Tiomarkets Daily Commentary 28 April 2020
The new week would begin on a positive note with equities rallying and the USD generally softer across the board. However oil prices would continue to slide as storage and short-term demand issues linger. Countries such as New Zealand announced they had effectively eradicated Covid-19 while some European countries like Austria and the Czech Republic continue to ease restrictions. Czech citizens are even allowed to travel outside of the country if they want to. There is of course one small problem with that – nowhere to go! And on the sporting front there are signs of various European football leagues preparing for a re-start, albeit in empty stadiums. US PGA Golf and Formula One racing have also set tentative schedules to get their seasons back under way.
FX markets are generally being led by moves in equities today and despite the pressure on the price of oil as well as some erratic earnings releases in the US, equities start out with a positive skew. The DJ would open higher by 300 points following on from some solid gains in Europe. FX in Europe could be characterized by one thing – a weaker USD. EURUSD would rally to 1.0888 and GBP to 1.2518. USDJPY meanwhile would finally break out of that wedge formation which I highlighted in my 2 previous commentaries, slipping as low as 106.55. AUDUSD would rally to 0.6512. But once the US was open it was all change and although equities initially remained steady, the USD would turn taking EURUSD back to 1.0825 and GBP to 1.2420. Almost back to where we started and enough of a reversal to cause some pain to European traders caught short USD. Next to move are equities. A 300 point gain for the DJ evaporates and the Nasdaq turns negative as tech stocks tumble. There is no real catalyst just the general uncertainty of what a ‘recovery’ might look like. Although the USD slipped back a little in afternoon trade, equities could not find any momentum ahead of some big names reporting after the bell. The DJ would close down by just over 0.1% while the tech-heavy Nasdaq would close down 1.4%.
Rarely do I show the same chart in back to back commentaries as I said yesterday. Never do I show the same chart 3 times in a row! But I will make an exception today just to show you the break lower in USDJPY through the base of the wedge formation I have been touting. We had a sharp break lower for almost 40 points before a rebound back to the line that was broken as the USD reversed. As we close the day, we are lurking right at the breakdown level. Now those of you who like trading breaks for a quick smash and grab may already be happy with the price action. Some looking for a deeper move might feel frustrated. And then some who missed it completely might welcome the bounce to go short. And of course there will be some calling it a false break and looking to buy back above the breakdown line. This just highlights the beauty of trading technicals. We all look at the same picture yet choose very different approaches to trade it. As always, that choice is yours. But hopefully this provides a good illustration of the options open to you.