US recession worries intensify

The USD maintained its sideways motion yesterday as the market seems to keep a wait-and-see position, given the worries for a possible recession in the US economy and its characteristic how safe haven currencies such as JPY and CHF got some support. It should be noted that the Philly Fed Business Index unexpectedly fell yesterday in another indication of slowing if not contracting economic activity in the US economy, intensifying market worries for a possible recession. Furthermore, the weekly initial jobless claims figure jumped yesterday implying that a slack is building up in the US employment market, while the existing home sales figure dropped implying a lack of demand in the US real estate sector. It was characteristic of a deterioration of the market sentiment as riskier assets such as commodity currencies CAD and AUD as well as US stock markets ended their day in the reds. US equities markets on the other hand seem to have also been adversely affected by unconvincing earnings reports and we note how Tesla has reversed some of the price cuts it had announced after the share price’s downturn in the past few days. We expect today’s stock markets to continue to keep their focus on earnings releases, especially high-profile companies, among which we note Procter and Gamble (#PG) for today. Back in the FX market and north of the US border, we note the continuous weakening of the Loonie over the past few days and besides the deteriorating market sentiment also the drop of oil prices, due to worries for the demand side of the commodity, seems to keep downward pressure on the CAD. Across the Atlantic, we note the contraction of the headline retail sales for March in the UK, yet the issue becomes even more critical should one view the core retail sales growth rate on a year-on-year level, which has been in the reds for over a year now, exactly highlighting the waning demand at a basic level in the UK.

EUR/USD remained stable yesterday just below the 1.1000 (R1) resistance line as was expected. On the one hand, the upward trendline guiding the pair since the 20th of March remains intact implying a bullish outlook, yet on the other hand the pair seems to have hit a ceiling at the 1.1000 (R1) level and the RSI indicator continues to run along the reading of 50 implying a rather indecisive market which may allow the sideways motion to continue. Hence we tend to maintain a bias for a sideways motion, which may ultimately put the upward trendline to the test. Should the bulls regain control over the pair we may see EUR/USD breaking the 1.1000 (R1) resistance line and aim for the 1.1140 (R2) resistance level. Should the bears take over, we may see EUR/USD breaking the prementioned upward trendline, the 1.0855 (S1) support line and aim for the 1.0695 (S2) support level.

USD/CAD maintained its upward trajectory, yesterday breaking the 1.3465 (S1) resistance line, now turned to support. We intend to maintain our bullish outlook for the pair as long as the price action remains above the upward trendline guiding the pair since the 14 of April. We note also that the RSI indicator has surpassed the reading of 70 highlighting the bullish sentiment in the market for the pair, yet may also imply that the pair has reached overbought levels and may be ripe for a correction lower. Also note that the price action is nearing the upper Bollinger band which may slow down the bulls a bit. Should the buying spree be maintained or even intensify we may see USD/CAD breaking the 1.3560 (R1) resistance line and aim for the 1.3655 (R2) resistance level. For a bearish outlook, despite not seeming probable currently, we would require the pair to reverse direction, break the prementioned upward trendline signaling an interruption of the bullish movement, a break of the 1.3465 (S1) support line and the pair to start aiming for the 1.3335 (S2) support level.

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During today’s European session, we note the release of France’s, Germany’s, the Eurozone’s as a whole and UK’s preliminary PMI figures for April while ECB Vice President De Guindos is scheduled to speak. In the American session, we note the release of Canada’s retail sales for February and the US preliminary S&P PMI figures for April. On the monetary front, we note that ECB Policymaker Elderson, ECB Vice President De Guindos and Fed Board Governor Cook are scheduled to speak.