The US dollar has continued to decline against a basket of currency majors. The dollar index (#DX) has updated local lows and closed in the negative zone (-0.53) yesterday. The US currency is under pressure due to tensions between the US and China, as well as mass protests in the United States. In 15 states and Washington, National Guard units were deployed to contain the protests that began due to the death of African-American, George Floyd, after police custody.
Today, the Reserve Bank of Australia has decided on a key interest rate during the Asian trading session. As experts forecasted, the indicator was left unchanged at 0.25% per annum. Demand for risky assets is still high amid investors’ hopes of economic recovery after the consequences of COVID-19.
The “black gold” prices have been growing in expectation of OPEC+ meeting. At an online meeting later this week, major manufacturers will decide whether to extend record cuts in production to support prices. Currently, futures for the WTI crude oil are testing the $36.15 mark per barrel. At 23:30 (GMT+3:00), API weekly crude oil stock will be published.
Market indicators
Yesterday, there was the bullish sentiment in the US stock market: #SPY (+0.40%), #DIA (+0.39%), #QQQ (+0.30%).
The 10-year US government bonds yield is consolidating. At the moment, the indicator is at the level of 0.66-0.67%.
The news feed on 2020.06.02:
Today, the publication of important economic news is not expected.
The U.S. faces the prospect of a Japan-like deflation.
Let’s begin with a brief review of Japan.
Here’s a chart and commentary from the 2020 edition of Robert Prechter’s Conquer the Crash:
Japan had one of the strongest economies in the entire world, growing at a 9% rate for 20 years up to 1973, and then a pretty strong rate of about 4.5% through 1994. From there, it’;s averaged about 1%. …
Economic growth in the United States today is weaker than Japan’s was in 1989 when its bull market ended. The U.S. economy is dramatically weak relative to the amount of central-bank inflating.
Speaking of the U.S., here’s a May 18 headline and sub-headline from Bloomberg:
America Is Becoming Japan, Not in a Good Way
The country could be on the brink of its own deflationary era.
Bloomberg referred to this prospect as the “Japanification” of the U.S.
But, getting back to that phrase “deflationary era” – what would that look like? What is deflation?
Well, many people erroneously believe that deflation simply means “falling prices.” Yet, it goes well beyond that.
Let’s return to the 2020 edition of Conquer the Crash for a fuller explanation:
A deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people’s desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep, general decline in production. … Because both credit and production support prices for financial assets, their prices fall in a deflationary depression. As asset prices fall, people lose wealth, which reduces their ability to offer credit, service debt and support production.
Well, the U.S. has already experienced falling asset prices. Consider oil and other commodities, as well as the stock market – which, despite the recent rally, is still well off the highs.
Plus, and most importantly, there’s been a credit market contraction and slackening production.
In April, manufacturing output declined 6.3%, according to the Federal Reserve. Moreover, industrial production dropped 5.4% and Q1 GDP fell 4.6%. The Q2 GDP number could show a much bigger drop. Current estimates range from a decline of 25% to 40%.
Also in April, the Credit Managers’ Index from the National Association of Credit Management slid 8.3 points. That’s after a drop of 7.2 in March.
Other deflationary pressures are also in place. As examples, producer prices have been sluggish, and according to the Atlanta Fed’s U.S. wage growth tracker, wage growth peaked at 3.9% in July 2019 and fell to 3.3% in April 2020.
There’s only been two major deflationary depressions in U.S. history. The first one extended from 1835 to 1843. The second one – known as “The Great Depression” – followed the 1929 stock market crash and stretched into 1933.
As you may know, other nations also suffered through the Great Depression.
Is another deflationary depression on our doorstep?
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This article was syndicated by Elliott Wave International and was originally published under the headline Deflation: Why the “Japanification” of the U.S. Looms Largey. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
– Every election year over the past five US Presidential election cycles has presented a unique set of price rotation events. Particularly evident in strongly contested US Presidential candidate battles where the voters are consumed with pre-election rhetoric. The 2007-08 election cycle was, in our opinion, very similar to the current market cycle in terms of consumer sentiment and economic function. The 2015-16 election cycle was less similar – yet still important for our researchers.
The economic conditions of the US economy and the global economy were vastly different prior to each US Presidential election cycle and continue to evolve throughout the current 2020 election cycle. Yet, our researchers believe the correlation of price volatility and rotation combined with the distraction for consumers as the election process occupies the hearts and minds of almost everyone across the globe takes a toll on the markets. Prior to almost any US Presidential, price volatility and trends tend to become much more exaggerated and extended.
We’ve published research articles about this technical setup/pattern that occurs in the markets nearly 8 to 15+ months before the US Presidential election cycle before. The basic theory of the setup/pattern is as follows…
_ 12+ months prior to the election date, the parties consolidate around specific candidates where the first battles of the US presidential election cycle conclude.
_ Over the next 12 months, the battle between the selected candidates becomes more heated and aggressive as voters are pushed information and disinformation related to their decisions.
_ The process of the election and the decision-making process for consumers/voters is very stressful and distracts from the normal economic activity for many. This distraction translates into an indecisive market where future expectations (optimism and pessimism) greatly depend on the outcome of the election. Thus, the markets are stuck in a “no man’s land” type of “stasis” waiting for the election event to conclude.
Depending on the events that lead up to the election date, the stock market could be biased towards a bullish trend or a bearish trend which can have a big impact on the pre and post-election outcomes.
S&P 500 Index 2006-09 US Presidential Election Cycle
Lets start by taking a look at the 2006-09 (2008 US election cycle) data/chart. First, we can see the price trend in 2006-07 was moderately bullish within the early election cycle. The first real signs of a crisis in the markets took place in mid-2007 where a deep low price move setup a double-bottom. Near the end of 2007 and into very early 2008, the stock market collapsed below those lows and never really recovered. The real collapse in price began in June 2008 – after a moderate price recovery from the new lows. Price continued to collapse more aggressively just prior to the election date and even after the election was completed.
Yes, we know this collapse was related to the 2008-09 Housing/Credit market crisis and was not related to the directly related to the Presidential election event. Yet, we, as technicians, believe price translates all external factors into a form that we can use to derive future information from. The point we want to try to make is that election cycle years tend to be much more volatile and aggressive.
The pre-election price declines appear to set up a bottom or double-bottom price level 12 to 15+ months prior to the election date. After that completes, the markets may attempt to rally above previous highs at some point, but will likely attempt to retest recent lows 4 to 12 months prior to the election date. As voters/consumers’ attention is consumed by the election process, news and rhetoric, consumers change their habits and become more protective of their assets and future expenses.
The one thing to consider when reviewing this chart is that the uncertainty and indecision in the markets related to the Presidential election cycle were compounded by the collapse of the housing, financial, and credit markets. This event created additional price and economic concerns fairly early in 2008. Additionally, pay attention to the June 2008 change in price trend that sets up a deeper downside price collapse.
S&P 500 Index 2014-2017 US Presidential Election Cycle
This next chart is the 2014-2017 US Presidential Election cycle and this chart highlights a very different time in US history. There was no massive housing/credit crisis event. There was no massive implosion of the US or global markets taking place throughout this time. There was only a heated battle between two candidates. The chart shows how 2015, nearly 12 months prior to the election date, the market price collapsed twice to complete a double-bottom pattern. This pattern seems to set up prior to election cycles with fairly high consistency.
As we progress to the 12 month period just before the election date (highlighted in CYAN), we can see the 2016 election year resulted in a moderate upside price bias after establishing a bottom very early in 2016. Still, there was a decent amount of volatility throughout the year – particularly in June and the 60 days prior to the actual election date.
Remember, other than political drama, this election cycle didn’t include any massive economic crisis events which could have altered the direction of the markets closer to the election date. The deeper double-bottoms set up the price range headed into the election date and the lack of surprise/crisis events prompted a moderate upside price bias leading into the election event.
S&P 500 Current 2017-2020 Presidential Election Cycle
Now, we take a look at the current 2017-2020 setup. This time, because of the prior extended rally in the markets from 2017, we’ve seen a series of deeper price lows setups into an expanding bottom/downward sloping price trend. This is somewhat unusual and suggests volatility is excessive at this time in the markets. We’ve also experienced the COVID-19 virus event occur, which is acting like the 2008 housing/financial crisis event.
At this point, heading into early June 2020 and understanding that these Presidential election cycle events typically result in much greater volatility as we get closer to the election date, our research team believes the June through August period could prompt a broad market downside retracement which coincides with Q2 data/expectations. The month of June prior to the election date (Q2) appears to be a very instrumental period for the markets.
The downward sloping lows on this chart suggest a deeper price rotation may occur as the markets move closer to the election date and continue to process the technical and economic data. The uncertainty related to Presidential election cycles is still at play in the markets. Should some type of crisis event unfold in the midst of the final 5 to 6 months prior to the election date, the risk of a downside price event would become much more excessive.
GDP Based Recession Indicator
Currently, the COVID-19 virus event has set up a critical price event headed into the 2020 Presidential election cycle which is somewhat similar to the 2008 election cycle. Pay attention to the GDP Based Recession Indicator chart below. Notice how the 2008 election cycle correlated with a massive increase in the GDP Based Recession Indicator? Now, see how the current GDP Based Recession Indicator has already begun to spike upward? Unlike what happened in 2016 where the GDP Based Recession Indicator stayed below 30, the current level of this indicator suggests a crisis event is beginning to unfold in 2020.
If this crisis event continues, the process where the price will attempt to properly identify risks and valuation levels will likely take place over the next 8 to 12+ months – which is very similar to what happened in 2008 and 2009. Our researchers believe June 2020 could become a critical month for price activity where the future price trends are established.
Concluding Thoughts:
Currently, we are urging our friends and followers to stay overly cautious of this upward price trend in the US stock markets. Even though we have seen the NQ and other sectors rally to near all-time highs, we believe the markets are still excessively volatile and the indecision leading up to a Presidential election cycle could prompt some really big price moves in the future. We are still trading the long side of the market and advising our clients to take very low-risk trades which have been properly sized. This is a traders market where skilled technical traders can find incredible gains.
June through August will likely become critical in regards to the future price trends and will likely determine if the markets continue to push higher or rotate downward as concerns and potential crisis events continue to unfold. Historically, June through August prior to a Presidential election cycle are very important measures of what happens near and after the election event.
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After finishing another ascending wave at 1.1111, EURUSD is consolidating around 1.1118. Possibly, the pair may expand the range up to 1.1157 and then return to 1.1118. If later the price breaks the range to the upside, the market may start a new growth towards 1.1192; if to the downside – resume trading inside the downtrend with the target at 1.1081.
GBPUSD, “Great Britain Pound vs US Dollar”
After breaking 1.2362 to the upside, GBPUSD is expected to continue growing towards 1.2447. After that, the instrument may start a new decline to reach 1.2362 and then form one more ascending structure with the target at 1.2518.
USDRUB, “US Dollar vs Russian Ruble”
USDRUB is consolidating to break 70.70 to the downside. Possibly, the pair may reach 69.86 and then return to 70.70 to test it from below. After that, the instrument may form one more ascending structure with the target at 69.44, at least.
USDJPY, “US Dollar vs Japanese Yen”
After completing the ascending structure at 107.86, USDJPY is falling to reach 107.44. Later, the market may resume trading upwards with the target at 107.64.
USDCHF, “US Dollar vs Swiss Franc”
USDCHF continues falling towards 0.9590. After that, the instrument may resume trading downwards with the target at 0.9650.
AUDUSD, “Australian Dollar vs US Dollar”
After breaking 0.6692 to the upside, AUDUSD is expected to continue growing towards 0.6772. Later, the market may fall to return to 0.6692.
BRENT
After breaking 36.66, Brent is expected to reach 38.48, After that, the instrument may correct towards and return to 36.66. Later, the market may resume trading upwards with the target at 39.00 and then start a new correction towards 30.50.
XAUUSD, “Gold vs US Dollar”
After breaking 1734.34, Gold is expected to form one more ascending structure towards 1750.10. After that, the instrument may correct to test 1734.34 from above and then resume trading upwards with the target at 1775.50.
BTCUSD, “Bitcoin vs US Dollar”
After completing the ascending wave at 9700.00, BTCUSD has finished the descending impulse to reach 9400.00 along with the correction towards 9500.00. Possibly, today the pair form a new descending structure to break 9400.00 and then continue trading downwards with the target at 9200.00.
S&P 500
The Index is still growing. Today, the asset may reach 3084.5 and then fall towards 3043.7. After that, the instrument may start a new growth with the target at 3160.5.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
As we can see in the H4 chart, the divergence made XAUUSD start a new decline to reach 23.6% fibo at 1690.70, which was later followed by another ascending impulse towards the high at 1764.86. If the pair breaks the high, it may continue growing to reach the post-correctional extension area between 138.2% and 161.8% fibo at 1798.90 and 1858.60 respectively. However, there is another scenario, according to which the instrument may rebound from the high start a new descending wave towards 38.2% and 50.0% fibo at 1645.40 and 1607.83 respectively.
In the H1 chart, the convergence made the pair complete the descending wave at 23.6% fibo (1690.70) and start a new growth to break the high 1764.86.
USDCHF, “US Dollar vs Swiss Franc”
As we can see in the H4 chart, after breaking the downside border of the Triangle pattern, USDCHF has failed to break the similar border of the Flat pattern. However, a breakout of this border is just a question of time. The current decline may be considered as a new correctional wave towards 61.8% fibo at 0.9453. The resistance remains in at 0.9743.
In the H1 chart, the descending wave is approaching 50.0% fibo at 0.9538. At the same time, one can see a convergence on MACD, which may indicate a rebound towards 0.9638. Earlier, this level acted as a support.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
RoboMarkets, the company that provides access to technologically advanced solutions for online trading, has announced updates to R Trader, its multi-asset trading platform, which were introduced to both mobile and desktop versions of the product. Within the frameworks of the updates, the mobile version users are offered several new features, while the desktop terminal now has the Corporate Events Calendar, a convenient graphical display of trading results and the history of account financial parameters, 4 new indicators, and contract specifications integrated directly in the platform.
In December 2019, RoboMarkets introduced a mobile version of its trading platform, R Trader. At that time, the terminal had only basic functions for performing trading operations. The current updates to R Trader Mobile include displaying positions on charts, the opportunity of modifying Watchlists and sorting in key tabs, and deposits/withdrawals information in the “History” section. Also, there is a feature that allows users to place an order by swiping the screen, thus helping to avoid pressing “buy” or “sell” buttons accidentally.
The R Trader desktop terminal now contains the Calendar of Corporate Events, such as “Dividends”, “Earnings”, and “Splits”. Also, clients have access to their trading history in the form of convenient charts that display the key account parameters: profit, Equity, “drawdown”, depositing, and balance. Using multifunctional charts, traders will be able to assess the status of their accounts, reduce risks, and modify trading methods to make them more effective and resulting. Particular attention should be paid to the integration of contract specifications for all instruments to help users save time that was earlier spent on searching the information about more than 12,000 instruments available in the terminal.
With due consideration to numerous demands of the Company’s clients, 4 popular indicators have been added to R Trader: VWAP, Force Index, Pivot Point, and Donchian Channel.
Kiryl Kirychenka, the head of the R Trader project, is commenting: “Our business principle lies in the systematic commitment to improving the products and solutions that we provide our clients with. This means that we invest in our services and risk management systems, as well as develop products that help traders make their work more effective. We’ve significantly improved and expanded opportunities of the R Trader mobile version. At the same time, the Company has implemented several solutions, which will allow to improve the platform’s trading functionality and increase the risk-control level. And that’s just a small part of what we’re planning to introduce in the nearest future”.
About RoboMarkets
RoboMarkets is an investment company with the CySEC license No. 191/13. RoboMarkets offers investment services in many European countries by providing traders, who work on financial markets, with access to its proprietary trading platforms. More detailed information about the Company’s products and services can be found at robomarkets.com.
– Increasing economic tensions between the US and China continue to threaten Hong Kong’s economy. China’s proposed national security law will see greater controls over areas such as secessionist activities, terrorism and foreign interference. Similarly, the announcement by the US secretary of state, Mike Pompeo, that Hong Kong should no longer be viewed as independent from China could undermine Hong Kong’s longstanding role as an intermediary between China and the rest of the world.
But one important pillar of Hong Kong’s economy remains unchanged and outside of Chinese government control – its currency, which is pegged to the US dollar via a currency board. This could have significant benefits for the city as it tries to deal with pressing socioeconomic challenges. But this also requires more public spending from the special administrative region’s government.
Since its introduction, the currency peg has withstood a variety of challenges – from the UK handover of Hong Kong back to China, to attacks from speculators. But it has often resulted in the Hong Kong government adopting an overly conservative approach to spending. Although the peg gives Hong Kong a considerable financial buffer, successive governments have tended towards fiscal conservatism. Public spending has rarely exceeded 20% of GDP since the 1997 handover.
Bad timing and poor management
Hong Kong is struggling to deal with sluggish economic growth and myriad socioeconomic challenges, not least increasing levels of poverty and a high level of inequality. The city was poised to benefit from legislation passed by the US senate which could force Chinese companies to delist from the US stock exchange. This would make Hong Kong the natural route for Chinese companies seeking to access overseas funds – something the city’s financial markets have long provided. But the new national security law and Pompeo’s comments will make Hong Kong less attractive.
Many of the challenges now facing Hong Kong have their roots in decades of mismanaged prosperity. Yet they do not necessarily threaten the US dollar peg.
In theory, the dollar peg gives the US the ultimate sanction on Hong Kong. In practice, it is more complicated, not least because the global demand for dollar assets helps subsidise US living standards. Nevertheless, were the US to strictly apply export controls or remove special tariffs, it would make Hong Kong’s task of sustaining a net inflow of foreign exchange more difficult.
A pragmatic choice
Hong Kong’s currency board was introduced in 1983 following concerns over capital flight and the volatility of Hong Kong’s then free-floating currency as UK-China negotiations over Hong Kong’s handover progressed. The currency board requires Hong Kong to hold enough liquid assets in the form of US dollar reserves to cover the amount of Hong Kong dollars that are in circulation.
The Hong Kong Monetary Authority (HKMA), which acts as a de facto central bank, ensures the US dollar trades in a narrow band between HK$7.75-7.85. So the HKMA will buy up Hong Kong dollars to strengthen the currency when it falls to the lower margin of this band and it will sell them when it gets too strong.
Replacing the US dollar with the Chinese RMB is currently not feasible due to restrictions on the RMB’s deliverability as a currency. This makes the RMB unsuitable as a liquid reserve asset. Meanwhile, China’s state enterprises and the offshore market for RMB continue to benefit from Hong Kong’s deep and liquid financial markets as a source of offshore US dollar funding.
Hong Kong’s future prosperity
Hong Kong’s future prosperity depends on good relationships between China and the US. But this is hindered by a historical reluctance by business interests and senior officials in the city to contemplate even moderate political reform. Such reforms are now unavoidable, however.
A deterioration in Hong Kong’s business sentiment can be traced to early 2019 and public concerns over democracy. Addressing public concerns should also benefit Beijing. China’s economic growth has seen its business interests in the city increase but also become more fragmented. This has made it more difficult to read the public mood. As issuer of the global reserve currency, the US also has a responsibility to ensure that liquidity shortage is not used as a political stick to punish Hong Kong.
Ultimately, neither the security law nor changes in the US stance towards Hong Kong will help the squeeze on living standards faced by many of Hong Kong’s residents. Conversely, maintaining the currency peg gives the Hong Kong government ample fiscal scope to deal with these.
Its own economic research indicates the economic impacts of external events on Hong Kong’s economic growth tend to be large but not long lasting. Data from Hong Kong’s government show that the 1997-98 Asian financial crisis saw Hong Kong’s economy contract by 8.3% in the third quarter of 1998 while the global financial crisis resulted in a 7.8% contraction in the first quarter of 2009. In both instances, Hong Kong’s economy returned to growth following four to five quarters of contraction.
Recent indications that the US is set to run budget deficits so great they will exceed wartime records could provide Hong Kong’s fiscally conservative government with the political justification for increasing much needed public spending.
Last week, the US dollar weakened significantly compared to its main competitors. The dollar index (#DX) has set new local lows and closed in the red zone. The conflict between Washington and Beijing is still in the spotlight. US President Donald Trump promised to call off Hong Kong’s special status if the new Chinese law did not come into force. However, China is confident that this will do more harm to the United States than to China.
Currency majors are currently consolidating. Financial market participants expect meetings of the Reserve Bank of Australia, the Bank of Canada, the ECB, as well as the US labor market report for May. Investors also expect another round of negotiations on Brexit, which will begin tomorrow in advance of the EU summit on June 18-19. There is not much time left until December 31 – Brexit’s deadline. Progress in the negotiations has not yet been observed. The EU has called on the UK to be more realistic as to what the country can achieve in the negotiations.
The “black gold” prices have become stable after a significant rally. Currently, futures for the WTI crude oil are testing the $35.15 mark per barrel.
Market indicators
On Friday, there was a variety of trends in the US stock market: #SPY (+0.45%), #DIA (-0.02%), #QQQ (+1.47%).
The 10-year US government bonds yield has declined. At the moment, the indicator is at the level of 0.65-0.66%.
The bullish sentiment prevails on the EUR/USD currency pair. The trading instrument has set new local highs. The European Commission has proposed to create a 750 billion euro recovery fund. The ECB meeting and the US labor market report for May will be key events on the current trading week. At the moment, EUR/USD quotes are testing the resistance of 1.1150. The 1.1090 mark is the nearest support. The single currency has the potential for further growth. We recommend following up-to-date information regarding the conflict between Washington and Beijing. Positions should be opened from key levels.
News Feed on the US Economy for 2020.06.01:
– German manufacturing PMI at 10:55 (GMT+3:00);
– ISM manufacturing PMI at 17:00 (GMT+3:00).
Indicators signal the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram is in the positive zone, indicating the bullish sentiment.
Stochastic Oscillator has started exiting the overbought zone, the %K line is below the %D line, which indicates a possible correction of EUR/USD quotes.
Trading recommendations
Support levels: 1.1090, 1.1065, 1.1035
Resistance levels: 1.1150, 1.1180, 1.1200
If the price fixes above 1.1150, further growth of EUR/USD quotes is expected. The movement is tending to the round level of 1.1200.
An alternative could be a decrease in the EUR/USD currency pair to 1.1060-1.1040.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.23104
Open: 1.23235
% chg. over the last day: +0.21
Day’s range: 1.23235 – 1.24257
52 wk range: 1.1466 – 1.3516
Purchases prevail on the GBP/USD currency pair. The British pound has set new local highs. GBP/USD quotes have found resistance at 1.2425. The 1.2360 mark is already a “mirror” support. The current trading week will be full of important economic reports. Investors continue to monitor the development of the US-China conflict. We recommend opening positions from key levels.
At 11:30 (GMT+3:00), UK manufacturing PMI will be published.
Indicators signal the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram is in the positive zone and above the signal line, which gives a strong signal to buy GBP/USD.
Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.2360, 1.2290, 1.2235
Resistance levels: 1.2425, 1.2470, 1.2500
If the price fixes above 1.2425, further growth of GBP/USD quotes is expected. The movement is tending to 1.2470-1.2500.
An alternative could be a decrease in the GBP/USD currency pair to 1.2330-1.2300.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.37636
Open: 1.37748
% chg. over the last day: +0.13
Day’s range: 1.36732 – 1.38003
52 wk range: 1.2949 – 1.4668
The USD/CAD currency pair has been declining after a prolonged consolidation. The trading instrument has overcome and fixed below the key extremes. The loonie is currently testing the following support and resistance levels: 1.3675 and 1.3735, respectively. USD/CAD quotes have the potential for further decline. Today we recommend paying attention to economic releases from the US, as well as the dynamics of “black gold” prices. Positions should be opened from key levels.
The news feed on Canada’s economy is calm.
Indicators signal the power of sellers: the price has fixed below 50 MA and 100 MA.
The MACD histogram is in the negative zone, indicating the bearish sentiment.
Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.3675, 1.3630, 1.3600
Resistance levels: 1.3735, 1.3790, 1.3825
If the price fixes below 1.3675, a further drop in the USD/CAD quotes is expected. The movement is tending to 1.3640-1.3620.
An alternative could be the growth of the USD/CAD currency pair to 1.3780-1.3800.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 107.640
Open: 107.679
% chg. over the last day: +0.01
Day’s range: 107.375 – 107.856
52 wk range: 101.19 – 112.41
The last sessions trades on the USD/JPY currency pair have been very active. At the same time, there is no defined trend. The technical pattern is still ambiguous. Financial market participants expect additional drivers. At the moment, the key range is 107.35-107.60. Investors are focused on a trade conflict between Washington and Beijing. Positions should be opened from key levels.
The news feed on Japan’s economy is calm.
Indicators signal the power of sellers: the price has fixed below 50 MA and 100 MA.
The MACD histogram is near the 0 mark. There are no signals at the moment.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which gives a signal to buy USD/JPY.
Trading recommendations
Support levels: 107.35, 107.10, 106.80
Resistance levels: 107.60, 107.75, 107.90.
If the price fixes below 107.35, a further drop in the USD/JPY quotes is expected. The movement is tending to 107.10-106.90.
An alternative could be the growth of the USD/JPY currency pair to 107.75-107.90.
While European Equity markets will likely see a very slow start into the trading week, the picture in US Equities is getting more and more very interesting.
The Dow Jones has seen a remarkable run from its March lows, gaining more than 35% since then. That corrective move resulted in US stocks now trading at over 143% market cap to US GDP and a forward Price-Earnings ratio of higher than 24.
The latter fact, in particular, seems a little too optimistic given the expected economic downturn in the months to come after the Corona lockdown.
In addition to that, last Friday’s press conference from US president Donald Trump let fears of new tensions between the US and China grow once again, after the U.S. has taken a more serious turn in response to a Chinese security law that threatens the long-standing independence of Hong Kong.
With the Dow Jones failing to recapture the EMA(200) (blue) on a daily time-frame last week, the line-up for a sharper corrective move and short-term pullback below 25,000 points seems given and short-term Short engagements seem, in our opinion, attractive from a risk-reward perspective:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between March 18, 2019, to May 29, 2020). Accessed: May 29, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the DJI30 CFD decreased by 2.2%, in 2016, it increased by 13.5%, in 2017, it increased by 24.4%, in 2018, it decreased by 5.9%, in 2019, it was up by 23.8%, meaning that after five years, it was up by 60.1%.
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