QUICK TAKE: USD Breakout, Silver Double Top, EUR/USD, Gold Breakdown
Equities: As the retail mania begins to subside (Reddit favourites drop in pre-market), equity markets have extended on yesterday’s gains with both Asian and EU bourses firmer on the session. In turn, US futures point to a firm Wall Street open.
Euro Stoxx 50 Sector Breakdown
Outperformers: Industrial (2.7%), Consumer Staples (2.1%), Financials (1.5%)
Laggards: Utilities (0.1%), Energy (0.3%), Healthcare (0.4%)
Intra-day FX Performance
AUD: The Australian Dollar is underperforming following a dovish surprise by the RBA. While the central bank had maintained rates at 0.1%, the QE program had been extended, earlier than many had expected and hence the subsequent drop in the currency. Alongside, the RBA noted that the exchange rate had appreciated and is in the upper end of the range of recent year. As such, this suggests that perhaps the AUD had been the motivation behind the dovish surprise. Another factor weighing on the currency has been the continued pullback in iron prices, which may see the AUD continue its underperformance against its Tasman counterpart.
USD: The dollar remains in recovery mode having made a break above the 91.00 handle. Alongside this, with USD/JPY testing 105.00 and EUR/USD dropping to two-month lows, the momentum looks like it will persist for the USD. As I highlighted in yesterday’s report, USD/JPY topside resistance is situated at 105.40 (200DMA). Going back to the Euro, the currency has broken below key support at 1.2065, raising the risk of a drop to 1.2000-11. In turn, given that positioning is still very much on the long side for the Euro and with retail (IG) traders buying the dip with net-longs up 38% since yesterday, EUR/USD is vulnerable to a long liquidation should 1.2000 give way.
of clients are net long.
of clients are net short.
Commodities: After multi-year gains in yesterday’s session, silver has reversed with the (not so) precious metal falling 5.3% (at the time of writing). Overnight, the CME had unsurprisingly raised margin requirements by 18% contributing to the pullback. That said, may have posted a double top with the rejection at $30. Elsewhere, gold is on the backfoot with a firmer USD (highlighted in our weekly forecast) and pick up in US real yields in particular, keeping risks tilted to the downside. Subsequently, the key area to watch is 1800-10, coinciding with the 50WMA, which is a level that gold has not closed below since Dec 2018.
Silver Price Chart: Daily Time Frame
Gold Chart: Weekly Time Frame
Looking ahead: Fed’s Mester and Williams on tap, while NZ Jobs report is in focus.