Today's Spotlight

Market Overview

Brent Donnelly, president at Spectra Markets, said in a Monday note to clients, “I think real money and CTAs [commodity trading advisors] are going to start selling USD. They probably would have been selling already if London wasn't on holiday,” 

“You have a Fed priced for perfection, ECB max priced, and US data looking far from perfect. I like the dollar lower against most pairs, but particularly USDJPY and EURUSD,” he added. He's long EURUSD and USDJPY short.

There are no economic data on Monday's schedule, but Richmond Fed President Tom Barkin is due to speak at 12:50 pm ET, followed by New York Fed President John Williams at 1:00 pm ET. They both vote on the interest rate policy-setting Federal Open Market Committee in 2024.

Tuesday's highlights include weekly Redbook same-store sales and the TIPP consumer sentiment reading.

Wholesale inventories data, weekly mortgage applications, and petroleum stocks data are due Wednesday; followed by weekly jobless claims and natural gas stocks on Thursday, and the preliminary University of Michigan consumer sentiment reading for May on Friday.

Release from the previous quarter, and the weak US jobs report from last Friday, raise the possibility of Rate cuts, removing rate hikes possibilities, increasing momentum for the equities, and a slowdown on the currency strength and yield gains. We note the statement made by JP Morgan analyst Phoebe White, “We feel more confident that yields are peaking here given the historical precedent for major sell-offs to peter out after reaching approximately 100bp in magnitude and 3-4 months in duration. Moreover, valuations appear stretched, with intermediate yields looking nearly 40bp too high relative to our fair value estimate,”

“However, we remain neutral on duration for now, as the next CPI report is still nearly two weeks away, and… mid-month Treasury auctions could provide a bearish impulse over the near term,” they added.

In March 2024, U.S. imports increased by $5.2 billion compared to March 2023, while exports of goods decreased by $5.1 billion to $171.3 billion. This negative trade may suggest a slowdown in business as found in data releases: The unemployment rate ticked up to 3.9% in April, though it remained below 4% for the 27th consecutive month, the longest such streak since the 1960s. In April 2024, the U.S. economy added 175,000 jobs, which was a deceleration compared to the upwardly revised 315,000 jobs added in March and fell short of market expectations for a 243,000 increase.

While analysts still find a moderate level of growth and a robust economy, consumer sentiment remains the same as inflation remains a concern for the majority of the population. Their constant call for a rate cut will allow new businesses to flourish, but a slowdown on US currency strength.

The FED may be hesitant to cut rates for this very reason as historically, an increased rate may benefit preparations for any rise in conflict. Increased rates may stimulate foreign investments as a show of a growing economy. Major decisions may be called after several more CPI releases. 

With the following possibilities stated above, BTC and the crypto market are something to watch as people look for real value markets to invest in. However, AI markets continue to pull in attention as advancements are continuously being made, alongside the adoption of Web3. 

GOLD - GOLD on the bullish as markets keep prices above 2295.536 and beyond 2319.398. We also now hear talks of analysts looking into shorting the US Dollar alongside the de-dollarization of several countries, putting pressure on the US economy, and slowing down their exports. This slowdown of exports may also refer to the attempt of the government to control inflation by releasing the dollar toward other countries by increasing imports. 

On this note, GOLD is becoming more attractive to trade as the literal “safe haven” for investors in the market. While a possibility for GOLD to create a low before a peak is possible, the current price does suggest a collection of orders before the next rise. 

SILVER -Silver is looking better as the prospects of a bullish market become more stable. The price ranged for the collection of orders and an opportunity for real money to enter lower. We may see another fall toward 26.753 before a continuation break above 27.552. We will see further accumulation of buy orders, pulling prices upward. 

DXY - We‘re currently experiencing a DXY slowdown as the price aggressively moved downward and the referred to ’real money is starting to come into play. The bounce off from 104.607 might be the last resistance of the dollar before a continuation toward the next structure as weak buying momentum is found on price upon reaching 105.071.

GBPUSD -GBP may have reached this quarters peak low at around 1.23000 as the current price consolidates comfortably inside the daily range. We can see a steady rise in the currency and may notice consistent growth in the market. We can call this a bullish increase as the DXY loses strength.

AUDUSD -The AUD has gained considerably from gaining strength from the COT reports as we see a more powerful rise in the pair compared to its peers. This increase has pushed the price beyond 0.66145 and may continue to push the price up toward the next structure. The quarterly low may have peaked at 0.64660 during April and a peak rise may be reached soon toward the end of the month.

NZDUSD -Similar to the AUD, NZD is gaining strong momentum toward the upside as the price may have peaked low last April at 0.528258. This aggressive push beyond the monthly structure at 0.59796 will continue to push the price toward 0.60847.

EURUSD -The momentum upward of the EUR also presents a potential for a short-term selloff as the price may retrace toward 1.07240 for a better position for buying. However, for swing traders, we suggest looking for placements toward the buying as analysts do call for a buying market.

USDJPY - Continued precaution must be practiced in this market as we continue to see the BoJ control Yen's weakness against the dollar as weve previously seen during the last week. We can expect to see further intervention or strengthening of the Yen throughout the quarter as we may have seen the peak high of USDJPY at 160.230.

USDCHF - The price has moved away from the channel and has moved with good momentum toward the downside. With the market possibly moving toward the bottom of the range to test structure, the quarter may have reached the peak high at 0.92248.

USDCAD - With the price peaking at a major structure at 1.38402, we can expect the price to continue downward during the entirety of the quarter as we see the price drop aggressively beyond 1.36563, and is now moving in a correction. We can also see the formation of a higher timeframe M pattern.