Tiomarkets Daily Commentary 24 April 2020
Friday would bring to an end quite an extraordinary week. A week where the price of Oil went negative and the President of the US suggested ingesting or injecting disinfectants and the like as an interesting approach to battling Covid-19. If you didn’t have a Trump / disinfectant meme in your inbox on Friday morning, the chances are you just arrived from another planet. Apparently, he was only being ‘sarcastic’. Unsurprisingly financial markets paid little attention. Friday would be about 2 sets of US data plus the usual headline watch for general improvements in the worst affected nations.
The first set of data would be US Durable Goods Orders for March. The Core number (which excludes the highly volatile aircraft number) was down just 0.2% as opposed to an expectation of -5.8%. It’s worth keeping in mind that this is still March data and the US wasn’t truly impacted by Covid-19 until the latter part of the month. Regardless, it was still better than the majority of economists were expecting. Next up the University of Michigan Consumer Sentiment for April. This is a much more current number which also came in a little better than expected at 71.8 v 68.0. Everything is relative though. This is a number that usually comes in between 90 and 100 with an occasional divergence. So what did this do for the markets? The ‘not as bad as expected data’ would push equity markets higher and the USD lower. Now this might seem counter-intuitive, but in the current environment, the USD will tend to lose ground when it’s role as a safe haven becomes less prominent. A stabilization of oil prices and higher equity prices was enough to send the USD lower against most major currencies. EURUSD would bounce from a low of 1.0727 to close at 1.0825. GBPUSD would also benefit rallying from 1.2298 to 1.2365. Conversely USDJPY would slip form a high of 107.75 to end the week at 107.48. AUD, NZD and CAD would all strengthen against the ‘green back’ also. XAU, much like the USD will lose its tarnish when data is better although it can still benefit from lower US yields. The yellow metal would end mid-range at 1,725 an ounce. And the front month (June) crude oil future would close at 17.18 up almost 50% in 3 days but still lower on the week. The DJ would end higher by 1.1% at 23,775. And just to end what has been quite a remarkable week, we see headlines that the President of North Korea could either be dead or in a vegetative state after a failed heart operation. Watch for more on this as the new week gets under way.
Rarely do I show the same chart in back to back commentaries, but I will today. The last chart you saw from me was an hourly USDJPY chart where I highlighted an emerging wedge pattern. Thursday saw a brief attempt to break to the topside above 108.00. As you will see, the line of resistance was briefly touched and then rejected in short order. This in itself only goes to strengthen the validity of the set up. Keep watching as the 2 lines converge.