The US dollar has rallied a bit against the Mexican peso during the early hours on Wednesday, as we continue to see a lot of volatility overall.
Keep in mind that the interest rate differential actually favors Mexico in this equation, and that’s part of why we had seen such a strong downtrend for so long.
That being said, we are in between the 50-day EMA and the 200-day EMA indicators, and that, of course, is an area you normally see a lot of volatility in. This is mainly due to a lot of technical traders placing trades in one direction or the other. More importantly, we’re around the 17 pesos level, which has a certain amount of psychology attached to it, and then you also have to keep in mind that there’s probably options barriers in that neighborhood as well.
Risk Appetite Continues to Matter
Because of this, I think we’ll have to pay close attention to how things play out because there is a risk appetite component in the USD/MXN pair. Keep in mind, people generally run to the US dollar in times of trouble and away from emerging market currencies regardless of the interest rate that you get paid. Beyond that, Mexico is highly levered to the US economy as it is now the number one exporter to the United States.
And obviously there’s a major influence on Mexican corporations and factories, et cetera, depending on what’s coming out of the U.S. With all of that being said, it does look like there is a large amount of clustering above that could cause some issues. And therefore, I think it’s going to be difficult to rally from here significantly. However, if we were to rally above 17.30 pesos then you have to think that perhaps the trend change is in the cards. It could be a difficult move, but it’s worth noting that if we do rally at this point in time, it could lead to not only the Mexican peso struggling, but also quite a few emerging markets as well.
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
You can see that the DAX did rally pretty significantly right off the bat here early Monday morning, but we are starting to see trouble in a very familiar area.
This area for lack of a better number, I’m going to call 18,250 euro.
It does look like we are essentially trying to consolidate here
With that being said, it does make a certain amount of sense that perhaps we will see a market that just bangs around between the 50 day EMA and the 18,250 euro level in the short term. But overall, it is a market that’s bullish. This consolidation makes a certain amount of sense after the recent pullback as traders have to test the waters to see whether or not the stock market is where they want to be.
DAX is the Big Market for EU
Furthermore, you must keep in mind that the DAX is the gateway to the rest of the European Union. So as the DAX goes, typically, so goes the AMX, the CAC, the MIB, et cetera. So with all of that being said, even if you’re not trading the DAX directly, this is an index that you need to pay close attention to if you have anything to do with equities on the continent.
If we can break above the 18,250 euro level on a daily close, I think at that point in time, you will have a real shot at this market trying to reach the highs again, near the 18,563 euro level. On a pullback, if we were to break down below the 50 day EMA, we could see the DAX go looking to the 17,500 euro level in area that has recently been massively supported. This area being broken below would obviously be a major turn of events, and therefore would be disastrous for not only the German stock exchanges, but for exchanges around the continent, as it is such a big player.
The EUR/USD pair could also give us an idea of how things go, as the German economy is so laden with export based companies. The euro falling against the dollar could also be a tertiary signal for where we go here as well.
S&P 500 Forecast: Continues to See Inflows
The S&P 500 rallied early during the trading session on Monday, as it looked like money was flowing back into Wall Street and stocks overall.
This does make a certain amount of sense, because people are starting to celebrate the idea that the jobs report in the United States was fairly weak, and therefore we could possibly be seeing the potential scenario setting up that the Federal Reserve could actually cut rates.
After all, this is what Wall Street cheers. They cheer unemployment. This should bring down inflation and therefore stocks should perform a bit better as rates in America drop. Speaking of rates, you will have to pay close attention to the interest rate situation which has been falling, but certainly looks as if it could turn around at any moment. If rates start to spike in America, that could very well put downward pressure on stocks.
Not Equal-Weighted
The S&P 500, of course, is not an equal weighted index. So, you have to keep that in mind. But I think ultimately as long as the top ten stocks or so are doing fairly well, you have a situation where the S&P 500 will rally. Underneath we have the 50 day EMA hanging around the 5090 level. And then underneath there we have the 5000 level which could be massive support as well, both from a structural and psychological standpoint.
It looks to me like the market is going to continue to be a buy on the dip scenario, and that we will eventually try to go looking toward the 5300 level, which is essentially where we topped out at recently. In general, this is an uptrend that had a nice correction of roughly 6 or 7%. And now those who are willing to follow the trend are starting to put money to work. That being said, you need to be very cautious about jumping in with both feet as there have been a lot of issues out there as of late, some of which have nothing to do with the stock market itself such as the geopolitical risks. Ultimately, I am bullish of this market, but I also recognize that there are a lot of exterior pressures out there that could come into the picture. Obviously, comma the fact that we are in the midst of earning season is a major issue as well.
NASDAQ 100 Forecast: Continues to Find Buyers
The Nasdaq 100 rallied a bit during the trading session on Monday, after initially pulling back the 17,850 level continues to be important as it showed itself to be support on that short term pullback.
Nonetheless, this is a market that I think does continue to go higher and eventually goes looking to reach the 18,385 level.
The market has been bullish for some time, and the fact that we have recovered so aggressively over the last couple of trading days certainly bodes well for the index.
Keep in mind that the 50 day EMA sits just below the 17,850 level as well. So that’s another reason to think that there are buyers just waiting to get involved in this environment. I just don’t have any interest whatsoever in trying to short this market because quite frankly, there’s just too much momentum. We will have to pay close attention to interest rates in the United States because quite frankly, if they start to rally, that might cause major issues for the Nasdaq 100 and some of the major technology companies.
We are in the midst of earnings season, so that could bring in a little bit of volatility. But I think at this point in time, it’s obvious that the Nasdaq 100 index wants to do everything it can to go higher. The short term pullbacks, I think, continue to be buying opportunities. The 17,000 level underneath is probably a major floor in the market, as it was the most recent swing low. This is more than likely not to be a concern, but it is a possibility if we get a sudden surge of fear in the markets overall.
The Other Scenario
If we break down below there then the 200 day EMA comes into the picture. But really at this point in time, I just don’t see an argument for shorting the market. And every time we pull back, I would have to assume that there will be buyers getting involved trying to take advantage of the Nasdaq 100 itself.
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
Gold and Silver are holding up relatively well despite the generally strong bearish reversals we have recently seen in commodity markets.
Silver is outperforming Gold, so traders should be more confident of being long of Silver than of Gold.
Neither precious metal looks like an immediate buy. It will probably be wise to wait for Silver to clear $27.50 or for Gold to clear $2330 before entering any new long trades.
Stock markets are generally rising again, which is probably good news for further rises in Gold and Silver.
Gold (XAU/USD): Technical Analysis
The price chart below shows that Gold is still established within a long-term bullish trend despite retreating from its record high made just a few weeks ago. Bulls still need caution as the price is not trading in blue sky and is prone to hitting resistance and swinging lower.
A few hours ago, the price made what seems to be a significant bearish reversal at the resistance level just below $2330. The price is currently sitting on the nearest support level at $2315 and looks quite likely to fall to $2308.
Silver is more bullish, but a long trade here in Gold could be a good idea if we get a bullish bounce at $2315, $2308, or even $2290. In the current technical circumstances where the price is not making any bullish breakouts, trading from bounces at support, even after a deep retracement, will likely be the best approach.
Silver (XAG/USD): Technical Analysis
The price chart below shows that Silver is still established within a long-term bullish trend despite retreating from its multi-year high made just a few weeks ago. Bulls still need caution as the price is not trading in blue sky and is prone to hitting resistance and swinging lower.
A few hours ago, the price made what seems to be a significant bearish reversal at the resistance level just below $27.50 which is a major quarter-number. The price is currently sitting on the nearest support level at $27.18 and looks quite likely to reject it, giving a possible long trade entry now.
A long trade here in Silver could be a good idea if we get a bullish bounce at $27.18, $27.00, or even $26.84. In the current technical circumstances where the price is not making any bullish breakouts, trading from bounces at support, even after a deep retracement, will likely be the best approach.
I see Silver as a better potential buy than Gold right now, but more conservative traders might prefer to wait for a bullish breakout above $27.50 instead of buying on the dip after a bounce at a key support level.
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
The USD/MXN has fought once again below the 17.00000 price level and Friday’s price action produced depths not seen since the middle of April.
As of this writing the USD/MXN is trading near the 16.94820 ratio as the currency pair has been able to sustain momentum below the 17.00000 level.
Sentiment in global Forex has produced a weaker USD recently and financial institutions reacted to Friday weaker than anticipated U.S jobs numbers with more selling pressure.
The USD/MXN touched a low around 16.83000 on Friday in the midst of strong selling momentum.
While the lower depth was not able to be maintained, the reversal higher has been polite and the broad Forex market has also sustained a weaker USD centric stance today. Bearish momentum in the USD/MXN has been a solid factor over the long-term and the move above the 17.0000 which touched a high of around the 17.52000 mark (excluding the temporary spike caused by Middle East conflict concerns which touched the 18.16000 ratio) on the 19th of April has once again seen value turn lower.
USD/MXN and Support Levels as Sentiment Shifts
Bearish traders of the USD/MXN will certainly have their eyes on lower depths for the currency pair. On the 9th of April the USD/MXN traded around the 16.26250 level. Forex has been volatile over the past four months and this may continue still. However, recent U.S data may have started to create a shift once again in behavioral sentient regarding economic outlook and what the Federal Reserve will be able to do moving forward.
While inflation remains troubling in the U.S, last week’s weaker than expected earnings numbers may make financial institutions lean towards a weaker USD outlook. Now that the 17.00000 level in the USD/MXN has been proven vulnerable again and price action has been able to be kept below this mark, bearish traders may believe sentiment can take the USD/MXN back to known levels below.
Short-Term USD/MXN Bets
There will not be a lot of U.S economic data until later this week. Traders should keep their eyes on U.S Treasury yields; if these numbers stay muted through Wednesday and begin to decline it will likely help the USD become weaker.
If the 16.91000 level is broken lower and sustained in the near term it would likely ignite more selling optimism for the USD/MXN.
However traders should keep in mind the rather messy results produced in the broad Forex market the past 4 months full of reversals.
Momentum lower might be wagered on, but sustainability is still more of a hope at this juncture as the Federal Reserve outlook still remains unclear for the mid-term.
USD/MXN Short Term Outlook:
Current Resistance: 16.95100
Current Support: 16.93010
High Target: 16.97500
Low Target: 16.89200
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
Gold was all over the place during the trading session on Friday as the jobs numbers came out lower than anticipated.
Looking at the shorter term charts, the market had initially swung all the way up to the $2,323 level in the $2,275 level and then turned around to basically close in the middle of the day at the middle of the candlestick.
So, a lot of noise for no particular reason. It is interesting to note that we are right around the $2,300 level and that of course is an area that a lot of people will pay attention to as it is a large round psychologically significant figure.
That being said, if we can take out the top of the candlestick from the Friday session, I suspect that we may continue to see upward pressure. There are plenty of reasons to think that gold may continue to go higher, not the least of which, of course, is geopolitical concerns. Even if we broke down below the bottom of the candlestick for the day, then the 50-day EMA right around the $2,250 level and then eventually the $2,200 level, both could offer a significant amount of support.
External Pressures
Pay attention to interest rates, because if it looks like traders are betting on the Fed cutting rates sooner rather than later, that will also help gold. This is a chart that is very technically sound and despite the fact that we got thrown around quite a bit on Friday, the reality is, this is still a very bullish market.
Because of this, I have no interest whatsoever in trying to get short of the gold market, and most of my energy is focused on trying to find a decent entry point. Over the longer term, I would not be surprised at all to see the gold market go much higher, perhaps even reaching $2,500 given enough time. On the downside, even if we break down below the $2,200 level, I think there are plenty of buyers underneath it might jump into the market in trying to take advantage of “cheap ounces.”
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
After touching lows on the 1st of May which challenged the 1.06500 level, the EUR/USD began to find buyers and a strong upwards surge developed on late Thursday and into Friday.
Speculators proved they have the desire to wager the end of last week. They might have gotten slightly ahead of their outlooks, but the EUR/USD did climb upwards from lows seen on Wednesday when the 1.06500 level was tested.
The upwards wave of buying began on Thursday and built into a powerful move Friday with the publication of U.S jobs data.
A high of nearly 1.08140 was seen on Friday before selling came into the market again and the EUR/USD went into the weekend near the 1.07583 mark.
The ability of the EUR/USD to finish at a higher level this past week compared to the value it started with will be welcome news for bullish traders of the currency pair. The values the EUR/USD closed with were last seen in the second week of April, but this was when the currency pair was actually caught in a downtrend. It hasn’t been since the 2nd of April that the EUR/USD has seen its current ratio while in the midst of an upwards climb.
Near-Term Nervous Sentiment in the EUR/USD
Trading in Forex, including the EUR/USD has been a wicked wagering landscape for a handful of months. However, last week’s U.S economic data may have been a rather important development for the outlooks of financial institutions. Gross Domestic Product came in weaker than anticipated, the falling growth numbers may slow the U.S economy and present traders with the hope that eventually weaker U.S growth will help erode inflation. The U.S Non-Farm Employment Change also came in below expectations.
While inflation remains a concern for the U.S Fed, earnings data on Friday was slightly weaker than anticipated. Rising prices in the U.S remain a concern for the Federal Reserve and they said this on Wednesday when they said they are uncertain about what inflation will do over the mid-term. It should be pointed out that WTI Crude Oil prices came down last week, which may help battle inflation too. But short-term speculative prices must turn into trends and this has not happened yet. However EUR/USD traders did show confidence and bought the currency pair in a flurry on Friday while speculating on better values. Nervous sentiment remains and this was seen as the EUR/USD couldn’t hold onto its loftier values as Friday closed. This coming week may see a wide price range too.
Starting Points for the EUR/USD This Week
German inflation numbers came in slightly below their expected results last week, which is perhaps a good sign for the European Union. However this data did not fuel a massive amount of EUR/USD buying. The ECB will conduct a virtual meeting this week, but it will not include a monetary policy decision, this will only come in June from the European Central Bank. The ability to go into the weekend above the 1.07500 mark will be looked upon favorably, but can the currency pair hold its ground and upwards momentum?
Perhaps financial institutions may start wagering on the notion that the worst of the economic news from the U.S is now in and the Federal Reserve will be able to start becoming dovish.
But betting on a change of direction from the Fed remains speculative taking into consideration inflation data from the U.S last week.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.06930 to 1.08910
Having produced a climb last week and a move above the 1.08000 level momentarily on Friday was an interesting development in the EUR/USD. However, the inability to sustain higher levels will cause nervousness for some traders as they contemplate tomorrow’s opening. If the EUR/USD can open with sustained trading above the 1.07550 level this would be seen as a positive.
Traders should also be aware that British banks will be closed tomorrow for their May holiday. This will make volumes within the EUR/USD lower than normal to start the day. Volatility might continue into Tuesday because of this, and then on Wednesday a host of European nations will be closed for a holiday. Last week’s higher finish was good news for the EUR/USD but the choppiness produced in the currency pair the past few months should serve as a reminder that outlooks remain cloudy and trading could stay speculative and without a firm trend.
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
At this point, the market is likely to continue to look at the 1.15 level as a major ceiling, and the fact that we have fallen so hard will certainly scare some traders away.
However, it’s also worth noting that we continue to knock on the door of the ceiling, and of course the interest rate differential favors the British pound, and therefore I think given enough time we eventually do break out.
Swiss National Bank
Keep in mind that the Swiss National Bank has no interest in seeing a strong Swiss franc at the moment, so you won’t have some of the noise and concerns that you have dealing with the Japanese yen at the moment. After all, the Japanese have intervened a few times, although they will end up losing. In this particular pair, the Swiss really don’t have any issue with the depreciation of their currency at this point, because it has been so strong for so long. In that sense, you do have a bit of a tailwind in this pair that you don’t have in some others.
All things being equal, I do believe that we have a situation where sooner or later the buyers come back in and take advantage of the interest rate differential, as it does pay so well at the end of each session. Remember, institutional traders pay close attention to this, and given enough time I do think that it is a main driver here. At this point, I think there is plenty of support all the way down to the 1.13 level, with the 50-Day EMA city just above there. In general, this is a pair that I’m looking for value to take advantage of.
That being said, if we were to simply turn around and rip through the upside, I think at that point you also have to consider getting long in GBP/CHF pair because at that point in time it would be very likely to see this pair reaching toward the 1.20 level over the longer term. Obviously, that would be something that would take some time to accomplish.
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
The German DAX has rallied just a bit during the early hours on Thursday as it looks like we are trying to recover a bit.
The 18,000 euros level is an area that obviously will attract a lot of attention due to the fact that it is a large, round, psychologically significant figure, but it’s also an area where we have seen some noise previously.
The market at this point in time continues to see the 50 day EMA underneath as potential support.
In this type of environment, I think we continue to see a lot of consolidation as we try to sort out which direction we are going in the longer term.
Trend is Still Positive
The DAX is bullish overall, but I think also this is a situation where if we can break the candlestick from the last couple of days then we could go looking to the 18,500 euro level. Underneath the 50-day EMA there is a lot of support that we’ve seen recently so I’m not interested in shorting this market anytime soon.
That being said, the 17,500 level is an area that I think a lot of people will be paying attention to because if we were to give that up, then the uptrend could be threatened. Keep in mind the DAX is the gateway to Europe for most traders so they will look to it as a place to put money to work initially. In that sense, you can look at the DAX as a harbinger of what happens on the rest of the continent such as trading in the MIB in Italy or the AMX in Amsterdam etc. At this point it looks like we’re trying to beat back some of this negativity, but I think we’ve got some choppy and volatile days ahead
When you get this type of choppy volatility, you are better off using small positions, but given enough time I do think that we continue to see an attempt to rally. If we don’t rally in this market, and start to break down, then the real trade would be to short some of the smaller European indices.
S&P 500 Forecast: Continues to Consolidate (SIGNAL)
Potential signal: if we break above the top of the wipeout candlestick from Tuesday, near the 5140 level, I would be a buyer and go looking toward the 5275 level. Underneath, the 5000 level would be my stop loss.
Ultimately, this is a market that I do think has a lot of support underneath it, but the 5000 level is an area that I think he is psychologically important as well as potentially structurally supportive as well. In fact, I think it’s an area of support that extends down to the 4925 level.
The 50-Day EMA sits just above, offering a certain amount of resistance. If we were to break above there, then the market is likely to go looking toward the 5125 level. Breaking above that level opens up the possibility of a move toward the 5300 level, but we would need to see some type of momentum in the market. That being said, it’s probably only a matter of time before Wall Street finds a reason to start pushing a bullish narrative again.
Interest Rate Markets and Jobs
Friday is the nonfarm payroll announcement, and that of course will have a major influence on what happens next. Ultimately, which you need to watch is interest rates coming out of the 10 year note in the United States, because that’s the only thing that Wall Street cares about, whether or not it is going to get cheap money. This has absolutely nothing to do with the economy, because as an American I can tell you that things are getting rapidly more expensive. Wall Street is worried about getting cheap money to push around and take advantage of liquidity.
This is a bit ironic, considering we are in the midst of earning season, but quite frankly earnings have nothing to do with what happens with the stock. That’s like assuming that stocks have something to do with the economy. It’s a transmission of liquidity like it has been since the Great Financial Crisis. This is a market that is currently trying to sort out whether or not it has enough liquidity to support it. If it does, it will rise. If it does not, it will fall. At this point, I think the only thing you can count on is a lot of noise.
Nasdaq 100: Sandwiched, Watch US 10-Year Treasury Yield Next
Nasdaq 100 has exhibited short-term intraday wild gyrations of 3% to 4% in opposite directions since last week.
Today’s data focus will be on US non-farm payrolls and ISM Services PMI for April to offer clues on whether the stagflation risk narrative is still alive.
Macro factors such as the movement of the US 10-year Treasury yield are likely to take over the driver’s seat over micro factors (earnings results) in the next two weeks.
Key levels on the US 10-year Treasury yield to watch are 4.70% (above, likely to be bearish for Nasdaq 100) and 4.58% (below, bullish bias for Nasdaq 100).
Since our last publication, the Nasdaq 100 has continued to inch lower from its current all-time high level of 18,465 printed on 21 March 2024. It has just ended April with a monthly loss of -4.46%, its worst monthly performance since September 2023 after its prior five consecutive months of positive returns.
So far it has recorded a maximum drawdown of -8% from its current all-time high to the recent 19 April 2024 low of 16,974, and current episodes of minor rebounds in price actions have been rejected by the downward slopping 20 and 50-day moving averages; the hallmark of a potential on-going medium-term corrective decline sequence within its longer-term major uptrend phase.
On a shorter-term intraday basis, wild gyrations between a range of 3% to 4% in opposite directions have been seen on the Nasdaq 100 due to several significant risk events, and data releases that unfolded this week, two of the “Magnificent 7 group of mega-cap US stocks earnings results (Amazon and Apple), US ISM Manufacturing PMI, US Treasury refunding requirements, and the FOMC monetary policy meeting.
These events and data sets offered conflicting signals on the state of the US economy; stagflation risk is still alive but negated by the Fed’s upcoming Quantitative Tightening (QT) taper initiative to kickstart in June where the monthly amount of US Treasuries roll-off in the Fed’s balance sheet will be reduced to US$25 billion from US$60 billion.
Hence, the QT taper initiative has offered a relief to potentially cap any adverse liquidity squeeze in the US financial system that can trigger a spike in short-term and overnight interest rates as a lesser amount of banks’ reverses may be needed to fund the US Treasury general account (TGA) as the amount in the Fed’s overnight reverse repos facility (the primary source of funding for TGA replenishment since September 2023) has dwindled to almost zero (US$428.68 billion as of 2 May 2024) from a peak of US$2.55 trillion in December 2022.
Watch US NFP & ISM Services PMI for more clarity on the state of the US economy
There will be two more key pieces of economic data to digest before we end this hectic and volatile week, US non-farm payrolls for April where there may be a risk of upside surprise as consensus expectations have been lowballed to +181K jobs added after a surprise rosy print of +232K jobs in March. April’s ISM Services PMI on the health of the US services sector will be out later; still in an expansionary mode (above 50 reading) but the pace of expansion has slowed since the start of the year with last month’s March print of 51.1 versus 53.4 seen in January. If April’s number comes in below expectations of 52 and March’s 51.1, the stagflation risk narrative is likely to gain traction again.
US 10-year Treasury yield may dictate Nasdaq 100’s next intermediate moves
A clearance above 4.70% resistance on the US 10-year Treasury yield (inverted) may trigger another potential downleg in the Nasdaq 100 with its key medium-term support zone coming in at 16,560/290 (also the 200-day moving average).
On the flip side, a break below 4.58% near-term support on the US 10-year Treasury yield (inverted) is likely to see a continuation of the rebound on the Nasdaq 100 from the19 April 2024 low to expose the next intermediate resistance at 17,900
To get LIVE ACCURATE 2-3 TRADES daily (Forex/Comex/Stocks) Telegram Financial Advisor
Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 