This Week In Markets: 24th - 28th May 2021 (FX, Stocks, Bonds, Commodities)

Okay, very good morning, Monday 24th of May. Hope you had a fantastic weekend and welcome to the briefing for the look ahead for this week. And before I begin, just remember to check out amplifierlive.com, especially if you're watching this on our YouTube channel. Don't forget to hit that like and subscribe button. But on Amplify Live, check it out because You know, the thing that's really cool now about what we've tried to design is all of the TraderHub content that we have. There is now, in fact, a free option where you can just join our community in a private Discord room, get access to some of the content, and then some other stuff you can check out if you so wanted to from there forward. But look, let's get straight into it and talk about what's going on this morning. And relatively quiet, not a great deal of weekend major news flow for me to speak of. Um, most of that was drawn towards what looked like a potential another sell-off in Bitcoin. However, that in itself has stabilized now, and in the futures we're trading around $35,500 there. But as far as sentiment is, is for multi-asset this morning, relatively neutral. The equity index futures are slightly positive. DAX up 41, NASDAQ 26, the S&P 12. Gold's trading up again about $7 FX markets very quiet, basically flat. The US 10-year up marginally around 3.5 ticks, and crude oil staging a bit of a, an uptick and recovery, trading back to $64 after that sell-off that was seen in the second half of last week. What I'll try to do in this briefing then is I'm going to try and pick out some of the news for you to be aware of, and then we'll look at the corresponding chart a little bit bigger from a technical perspective on the screen. And talk through some levels for the week ahead. So first things first, let's talk about Bitcoin. So volatility puts weekend traders on stomach-churning ride. I think this is a little bit sensationalized by Bloomberg, but nonetheless, we did see the largest digital token slump as much as 13% on Sunday. And as per usual, no real reason for the sell-off. When I say that jokingly, there obviously were a few catalysts that created the slump last week, but nothing really to pin it on over the weekend, just still a little bit of apprehension, I guess, about whether or not this route currently in Bitcoin is done yet or not. Um, we have looked at this. Piers and I talked about this in the Market Watch podcast on Friday, about the kind of historic way of which Bitcoin tends to go through these phases of high, high periods of volatility, typically defined by large sell-offs and then consolidation periods. And just having a look at a few things then here where we, where we stand at the moment. So this was that Sunday sell-off that we had in a bit of perspective, I guess, in terms of some of the recent price action that we've had. So it definitely has grinded lower from where we were trading, which was basically up at around a $41,000, nearly $42,000 level, to where we are at the moment. On the daily chart then, a couple of things we're still monitoring, uh, really going forward. And I'm just going to pinch this chart a little bit. Down here was the, the bottom of the sell-off that we had on the 19th, of course, which was seen around $30,000 level. That's still a big one to keep an eye on. Um, you know, if we go all the way back to October 2020 on this rising trend line, pretty much coincides with the 200 DMA and then also that kind of psychological $30,000 level. So that's still key to watch on the downside. Again, downside beyond that point, any breakdown of price, $27,000, that double bottom that we had back in the beginning, Jan, late Jan of 2021. Below there, then looking right the way down to $22,500, kind of thousand, which was the pre-Christmas kind of high before we broke out a little bit higher post-Christmas trade, uh, and then, uh, then just further down if we were to get there, eyeing kind of more around $20,000. So yeah, there'll be the key levels to, to watch on the downside. I'm talking the downside more, but just talking the other side, uh, any further recovery here, really, I think you've got to get back above $40,000 to really see more of an ongoing recovery. And that will remain fairly significant obstacle on the upside now, technically, over the next week's price action. But overall, it does feel like there's still a little bit of volatility in it and the crypto space at the moment, uh, just given the type of movement that we saw on Sunday. So I think it is something that people will be looking at quite closely, um, this week. A bit of talk over the weekend about the impact this could or might or is having on other asset classes. I don't really see that myself. I think you'd need to see— even if you saw something really spectacular like Bitcoin this week drops to $20,000, so basically halves again in value, I don't necessarily think that that will be anything more than perhaps a fleeting moment of a few hours where it might impact other assets. I really don't think it's that big a deal as far as the other markets are concerned, to be, to be quite honest. But moving on, let's have a look at another thing. So The other product, of course, that comes in step with this that a lot of people look at is gold. And gold holds near 4-month high amid bullish investor sentiment. And basically what they're saying here is that, um, that data that we get on a weekly basis talking about hedge fund positioning— so hedge fund managers have increased their net long position to the highest in 16 weeks in gold, according to data that came out at the end of last week. Bullion-backed exchange-traded funds have seen inflows in May following 3 straight months of sales. So it's flipped for the first time in a few months there to being more tilted to the buy side. Just having a good gold this morning. I mean, it's, it's pretty much within a near-term range that has been trading here, which has really been defined by— just flip over to my charts— $1,870.50 on the low and then roughly around the 1890, 91 on the high. I was just having a look at this, this area here, price getting a little bit squeezed. So just seen a bit of a run down after that pickup that we've had with Pivot providing a bit of support for the move higher in the Asia-Pac session. So I don't— there's nothing too much behind this latest little dip other than just a bit of a breakout of that price action we've had of late. So near term, if we're looking at gold on the intraday, probably the pivot would be an area to see how it responds around that, at that point in time. However, down at the S1 with that double bottom from, uh, really last week on Friday would be an area to keep an eye on. On the daily chart, yeah, really nice moves we've seen of late, and certainly going back to the last 3 weeks or so, you can see the bullish sentiment really coming to fruition here after We've seen quite a big breakout back at the beginning of May, and it's just continued its way up. Next target upside, and certainly could come into play this week, would be more psychological and technical, I'd say, is 1900. And then 1918 would start to bring in those highs that we've seen back towards the beginning of the year. The bigger then overall target would be recovery backs up to 1966, which then brings in those areas between the high on the 9th of November. And actually, um, yeah, 9th of November, this would have been around when some of that Pfizer news was actually coming out. At that time, this was actually the response to the Pfizer first vaccine coming, or looking like it was being successful and approved to come to market. And that was the consequent sell-off that we saw on gold on the back of the first kind of meaningful development on the vaccination side. So that's where we'd put us back up to, and that was retested up at around the beginning of the year. In January. So yeah, it would be, I guess, to, to continue that move in this week. It is possible. I'd say it's a bit of a big ask to get up there perhaps this week, given the size and scope of the run that we've had. To see that type of really consistent green price action all the way up, um, would be, I'd say, unusual without at least a period of consolidation at some point, and whether we'll see that here at around $1,900, just capping a little bit for the upside until the next meaningful kind of move comes or development in, in a news perspective. So pretty bullish still for, for gold overall. Then let's talk about oil. So oil reclaiming the $64 handle with front month futures, and a couple of things to update you on from an Iranian perspective. That's one of the main things people are looking at and attributing some of the sell-off that we had last week too. So talks between Iran and world powers are going to continue in Vienna this week as both sides try to resolve just some remaining differences in order to get back to that nuclear pact. Iran's parliament did say on Sunday though that a 3-month monitoring deal between Tehran and the UN nuclear watchdog has expired and the access to images from inside some of their sites would cease. On the back of that, the Secretary of State Blinken in the US responded and said there was no sign yet that Iran is willing to comply with its nuclear commitments needed to lift sanctions. And as such, then we have seen a little bit of a pull off those lows that were seen around $61, $65, $67 in futures. Again, the second half of really— most of last week really was considerable downside pressure. And we've retraced, just coming up to approximate 50% of that move at the current price. And we just reclaimed, as I said, the $64 handle. Um, so one of the things here timing-wise with, with oil and with this focus on Iran and so on, as well as OPEC, a meeting of the OPEC+ Joint Technical Committee which was to have taken place tomorrow to assess the state of global supply and demand, has been moved to the end of the month on the 31st, according to a person familiar with the matter. And then OPEC's kind of alliance planned next ministerial meeting is going to take place then, as it always does, the day after on the 1st of June. So scheduled, yeah. But at the moment, um, as you know, further developments on the vaccine— there's quite a few vaccine-type news coming out at the weekend talking about the effectiveness of the double dosage against the Indian variant, things of that nature. COVID case rates continue to, to decrease in the US, granted, outside of a few hotspot areas. And so therefore demand, I think, is still, in my point of view, I think, going to be picking up enough to counteract any type of Iranian crude coming back on the market if these sanctions are to be lifted and a new deal is to be struck between world powers and Iran. Irrespective of that, you know, a deal is not done until, you know, the bottom line's been signed, and there's still some way to go there. So at the moment, a bit of a bounce in oil being, being observed. A few other headlines to have a look at. So just quickly on the news perspective, uh, the White House said on Friday they're— they're going to pare down its infrastructure bill to $1.7 trillion from $2.25 trillion with cuts to investments in broadband and roads and bridges. But Republicans dismissed the changes as insufficient for a deal. How important is this? Again, it feels like it should be important because of the fact the market was definitely looking to stimulus to kind of guide the ship as whether or not equities continue to move on up. At the moment, I don't see any deal coming imminently. I think they're too far apart at this point in time. And the fact that the markets are not selling off, I think, tells you the fact that they're not assigning too much then priority to that being a necessity to get done in order to keep, let's say, sentiment stable or equities at these current levels. So Something to monitor, I think, rather than get too spooked by. And as I said, I don't think that they're going to make any particular progress this week if we're looking at it in the short term. The other thing then, UK, England's lockdown. Senior UK ministers said they're increasingly confident that the June 21st easing of all lockdown restrictions in England will go ahead as planned, as research suggested that COVID-19 vaccines were effective against a new strain, i.e., the Indian variant. So let's have a look at the currency markets and have a look at cable. So cable near term, this is looking at the last 2 and a bit weeks of price action. I've got a nice trend line going back to the 13th, which was supported on the 20th and also in the overnight Asia-Pac session So anyone, any, um, night owls if you like, would have been a nice long opportunity there, um, with the market responding well to that, that trend line and just coming up to then what would have been a nice logical target, which was the peak of the price action that we're seeing going back to Friday night's action in the futures market. So 4156 we trade at the moment. Any further move beyond this point today um, or continuation of this trend, uh, really looking at the higher bound levels at 142 and beyond to, to become more interesting. On the daily chart for the week, obviously last week we kind of had the run-up, um, as we were kind of anticipating at the beginning of that week. We were looking at, you know, major data, uh, the further reopening of the economy. And so as such, we did run up, but we saw some profit taking at around those year-to-date highs. So that's still a key level 1.4245 to have a look at on the upside as we go through the week. Uh, if we break the trend line and we start to see some downside pressure, then again I'd look down at 1.41 handle. I think that's a nice level because it encapsulates that area of price support that we've seen through a period of kind of mid to second half of last week. And then lower down you got the S2 the 1.407780 area, which also starts to encapsulate some of the price action here as well. So some nice support points if we get the break, or targets subsequently for a short if that was to materialize. But at the moment, um, looks to be fairly supported at the present point in time. As far as the euro is concerned, I guess on the daily chart Last week we saw a test up at around that high that we printed back on the 25th of Feb. I still think that's the really the key level to watch at this point in time. And so once again, looking at monitoring and tracking the dollar performance, we did see a bit of a move up of course on Friday, but general direction has been lower. So if that trend continues of dollar weakness then we'd be keeping an eye on those upside levels, both respectively in cable and eurodollars we've just discussed on the slightly higher time frames. Elsewhere, a quick run through the other charts, but just before I conclude on the euro, there was some comments out of Vice President de Guindos at the weekend who gave the latest kind of insight, I guess, in, in toward ECB's thinking. He said that recent data has been much more positive and that ECB monetary policy decision in June will be based on data but also noted that policy must remain accommodative. So again, it's kind of reiterating the stance but being a little bit more upbeat, I guess, on current economic conditions. Um, final charts to have a look at, I guess, our equity, and then we can have a run-through of the calendar, main things to have a look out for. This was just a look at T-notes, and I wanted to have a look at T-notes because And what we have seen is it's kind of the market— market participants are in a kind of in a hawkish mindset to a degree of they definitely attribute more risk to, say, inflation than what we've seen to adhering to Fed guidance in the respect that the Fed are kind of holding the line and remaining accommodative. And every time we get a kind of a hawkish surprise or hawkish development, as we did with CPI, yields pop. You'll— so the price of T-notes drops, and then we recover. FOMC hawkish surprise drops, we recover. So for me, there's a pretty consistent theme here. In actuality, I think you— the, the 10-year, if you take out the volatility in this trading range that we're kind of looking at here, it's pretty quiet comparative to other markets. And as long as we don't really see a change in nominal yields, then I don't really think, um, that really this is too much of a thing to get too obsessed by. This whole idea about inflation being a real consideration or headache for the market to digest, I think that that has passed to a certain degree. But Just looking here and some of the upside on the intraday, R1 with this trend line over the last 2 weeks, I'd be keeping an eye on. Um, and so at this present point in time, probably looking at the S1 here and that prior low that was seen on Friday. So this area and the trend line to dictate the upper and lower bound of what could be just trading range for the rest of the session today because the calendar is particularly quiet. And then for the equity side of things, going to look at both the S&P and the NASDAQ, really more on the daily. And the reason for that is just to keep an eye on a few longer-term levels. I mean, where the NASDAQ trades at the moment doesn't look particularly appealing on, on this time frame, but the point being is that there's still a very important trend line that's in play at the moment, and that goes back to the summer of last year. They've had that more firm retest back in March, and then more recently here just in the last 2 weeks. So price is still quite a way off that at the moment, but that's still obviously within the week context would be really important to watch. And as long as we remain above here, I still think the market remains kind of supported on any dips. And then likewise for the S&P, it's a pretty similar kind of picture in that respect. So if we just look on here, again, the market responded very nicely on a trend line. This one's slightly, um, not as dated in, in the kind of length of the trend line, but this goes back to kind of late October of 2020. The retest again around that March dip that we saw in US equities. And the markets responded quite nicely thereafter. So for the S&P here, I think upside— we're trading at 4164 at the moment. We had a failed attempt to try and break that top end. I just zoom in here. This area here, we failed to break above that on Friday, albeit a brief test. And so upside, that will be quite key. If we did start to see that move transpire, then you might see a break, move up to 4,200, pullback, and then people will be looking to target the bulls back up to the, the all-time high levels again. Okay, let's have a quick look at the calendar then. What's for today? Today is really quiet. There's actually nothing going on from an economic data point of view of interest, in fact. And so speaker-wise, there's a few to be aware of, and Brainard speaks at a crypto conference. So what's this crypto conference? Consensus by CoinDesk is what this crypto conference is called. Now, I wouldn't normally be talking about the crypto conference, but the reason why I am is because there's some pretty interesting speakers. Fed's Brainard is one of the more senior members of the FOMC. He You've got Lawrence Summers, Ray Dalio, and Cathie Wood are all going to be giving keynote speeches. I will share the full kind of agenda day by day as we go through. But as you can see, then we do have Fed's Brainard speaking at that event a bit later on this afternoon at 2 PM. Bank of England Governor Bailey, Cunliffe Saunders, they appear before the Treasury Select Committee talking about monetary policy. This is normally a bit of a non-event. It's more about them just reporting back to the Treasury of their decisions and their policy as it stands at the moment. Unlikely to yield anything new or surprising, but so you're aware, it's at 3:30. Fed's Mester, Bostic, and George all speaking today. Bostic, a voter right now, speaking on the public responses to the COVID pandemic at 5 PM. Otherwise, let's just have a quick look at the week. Um, so just moving over to Tuesday, you do get the German, uh, IFO Business Climate Indicator, and it's expected to hit its highest level since May of 2019, while the GfK survey out of Germany on Thursday— so in terms of your two German releases— is forecast to reach a 7-month high according to economists polled by Reuters. So looking for good data in that respect on a confidence perspective. And that comes as, um, obviously COVID cases become more under control and we go through this period of trying to reopen in the German economy and optimism lifting on the back of that. So looking out for some stronger numbers there. So again, if you're thinking about a euro on those higher timeframe charts, do we see the dollar revert back to that weakening trend? Amid as well some more optimistic signs emerging from some of these key European countries like Germany and their data. And that could help that then retest up at that level in the euro, which would be quite key. Um, if we were to go further, then we do have on Wednesday— excuse me, Thursday, I should say— you get the US GDP figure. Could potentially be revised higher on the back of stronger consumer spending after upward revisions for March. So those figures will be coming out on Thursday, uh, and then on Friday it gets a little bit more busy. You get EU economic sentiment data, like, to confirm continued optimism among businesses and consumers as reopening is getting underway and vaccination rollout programs continue to pick up. speed. You do also get the, uh, personal income levels, the April core PC price index in the US, and Chicago PMI. The Michigan number is the final reading, which we'll get on Friday. Final thing to be aware of— haven't heard of any specific date or more information as yet, but there was some talk last week that top trade officials in the US and China are poised to hold their first meeting to to review the Phase 1 of the trade agreement that was signed under President Trump. The meeting could occur at the end of the month with a potential in-person meeting of the two heads of state, Biden and Xi, in the summer. So just keeping an eye out for any more specifics on that subject. All right, that is it. So hopefully that's a thorough enough rundown to get you up to speed. Again, check out AmplifyLive.com The guys already in the community, I'll start updating the technical analysis section as well with annotated charts. So good luck for today and enjoy the rest of the week. Take care.