Gold and oil prices are strengthened especially in otherwise fairly mixed markets. U.S. equities reversed the initial losses overnight and closed higher. Asian markets are also following and trading up a bit. In the foreign exchange markets, the Canadian dollar is currently the strongest today thanks to the oil price. Sterling and Yen are the weakest. This week, however, Dollar is the strongest, followed by Swiss francs. New Zealand, Australian Dollar and Sterling are the best performers.
Technically, the Dollar rally attempt could not sustain so far. Area trading in EUR / USD, AUD / USD, USD / CHF and USD / CAD is likely to remain in established range before weekly closure. USD / JPY is probably an exception as it is restored after drawing support form 4 hour 55EMA. The focus is back on 107.76 resistance. Break will confirm the case that the correction decline of 111.71 is completed and bring further increase to 109.38.
In Asia, Nikkei is currently 0.63%. Hong Kong HSI has risen 0.56%. China Shanghai SSE has risen 0.32%. Singapore Strait Times has risen 0.34%. Japan’s 10-year JGB yield has risen 0.0027 by -0.002. Accommodation increased DOW 1.62%. The S&P 500 rose 1.15%. NASDAQ rose 0.91%. 10-year yield fell -0.030 to 0.619.
Gold finished triangle consolidation, ready to resume the trend?
The gold break of 1723.36 resistance overnight suggests that triangle consolidation of 1747.75 may finally be completed. The focus is immediately back on this high. Break will resume a bigger trend. 61.8% forecast from 1160.17 to 1703.28 from 1451.16 at 1786.80 will be a major obstacle to overcome. Persistent break that could help accelerate upward in the medium term. Meanwhile, violations of less support from 1711.14 will dampen the bullish case and bring more range trading first.
Chinese industrial production grew again, but retail sales contracts, USD / CNH, are collapsing
China’s industrial output rose 3.9% yoy in April, above expectations to 1.5% yoy. It is the first expansion read this year as activity returned to normal from the coronavirus pandemic. However, consumption remained weak as retail sales rose -7.5% yoy in April, which was in line with expectations. That’s already better than the -15.8% drop in sales in March. Construction investments increased by -10.3% ytd this year in April, worse than expected at -10.0%.
USD / CNH remains in range after release and has few reactions. Outlook is unchanged, the structure of the rebound from 6.8452 suggests that it is the second part of the correction pattern from 7.1953. Therefore, we would expect the upside to be limited by this 7.1953 resistance to bring another fall. Breach of 7.0523 would start third leg towards 6.8452 / 9040 support zone.
Overall, we expect range trading to continue between the 38.2% retracement of 6.2354 to 7.1953 at 6.8286 and 7.1953. Breakout on each side will require significant development in order to fuel.
New Zealand BusinessNZ PMI fell to 26.1, production and new orders were hit the hardest
The New Zealand BusinessNZ Performance of Manufacturing Index fell -11.9 to 26.1 in April. It is the lowest level on record since the survey began, with a previous low of 36.1 record in November 2008 during the global financial crisis. Production (down from 31.4 to 19.8) and new orders (down from 36.6 to 17.8) were particularly hard hit.
BusinessNZ chief executive of manufacturing Catherine Beard said: “Looking at respondents’ comments, only two words stand out, namely COVID-19 and lockdown, with 89.7% of respondents reporting negative comments” . Lockdown was lowered to Level 3 on April 28 and Level 2 on May 14. “This should see a return to relatively stronger activity levels. However, the extent to which the sector climbs out of the rock bottom will depend to a large extent on the ability to get new orders started together with revised factory flooring processes for production ”.
BNZ Senior Economist Doug Steel said that “the recent negative PMI readings from around the world illustrate the widespread financial pain that is being felt. New Zealand’s April reading is lower than other countries with which we often compare, which is in line with suggestions that NZ restrictions have been tighter than many ”.
Look forward to
Germany will release GDP in the first quarter of the European session along with Eurozone GDP, employment and trade balance. Later in the day, U.S. retail sales, industrial production, Empire State manufacturing, U-Michigan consumer sentiment and business inventories will be released.
Daily USD / CAD Outlook
Daily pivots: (S1) 1.4005; (P) 1.4073; (R1) 1.4112; More….
The USD / CAD rebound lost momentum ahead of 1.4173 and intraday bias remains neutral. Outlook is unchanged so that correction from 1.4667 can be extended. In the event of another fall, the downside should contain the 61.8% retracement of 1.3202 to 1.4667 at 1.3762 to bring the rebound. On the upside, breach of 1.4173 resistance will indicate that the correction is completed. Intraday scares will be returned to the head to try again 1.4667. However, sustained break of 1.3762 brings deeper declines to 1.3664 key support next.
In the bigger picture, at this point, we still see increase from 1.2061 (2017 low) as resuming trend from 0.9056 (2007 low). A crucial break of 1.4689 (high in 2016) will confirm this bullish case. The next medium-term target is 161.8% forecast from 1.2061 to 1.3664 from 1.2951 at 1.5545. Rejection before 1.4689 brings some consolidations first. But the outlook will remain bullish as long as 1,3664 resistance-turned support holds, even in the case of deep withdrawal.
Updating economic indicators
|22:30||NZD||BusinessNZ Manufacturing Index mar||38||53.2||53.7|
|23:50||JPY||PPI Y / Y Apr||-2.30%||-1.60%||-0.40%|
|02:00||CNY||Retail Y / Y Apr||-7.50%||-7.50%||-15.80%|
|02:00||CNY||Industrial production Å / Å Apr||3.90%||1.50%||-1.10%|
|02:00||CNY||Construction investment YTD Y / Y Apr||-10.30%||-10.00%||-16.10%|
|06:00||EUR||Germany GDP Q / Q Q1 P||-2.10%||0.00%|
|09:00||EUR||Eurozone trade balance (EUR) Mar.||17.2B||25.8B|
|09:00||EUR||Eurozone GDP Q / Q Q1 P||-3.80%||-3.80%|
|09:00||EUR||Eurozone Employment Change Q / Q Q1 P||-2.00%||0.30%|
|half past one||CAD||Foreign Securities (CAD) mar||20.61B|
|half past one||USD||Empire State Manufacturing Index May||-65||-78.2|
|half past one||USD||Retail M / M Apr||-10.00%||-8.70%|
|half past one||USD||Retail ex cars M / M Apr||-8.60%||-4.50%|
|13:15||USD||Industrial production M / M Apr||-11.60%||-5.40%|
|13:15||USD||Capacity utilization Apr||65.00%||72.70%|
|14:00||USD||Michigan Consumer Sentiment Index May p||68||71.8|
|14:00||USD||Business Inventory Mar||-0.50%||-0.40%|