Despite the eye wateringly high levels of unemployment for the US in Friday’s Non-farm payrolls (which will also be even worse in next month’s data), the outlook for recovery on risk has picked up again. Coming into Monday morning, the glass remains half full as risk appetite edges positively once again. Suggestion is that China is at least holding up its end of the bargain over the US trade agreement, by delivering on its pledges over structural issues (although it needed to pick up on its purchase promises). Economies are also tentatively looking to re-open from their state of lockdown too. The UK now joining this move, with a “conditional” phased re-opening. Political opposition remains high, but such is the way of UK politics, there is visceral opposition to whichever path is taken. There is a risk positive bias to the moves on major markets. US Treasury yields are ticking higher, whilst US equity futures are holding up and in forex, the yen, US dollar and Swissy are underperformers. The key for the bulls will now be seeing consistent breakouts on these risk recoveries, back above their April highs. If this is seen then the glass will be more than half full once more.
Wall Street closed with strong gains on Friday, with the S&P 500 +1.7% at 2929. A positive bias with the E-mini S&P futures +0.2% higher has allowed Asian markets a decent session overnight, with the Nikkei +1.0%, although Shanghai Composite was -0.2%. In Europe, the positive vibe is translating to early gains on futures, with FTSE futures +0.8% and DAX futures +0.5%. In forex, JPY is the big underperformer, and whilst the earlier losses for USD are being pared slightly, the strength of AUD is a risk indicator. In commodities, there is a basis of support again forming for gold and silver, although oil is slightly lower with both WTI and Brent Crude both c. -1%.
There are no key economic releases due today.
Chart of the Day – German DAX
We have been far more cautious of the DAX rally in recent sessions. A broken recovery uptrend and faltering momentum in the move. However, Friday’s session has helped to improve the outlook slightly more. A downside gap at 10,840 has now been closed with a positive session. However, not only that, an old breakout support at 10,820 also held and this look to be building as an important level of near term support now. The bulls will be encouraged by the pick-up in positive momentum in recent sessions too, with MACD lines beginning to edge higher again, whilst Stochastics have crossed higher and RSI has again picked up off 50. The underside of the old uptrend still needs to be breached (as it is now a basis of resistance at 11,100 today), whilst 11,025 (the 50% Fibonacci retracement of 13,7985/8255) and 11,235 (the April high) are a barrier. Futures are looking decent in early moves today, but there is a lot of resistance overhead to overcome still. If the bulls can clear this though, it would be a strong signal once more. There is a more important gap from March at 11,445 that still needs to be closed in order for a medium term recovery to fully develop, but the bulls would be in a strong position to do so. The 11,820/11,840 band is now initial support as a pivot area, above a near term higher low at 11,600.
The ranging on EUR/USD of the past month has been re-affirmed in the past few sessions as the corrective momentum of early last week has dissipated once more. The wild swings of February towards early April have now begun to look a little more settled as the market ranged between $1.0725/$1.1015. This is being reflected on the momentum indicators where RSI has been oscillating in a range between 40/56 and MACD lines have held in a tight band just under neutral. A recovery candle from Thursday has held ground over Non-farm Payrolls and remains settled this morning. The hourly chart shows the market is now looking to hold above an old near term pivot at $1.0810 but the overhead resistance of $1.0890 is preventing recovery. A very slight negative bias is still present, but essentially the outlook is mixed in a market in need of the next catalyst.