, as investors continue to monitor the shutdown of the Colonial pipeline which is expected to return back to operation by the end of the week. Focus shifts today towards API weekly inventory data, along with OPEC’s monthly oil report, with technical indicators favoring further downside, to be confirmed on an hourly close below $64.40 with $63.85 and $63.35 as next support targets in extension.

 

 

Rony Nehme

Rony Nehme

Chief Market Analyst at SquaredFinancial

Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

 

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