Cautious start to Q2

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Daily News – 1 April 2020

By: Andria Pichidi

The cautious sentiment holds strongly as coronavirus outbreak-led fears showed no signs of abating. – US, Europe and the UK facing a severe crisis situation. – Warnings of very high death tolls from U.S. President Trump hit sentiment at the start of the second quarter.
Month- and quarter-end are seeing some big flows but no real strains. -The USA30 dropped -1.8% on the day and plunged 23% on the quarter, the worst Q1 ever. The USA500 fell -1.6% and declined 20% since January, the worst since the financial crisis. GER30 and UK100 futures have lost -3.2%.

USD INDEX declines to 98.85.

Treasuries remain on a solid bid overall but decline overnight. – The drop came after the exclusion of some bonds due to the huge moves in markets seen during March.

While Wall Street may stabilize somewhat in Q2, the economy will be hit hard with estimates for hefty rates of contraction. Market estimates -9% drop in Q2 and a like-size bounce in Q3.
      • China’s Caixin manufacturing PMI climbed 9.8 points to 50.1 in March, almost fully               recovering from the 10.8 point drop to the record low of 40.3 in February.
      • RBA Minutes: No appetite for negative interest rates
      • BoJ Gov Kuroda: If inflation nears 2%, BoJ will need to adjust monetary policy to                stabilize prices
      • Japan PM Abe: Not in a situation to declare an emergency now
      • German retail sales jumped 1.2% m/m in February. – These numbers clearly precede          the virus-restrictions.

 FX MARKET

USOIL – down to $22.00 – Next Support $19.10 & $19.15. R1: 20.65 – API data registered huge inventory build
GOLD – dropped below $1600 amid end-of-quarter flows. Trades below PP at 1590. R: 1608 and S: 1560.
CAD the main loser – drifted to 1.4008 from 1.4350. Currently regained 1.4100 level. R: 1.4250 and S: 1.4060 and 1.3930
NZD trades below PP. Currently at 0.5915 – S at 0.5900 and 5835
AUD – down on amid weak gold, trades below PP. S at 0.0.6066 and 0.5990, R at 0.6138 and 0.6205
YEN below PP at 107.90, S at 107.00, R at 108.35
CHF – gained some ground but holds above 0.9600 – S1 at 0.9590 and 0.9560, R at 0.9675
GBP – drops below 1.2400 as coronavirus woes UK diplomats. Currently trades at 1.2360 – S1: 1.2275 and R: 1.2470
EUR – ignores better than expected German retail sales. Below 200-day SMA for a 3rd day. -S:1.0956 and R: 1.1040-10.50.

TODAY: European final Manufacturing PMI, along with the UK Final Manufacturing PMI and Eurozone Unemployment Rate will also offer some fresh trading incentives. The highlight of the day will be US ADP Employment Change followed by US Manufacturing PMI reports due to be published by both Markit and ISM

Biggest (FX) Mover – CADJPY (-1.25%) – drifted from 76.76 to 75.80. It trades below PP while it trades below 20-day SMA for a 3rd consecutive day. Daily momentum indicators continue to negatively configured while intraday indicators turned negative earlier. RSI (37) negative, MACD just turned negative while signal lines is at zero. Stochastics post bearish cross at 48 and currently slopes southwards . – H1 ATR is at 0.25 and at H4 ATR is at 0.52


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