CFD Markets News and Forecasts — 14-04-2021

• Spillover from U.S. stimulus will mostly affect 2022
• It will boost Europe's inflation by 0.15 percentage points
• Countries with larger tourism sectors will likely take longer to recover

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 5.889 million barrels in the week ended April 9, following a drop of 3.522 million barrels in the previous week. Economists had forecast a draw of 2.889 million barrels.

At the same time, gasoline stocks rose by 0.309 million barrels, while analysts had expected a build of 0.786 million barrels. Distillate stocks dropped by 2.083 million barrels, while analysts had forecast an advance of 0.971 million barrels.

Meanwhile, oil production in the U.S. increased by 100,000 barrels a day to 11.000 million barrels a day.

U.S. crude oil imports averaged 5.9 million barrels per day last week, down by 411,000 barrels per day from the previous week.

• There is still a lot of labour slack in U.S.
• It will take a while to get back to full employment
• It makes sense 10-year Treasury yield drifts up this year, not alarming

FXStreet reports that the NZD is leading the G10 pack against the USD after the Reserve Bank of New Zealand (RBNZ) delivered as expected overnight. The kiwi has made a clean break to a fresh trading range, but a crowded technical landscape ahead could slow further progress. That said, the NZD continues to trade at a significant discount to its short-term drivers, as Ned Rumpeltin, European Head of FX Strategy at TD Securities, notes.

“NZD/USD made a clean break above resistance at the 0.7070 level in the aftermath of the policy decision. The pair has since gravitated toward the next natural attractor around the 0.7100/25 zone. This area had served as a fairly effective floor for much of the first quarter this year. It will be interesting to see if spot can hold onto these gains as the move looks a bit overdone relative to the strength of its catalyst.” 

“We note the NZD continues to trade at a significant discount to its short-term drivers. This has been the case for some time and the gap has started to narrow since its extremes in March. That said, plenty of room remains before we would start to lean the other way on a valuation basis. Looking higher, potential price action faces an area of considerable congestion on the charts from the first few months of the year. In the absence of a clear positive catalyst, the kiwi could face a fairly tough slog from current levels.” 

“With an eye on our end-Q2 forecast of 0.72 for NZD/USD, we think further progress to the upside may be more of a grind at this stage.”

U.S. stock-index futures traded mixed on Wednesday, as investors digested the first batch of Q1 corporate earnings while awaiting the Fed’s Chairman Powell speech at the Economic Club of Washington and the release of the Fed’s “Beige Book" later today.

Global Stocks:

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, notes that silver (XAG/USD) is approaching the 55-day ma at 26.25 but the metal will need to regain the 26.69 level to reassert upside pressure.

“The price of silver recently sold off towards and bounced just ahead of the 9th December low at 23.57. It has eroded the two-month downtrend and is well placed to challenge the 55-day ma at 26.25 and the mid-March high at 26.69.” 

“The market will need to regain 26.69 on a closing basis to confirm upside intent to the 28.37 23rd February high and the 30.09 1st February high. Failure here will trigger a retest of the 23.57 support and the 78.6% retracement at 23.17.”

(company / ticker / price / change ($/%) / volume)

Twitter (TWTR) assumed with a Neutral at Wedbush; target $75

Facebook (FB) downgraded to Neutral from Outperform at Wedbush; target lowered to $340

Exxon Mobil (XOM) upgraded to Mkt Perform from Underperform at Raymond James

The Labor Department reported on Wednesday the import-price index, measuring the cost of goods ranging from Canadian oil to Chinese electronics, rose 1.2 percent m-o-m in March, following an unrevised 1.3 percent m-o-m gain in February. Economists had expected prices to increase 1.0 percent m-o-m last month.

According to the report, the March gain was driven by higher prices for both fuel (+6.3 percent m-o-m) and nonfuel (+0.8 percent m-o-m) imports.

Over the 12-month period ended in March, import prices surged 6.9 percent, with higher fuel (+54.3 percent; the largest 12-month advance since February 2017) and nonfuel (+3.8 percent; the largest 12-month increase since October 2011) prices contributing to the climb. This was the largest over-the-year advance since the year ended January 2012.

For Q1, the import prices recorded a 4.1-percent increase, the largest 3-month rise since May 2011.

Meanwhile, the price index for U.S. exports jumped 2.1 percent m-o-m in March, following an unrevised 1.6 percent m-o-m increase in the previous month.

The March rise was driven by higher prices for both agricultural exports (+2.4 percent m-o-m) and nonagricultural exports (+2.0 percent m-o-m).

Over the past 12 months, the price index for exports rose 9.1 percent, reflecting surges in prices of both agricultural exports (+20.5 percent; the largest over-the-year rise since September 2011) and nonagricultural exports (+7.9 percent; the largest over-the-year advance for the index since September 2011). This represented the largest over-the-year increase since September 2011.

Over Q1, the price index for exports jumped 6.5 percent. This marked the largest 3-month increase since the index was first published in September 1983.

Wells Fargo (WFC) reported Q1 FY 2021 earnings of $1.05 per share (versus $0.01 per share in Q1 FY 2020), beating analysts’ consensus estimate of $0.65 per share.

The company’s quarterly revenues amounted to $18.063 bln (+2.0% y/y), beating analysts’ consensus estimate of $17.423 bln.

WFC rose to $39.89 (+0.25%) in pre-market trading.

USD fell slightly against most of its major counterparts in the European session on Wednesday as strong demand at the latest U.S. bond auction caused a decline in the  U.S. bond yields.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.1% to 91.79.

The U.S. Treasury yields showed a widespread drop as the auction of 30-year bonds Tuesday afternoon saw strong demand. Investors bid for nearly two-and-a-half times more than the $24 billion on offer. This suggested that market participants were not worried about slightly higher than expected U.S. CPI figures for March and stay comfortable with the Fed's pledge to keep its interest rates at their current ultra-low levels for at least another two years. 

Benchmark 10-year Treasury bond yields decreased five basis points to 1.62% at yesterday’s close and fell further to a three-week low of 1.61% overnight. At the moment, 10-year note yields are trading at 1.63%.

Goldman Sachs (GS) reported Q1 FY 2021 earnings of $18.60 per share (versus $3.11 per share in Q1 FY 2020), strongly beating analysts’ consensus estimate of $8.93 per share.

The company’s quarterly revenues amounted to $17.700 bln (+102.4% y/y), strongly beating analysts’ consensus estimate of $11.744 bln.

GS rose to $333.00 (+1.62%) in pre-market trading.

FXStreet reports that the Credit Suisse analyst team notes that the S&P 500 stays on course for the 4200 level, although “red flags” are starting to emerge. 

“Key ‘red flags’ for the S&P 500 are as follows: The rally has extended to the top of its multi-year channel from the 2009 low. We have moved to the upper end of its ‘typical’ extreme – 15% above the 200-day average. OnBalanceVolume is not confirming the new highs and shows a clear bearish divergence. Outright Volume is now falling as the market itself moves higher. 93% of S&P 500 stocks are now above their 200-day average. Weekly DeMark Sequential is now seen very close to an exhaustion signal.”

“Classic momentum measures though are not yet seen at an extreme and we see scope for the market to get more overstretched yet and we continue to look for further gains to 4175, then ideally our core Q2 objective at 4200."

JPMorgan Chase (JPM) reported Q1 FY 2021 earnings of $4.50 per share (versus $0.78 per share in Q1 FY 2020), beating analysts’ consensus estimate of $2.94 per share.

The company’s quarterly revenues amounted to $32.300 bln (+14.3% y/y), beating analysts’ consensus estimate of $29.967 bln.

JPM fell to $153.17 (-0.60%) in pre-market trading.

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. fell 3.7 percent in the week ended April 9, following a 5.1 percent tumble in the previous week. This marked the sixth consecutive decline.

According to the report, refinance applications plunged 5.0 percent, while applications to purchase a home declined 1.4 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased from 3.36 percent to 3.27 percent, the lowest level in five weeks.

“Purchase and refinance applications declined, with most of the pullback coming earlier in the week when rates were higher, noted Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Refinance activity has now decreased for nine of the past 10 weeks, as rates have gone from 2.92% to 3.27% over the same period.”

FXStreet reports that UOB Group’s FX Strategists reiterate the outlook for USD/CNH still remains tilted to the negative side in the near-term.

24-hour view: “Our expectation for USD to ‘test 6.5400’ did not quite materialize as it traded in a relatively quiet manner between 6.5414 and 6.5582. Downward momentum has improved somewhat and a dip below 6.5400 would not be surprising. For today, the next support at 6.5300 is unlikely to come into the picture. Minor support is at 6.5350. Resistance is at 6.5480 followed by 6.5550.”

Next 1-3 weeks: “USD is approaching 6.5400 and a daily closing below this level could lead to weakness towards 6.5300. Overall, USD is deemed under mild downward pressure as long as it does not move above 6.5630.”

FXStreet reports that economists at Credit Suisse note that USD/JPY has broken support from the 23.6% retracement of the Q1 rally at 108.99, which is seen exposing more important support at 108.55/33. Failure to hold this latter area would see a top complete. 

“USD/JPY weakness has extended further for a break of 108.99. This is seen exposing what we see as more important support at 108.55/33, the key lows from March and ‘neckline’ support. Whilst we would look for an attempt to hold here a break would instead see a top complete to mark a more important turn lower. We would then see support next at the 38.2% retracement of the Q1 rally at 107.82/77, with the 55-day average currently at 107.54, which we would look to hold at first.” 

“Resistance moves to 109.33 initially, then 109.57, with the immediate risk seen lower whilst below here."

• This will translate into borrowing volumes of on average roughly EUR150 billion per year, which will make EU one of the largest issuers in euro
• All borrowing will be repaid by 2058
• Commission's diversified funding strategy would combine multiple funding instruments, including medium and long-term bonds, some of which will be issued as green bonds, EU bills

FXStreet reports that economists at Credit Suisse remain bullish on the loonie ahead of next week’s fiscal budget announcement on 19 April and of the BoC’s interest rate decision on 21 April.

“We see COVID-19 and lockdown-related risks to the growth outlook as limited for now, and partially offset by the prospect of additional fiscal spending.”

“Bank of Canada may announce a very gradual plan to reduce asset purchases: we think this would add to the already ongoing reduction in balance sheet growth, with positive implications for CAD.”

“Our view on CAD is constructive, with a 1.2260 USD/CAD target over a three-month horizon.”

Reuters reports that ECB Vice President Luis de Guindos said that the European Central Bank will act on any "detrimental" rise in borrowing costs and considers removing stimulus too early a bigger risk than acting too late.

"At the moment, risks from the early withdrawal of policies are higher than the risks associated with keeping support measures in place," de Guindos told.

Several policymakers including ECB chief Christine Lagarde have expressed satisfaction in the market's reaction to the bank's March decision to "significantly" increase bond purchases and de Guindos said the ECB would act again if markets were out of sync with real economic developments.

"We are continuously monitoring favourable financing conditions and this is going to be our guide in the short and medium term, and if we notice... that there is a detrimental tightening of financing conditions, we will react; this is part of our commitment in the short term, until the pandemic is over," he said.

According to estimates from Eurostat, in February 2021, the seasonally adjusted industrial production fell by 1.0% in the euro area and by 0.9% in the EU, compared with January 2021. Economists had expected a 1.1% decrease in the euro area. In January 2021, industrial production rose by 0.8% in the euro area and in the EU.

In February 2021 compared with February 2020, industrial production decreased by 1.6% in the euro area and by 1.1% in the EU. Economists had expected a 0.9% decrease in the euro area.

In the euro area in February 2021, compared with January 2021, production of capital goods fell by 1.9%, energy by 1.2%, durable consumer goods by 1.1%, intermediate goods by 0.7% and non durable consumer goods by 0.1%. In the EU, production of capital goods fell by 1.9%, durable consumer goods by 1.0%, energy by 0.7%, intermediate goods by 0.6% and non-durable consumer goods by 0.1%.

In the euro area in February 2021, compared with February 2020, production of non-durable consumer goods fell by 4.3%, capital goods by 2.2%, energy by 1.5% and intermediate goods by 0.1%, while production of durable consumer goods rose by 0.7%. In the EU, production of non-durable consumer goods fell by 3.8%, capital goods by 2.4% and energy by 1.5%, while production of intermediate goods rose by 0.5% and durable consumer goods by 2.4%.

Reuters reports that the International Energy Agency (IEA) said that vaccine rollouts are brightening the outlook for global oil demand, though rising cases in some major oil-consuming countries show a recovery may be fragile.

"Fundamentals look decidedly stronger," the IEA said in its monthly report.

"The massive overhang in global oil inventories that built up during last year's COVID-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing."

IEA predicted global oil demand and supply were set to re-balance in the second half of the year and that producers may then need to pump 2 million barrels per day more to meet the expected demand.

OPEC and allies including Russia, a grouping known as OPEC+, can tailor their output to meet demand whether the virus is tamed or not, the IEA added.

RTTNews reports that final data from the statistical office INE showed that Spain's consumer prices increased in March as initially estimated.

Consumer prices grew 1.3 percent year-on-year in March, after remaining unchanged in February. The core inflation remained unchanged at 0.3 percent in March, in line with the initial estimate.

On a month-on-month basis, consumer prices rose 1.0 percent in March, following a 0.6 percent fall in the previous month, as initially estimated.

Inflation, based on the harmonized index of consumer prices increased 1.2 percent in March, as estimated.

FXStreet reports that Benjamin Wong, Strategist at DBS Bank, discusses XAU/USD prospects.

“Gold has developed a minor double bottom and if the pattern delivers, there remains a nudge higher. What’s more, 1671, which is the monthly Ichimoku chart’s kijun support is the level to make or break as gold continues to find its stability pulse.”

“Despite gold having marched higher from its recent 1677 lows, gold remains under the cosh as it stays under the price cloud (the default setting that gold retains the bearish trait of the decline from 2075 highs). That indicates technically gold maintains an underlying bearish trait that was unleashed last September on a crossover sell signal on a 1959 breakdown.”

Bloomberg reports that French Governor Francois Villeroy de Galhau said that the European Central Bank can exit from its exceptional crisis measures while maintaining accommodative monetary policy.

“Our monetary policy should remain accommodative for the years to come, but our combination of instruments could evolve,” Villeroy said.

To ensure a smooth transition out of crisis stimulus, he said the ECB can use the flexibility of its PEPP asset purchase program, combined with the possible end date of March 2022, and enhanced forward guidance to make it clear the institution will let inflation overshoot its 2% target, he said.

“We would have a full range of what I call a quartet of instruments: asset purchases and adjustments of them, but also negative rates, liquidity provision, and fourth, and not least, forward guidance,” Villeroy said.

FXStreet reports that Credit Suisse analyst team said that aluminum (LME) is currently seen as the strongest industrial metal.

“Aluminum completed a major base last year and is seen on the cusp of resolving its recent range to the upside with a break above the recent range high at $2301 needed to confirm. This should then lead to further upside potential toward $2375, the May 2018 high, before the even more important 78.6% retracement of the whole 2018/2020 downmove seen at $2448, which we would expect to cap at first. Beyond though in due course can expose $2718, the April 2018 high.”

During today's Asian trading, the US dollar fell against the euro, yen and pound. The statistical data published on the eve, which showed an increase in inflation in the United States to the highest in more than 2.5 years, could not support the US currency due to the appearance of signals about the possibility of slowing down the pace of vaccination in the world.

Earlier on Tuesday, the US Food and Drug Administration (FDA) recommended suspending the use of the COVID-19 coronavirus vaccine, produced by Johnson & Johnson, due to cases of thrombosis. This has raised concerns that, with the pace of vaccination slowing, the Federal Reserve (Fed) will be forced to start scaling back stimulus measures later than currently expected, despite accelerating inflation.

U.S. consumer price growth (CPI) accelerated to 2.6% year-on-year in March after rising 1.7% in February, Labor Department data showed. Inflation has reached its highest level since August 2018. Analysts on average predicted a rise of 2.5%.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell 0.17%.

Reuters reports that an ECB survey showed that eurozone citizens expect the European Central Bank's proposed digital euro to be private, safe and cheap.

"What the respondents want most from a digital euro is privacy (43%), security (18%), usability across the euro area (11%), the absence of additional costs (9%) and offline use (8%)," the ECB said in a report.

The ECB is working on creating an electronic form of cash but a digital euro is unlikely to be a reality for four to five years at a minimum.

eFXdata reports that Credit Suisse discusses CHF outlook.

"We believe that the SNB sold CHF 583 million worth of FX reserves in February. A small amount compared to a total of CHF 934 billion. However, it appears that the SNB shifted reserves in March as well. These sales should not be seen as a tightening of monetary policy but as an attempt to defuse the tensions with the US. Nevertheless, we believe this move introduces more two-way risk in EURCHF from here, keeping FX vols supported," Credit Suisse adds.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2053 (3302)

$1.2026 (1726)

$1.2005 (909)

Price at time of writing this review: $1.1965

Support levels (open interest**, contracts):

$1.1908 (346)

$1.1885 (507)

$1.1856 (1506)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date May, 7 is 47401 contracts (according to data from April, 13) with the maximum number of contracts with strike price $1,2000 (3302);

GBP/USD

$1.3906 (930)

$1.3876 (499)

$1.3850 (339)

Price at time of writing this review: $1.3785

Support levels (open interest**, contracts):

$1.3713 (668)

$1.3678 (360)

$1.3626 (1900)

Comments:

- Overall open interest on the CALL options with the expiration date May, 7 is 12822 contracts, with the maximum number of contracts with strike price $1,4200 (3731);

- Overall open interest on the PUT options with the expiration date May, 7 is 15695 contracts, with the maximum number of contracts with strike price $1,3700 (1900);

- The ratio of PUT/CALL was 1.22 versus 1.23 from the previous trading day according to data from April, 13

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that New Zealand's central bank left its monetary policy unchanged on Wednesday, as widely expected.

The Reserve Bank of New Zealand decided to keep the Official Cash Rate at 0.25 percent and the Large Scale Asset Purchase at NZ$100 billion.

The committee agreed to retain its current expansionary monetary setting until consumer price inflation will be sustained at the 2 percent target, and that employment is at or above its maximum sustainable level.

The MPC said it is prepared to lower the benchmark rate if required.

The committee observed that short-term data continues to be highly variable as a result of the economic impacts of COVID-19.

Over the medium-term, the outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence, the MPC said.