Mayhem in the market is maintained as the week starts

Trump’s “medicine” for the US economy continues to maintain the mayhem in the markets. In the FX market the USD gained against its counterparts as the unexpected rise of the NFP figure and the simultaneous uptick of the unemployment rate on Friday for March sent out mixed signals regarding the state of the US employment market. A bit later on, Fed Chairman Powell, warned that the tariffs imposed by US President Trump are likely to reignite inflationary pressures in the US economy, an issue that tends to make the Fed more hawkish, while we would add that the chances for a recession, seem to be increasing which tends to add pressure on the Fed to cut rates. We also note that the Fed Chairman stated that he plans to serve out his term. On a fundamental level, we highlight that China responded with tariffs of its own on US products at the level of 34%, which heightened market fears for an extension of the trade war, weighing considerably on international equities markets and the prices of oil as international trade is expected to be hit, thus curtailing the oil demand outlook.     

In the FX market we note the drop of AUD/USD as the pair broke the 0.6170 (R1) support line, turned to resistance. Given that the pair in its downward motion has broken the lower boundary of its past sideways motion, we switch our past sideways motion in favour of a bearish outlook. We note that the price action has also broken the lower Bollinger Band while the RSI indicator has reached below the reading of 30, with both signals highlighting the strong bearish sentiment for the pair, yet at the same may imply that AUD/USD may have reached oversold levels and may thus be ripe for a correction higher. In a bearish outlook, AUD/USD could break the 0.5980 (S1) line and start aiming for the 0.5700 (S2) support level. If the bulls take over, AUD/USD could break the 0.6170 (R1) resistance line and continue higher to break also the 0.6410 (R2) level.

In the commodities market we highlight the tumbling of WTI’s price action. The commodity’s price broke on Friday broke the 65.00 (S2) support level and during today’s Asian session also broke the 61.65 (S2) support level. We maintain our bearish outlook for the commodity’s price yet note that the lower Bollinger Band has been broken and the RSI indicator has reached below the level of 30, with both indicators highlighting the bearish sentiment for the commodity yet also warning that a correction higher is also possible. For the continuance of the bearish outlook we would require WTI’s price to break the 57.30 (S1) support line and we note the 53.90 (S2) support level, as the next possible target for the bears. For a bullish outlook we would require the commodity’s price to reverse the downward motion of the past three days thus breaking the 68.40 (R3) resistance level, and continue rising breaking above the 72.20 level.  

Other highlights for the day:

Today we get Germany’s industrial output for February, UK’s Halifax House prices for March and Euro Zone’s Sentix index for April, while ECB’s Cipollone speaks. In tomorrow’s Asian session, we get from Japan the current account balance for February and from Australia March’s NAB indicators.

As for the rest of the week:

On Wednesday we note the release from New Zealand, RBNZ’s interest rate decision and in Japan BoJ’s Governor Ueda speaks and late in the American session, the Fed is to release the minutes of the March meeting. On Thursday, we get UK’s House price Rightmove for April, Japan’s Corporate Goods Prices for March, China’s inflation metrics for the same month, Sweden’s GDP rate for February, Norway’s CPI rates for March, from the Czech Republic the final CPI rates for the same month and the highlight is to be the US CPI rates for March, the weekly initial jobless claims figure and Canada’s building permits for February. On Friday we get UK’s GDP and manufacturing Output rates for February, Sweden’s CPI rates for March, the US PPI rates for March and the US preliminary University of Michigan consumer sentiment for April.   

AUD/USD Daily Chart

• Support: 0.5980 (S1), 0.5700 (S2), 0.5510 (S3)
• Resistance: 0.6170 (R1), 0.6410 (R2), 0.6665 (R3)

WTI Daily Chart

• Support: 57.30 (S1), 53.90 (S2), 51.40 (S3)
• Resistance: 61.65 (R1), 65.00 (R2), 68.40 (R3)

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