A couple of lines of text from the Bank of England Minutes got the attention of the market yesterday; “for some members, the monetary policy decision was becoming more balanced”. This was taken as a subtle indication that the vote for keeping rates on hold might not be 9-0 for much longer. Another was “the more gradual the intended rise in bank rate, the earlier it might be necessary to start”.
Retail sales stepped in at the same time as the minutes to further boost the UK’s credentials. Shoppers in April, helped by a late Easter, boosted sales by almost 7% compared to a year earlier, which is the strongest single month growth in almost a decade.
The market wasn’t really prepared for what we heard and the trading reaction was fairly swift, with Sterling rising against its peers, particularly against the Euro which was suffering at the fact that the statement from the BoE highlighted a likely deepening of policy divergence in the not too distant future. A lot of the action was in the bond market, where the yield spread between German and UK government debt hit a 15 year high.
Another light blow for Europe is that of Russia signing its gas deal with China. The deal was struck in Shanghai at 4am their time and will mean the supply of more than a trillion cubic metres of gas over the next thirty years, once the pipeline is built. Equally interesting is that the deal will bypass the US Dollar as its denomination of choice – a first for such a large energy deal and probably a small worry for the US, who borrow well beyond their means on the back of their currency’s status.
China had another thing to smile about last night as their manufacturing numbers came in a whole point higher than even the highest forecast. The data also showed an increase in new export orders, which further fuelled risk appetite and lifted a number of Asian bourses by more than 1% on the session.
From the US, the Federal Reserve’s last meeting was apparently much less interesting than the Bank of England’s. They’re still resigned to the fact that the cold weather slow down hasn’t been entirely overcome and the housing market could risk a persistent slowdown. One thing to give them credit for is that they are already talking about how to normalise monetary policy, even though the starting point for doing so is still a long way off – that said, working out how to raise interest rates whilst holding a balance sheet of that size and at the same time maintaining a stable market is a real head scratcher, so they’ll need all the time they can get, I’m sure.
Looking at today, the data sheet kicks off with French confidence figures, followed by PMI data from both Paris and Berlin and then Europe as a whole. This will be an interesting one to watch, as ECB member Weidmann said yesterday that ECB action in June is not a done deal. If the numbers disappoint he’ll probably wish that he could scratch those comments from the record. Following this is a wave of UK data wit h the highlight being GDP for Q1. Later we’ve got US manufacturing, jobless claims and home sales. We go into the day riding on the back of the Chinese wave, so if the chips fall in favor, we could see a lot of buying.
Forex Dance Floor
The pick of the day is UDS/CHF. Remember my horror story about this pair last week? Well, I’m still waiting and see whether I should completely change my bearish outlook into bullish on this naughty pair. The pair still remains within a downward channel with the RSI approaching the overbought zone. The most important key here is the 50% Fibonacci level which the pair is getting close to. Will Mr. Fibo hold the pair at 0.8975 and prevent them from going further up? We shall wait and see. And if it does, that could be a perfect entry point for bears, with targets at 0.87, 0.858 and 0.8275 in extension. Now if the pair decides to go nuts and break all these boundaries. We shall see more upside towards 0.915 and 0.938.
Intraday, look for long positions above 0.891 with targets @ 0.896 & 0.8985 in extension.
Long term traders. Don’t sweat the small losses and look at the big picture. Short term traders, invest responsibly. And wait, are we hooked up on the social media? To get the most recent intraday updates, don’t forget to follow Invest Diva on Twitter and Facebook.
Intraday Forex Technical Levels
EUR/USD Intraday: key resistance at 1.37.
Invest Diva likes: Short positions below 1.37 with targets @ 1.364 & 1.362 in extension.
If pair goes nuts: Above 1.37 look for further upside with 1.372 & 1.3735 as targets.
What’s up on the dance floor: Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited. Indeed, the 1.37 resistance area maintains a bearish bias.
Supports and resistances:
1.3735
1.372
1.37
1.367 Last
1.364
1.362
1.36
GBP/USD Intraday: supported by a rising trend line.
Invest Diva likes: Long positions above 1.6845 with targets @ 1.6935 & 1.697 in extension.
If pair goes nuts: Below 1.6845 look for further downside with 1.68 & 1.678 as targets.
What’s up on the dance floor: The RSI has just landed on a support around 30% and is reversing up.
Supports and resistances:
1.7
1.697
1.6935
1.6872 Last
1.6845
1.68
1.678
USD/JPY Intraday: bullish bias above 101.25.
Invest Diva likes: Long positions above 101.25 with targets @ 101.9 & 102.1 in extension.
If pair goes nuts: Below 101.25 look for further downside with 101.05 & 100.8 as targets.
What’s up on the dance floor: The RSI is mixed with a bullish bias.
Supports and resistances:
102.35
102.1
101.9
101.61 Last
101.25
101.05
100.8
NZD/USD Intraday: under pressure.
Invest Diva likes: Short positions below 0.86 with targets @ 0.8535 & 0.851 in extension.
If pair goes nuts: Above 0.86 look for further upside with 0.8635 & 0.8655 as targets.
What’s up on the dance floor: As long as the resistance at 0.86 is not surpassed, the risk of the break below 0.8535 remains high. The pair is trading in a bearish channel.
Supports and resistances:
0.8655
0.8635
0.86
0.8563 Last
0.8535
0.851
0.8485
AUD/USD Intraday: bullish bias above 0.9205.
Invest Diva likes: Long positions above 0.9205 with targets @ 0.929 & 0.9315 in extension.
If pair goes nuts: Below 0.9205 look for further downside with 0.9175 & 0.915 as targets.
What’s up on the dance floor: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Supports and resistances:
0.934
0.9315
0.929
0.9237 Last
0.9205
0.9175
0.915
USD/CAD Intraday: bullish bias above 1.0885.
Invest Diva likes: Long positions above 1.0885 with targets @ 1.096 & 1.099 in extension.
If pair goes nuts: Below 1.0885 look for further downside with 1.0845 & 1.081 as targets.
What’s up on the dance floor: The RSI lacks downward momentum.
Supports and resistances:
1.101
1.099
1.096
1.091 Last
1.0885
1.0845
1.081
Intraday US Index
S&P500
Long positions above 1874 with targets @ 1892 & 1899 in extension.
Alternative scenario: Below 1874 look for further downside with 1864 & 1859 as targets.
Dow Jones
Long positions above 16390 with targets @ 16560 & 16620 in extension.
Alternative scenario: Below 16390 look for further downside with 16310 & 16240 as targets.
Nasdaq 100
Long positions above 3584 with targets @ 3657 & 3680 in extension.
Alternative scenario: Below 3584 look for further downside with 3564 & 3540 as targets.
Russell 2000
Long positions above 1088 with targets @ 1115 & 1126 in extension.
Alternative scenario: Below 1088 look for further downside with 1078 & 1068 as targets.
