Navigating the Safe Haven Bid in the U.S. Dollar | Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 3899.75, down 30.25
NQ, yesterday’s close: Settled at 13,006.25, down 65.50
Fundamentals: U.S. benchmarks finished poorly on Tuesday but have shown signs of stabilizing overnight. Like Monday, rally attempts in the S&P and NQ were deflected by strong levels of technical resistance. From there, each bled slowly leading up to the final hour. At that time, gauges of the broader risk-appetite, such as the Russell 2000 and Crude Oil, were already down sharply due to lockdown announcements across Europe and worries of reopenings being paused in the U.S. They finished down 3.6% and 6.2% respectively. Big Tech and the Work-From-Home trade were performing well for much of the day, but the slow bleed pressured just about everything into the close. Germany had initially announced a five-day lockdown over the Easter holiday, but fears were exacerbated when they extended that to April 18th during U.S. trading hours. However, the picture turned brighter early this morning upon the release of Flash PMI data in Europe. Much better-than-expected reads across the board provided a boost to risk assets. German Manufacturing was 66.6 versus 60.8 and the overall Eurozone read was 62.4 versus 57.7. Germany avoided a contraction in the Services sector for the first time since September and Eurozone Services PMI contracted less than expected at 48.8 versus 46.0. Although the lockdown news certainly weighed on sentiment, this PMI data was an offset; economic activity will be reduced from a better level. U.S. Durable Goods data will be released at 8:30 am CT, Flash PMIs follow at 8:45 am CT, and Powell/Yellen face their second day of Congressional testimony at 9:00 am CT. The U.S. Dollar is in focus, the Dollar Index surged on yesterday’s safe haven bid, hitting the highest level since November overnight.
In the coming days, you will hear more about the 7-day average of Covid-19 cases and deaths in the U.S. This should prove to be a barometer of the risk-appetite and a turn lower will lift the reopening trade.
The Semiconductor space finished down more than 2.5% yesterday, but news from Intel after the bell brought a relief rally. The company announced its plan to invest $20 billion to build two new manufacturing plants in Arizona and said sales should fall less than feared this year. This reasserts the company as a leader within the industry and has provided a jolt to the space ahead of the bell. In other news, Elon Musk tweeted, “You can now buy a Tesla with Bitcoin” and Bitcoin surged more than 6% overnight. There is truth to strength in Bitcoin bringing support to the NQ, especially now that companies within the index hold it in their reserves.
Technicals: Despite the wide trading range, our landscape has changed very little. Yes, the Russell 2000 lost significant ground, but the S&P tested and held our rare major four-star support once again at 3876.25-3886.75 and the NQ stayed well in front of major three-star support at 12,900-12,924. We certainly were concerned with the late price action yesterday, a slow bleed lower during regular trading hours typically does not favor the overnight trade. Low and behold, lower price action has so far been rejected and this supports our more Bullish Bias. Our Pivots today will prove to be a point of balance; continued action above ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (May)
Yesterday’s close: Settled at 57.76, down 3.80
Fundamentals: Crude Oil has rebounded by as much as 3.5% overnight. News of the Suez Canal blockage has certainly staved off the selling, but we find the initial strength at 1:00 am CT more technical, as price action failed to extend yesterday’s late losses. We further believe it was the strong PMI data out of Europe that boosted the tape to a session high of 59.74, still shy of the psychological $60 mark. According to Javier Blas, the Chief Energy Correspondent for Bloomberg News, the blockage of the Suez Canal is a bigger problem for refined products as Crude Oil can move through two nearby pipelines. Regardless, this has been supportive to yesterday’s heavy selling. U.S. Durable Goods are due at 7:30 am CT and Flash PMI data follows at 8:45 am CT. Weekly EIA inventory data will be released at 9:30 am CT and expectations are for -0.272 mb Crude, +1.186 mb Gasoline, and -0.122 mb Distillates.
Technicals: Price action is showing signs of stability this morning and has responded to major three-star support at 57.64, despite trading decisively below there into yesterday’s close. The bulls are seemingly attempting to the driver’s seat from oversold levels and will hold such while above our momentum indictor which comes in at 58.48 this morning. Still, price action must clear first resistance at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1725.1, down 13.0
Silver, yesterday’s close: Settled at 25.227, down 0.542
Fundamentals: Silver has been the dog this week, dragging Gold with it. Additionally, Gold truly could not stave off the Dollar’s surge through yesterday despite strength in Bonds and finished on session lows. On the bright side, there are signs of stability overnight after the metal again responded to technical support, discussed in the Technical section below. The better PMIs out of Europe this morning strengthened brought a foreseeable floor to the Euro’s weakness upon new lockdowns and this helped Gold dig higher from its overnight lows. Durable Goods in the U.S. missed expectations this morning and this also gives reason for strength in Gold through today’s session. Still, we have U.S. Flash PMIs due at 8:45 am CT, Powell/Yellen face Congress for the second day at 9:00 am CT, and there is a 5-year Note auction at noon CT. Also, NY Fed President Williams speaks at 12:45 am CT and San Francisco Fed President Daly speaks at 2:00 pm CT, both are 2020 voters. If the Dollar fails to extend gains today and Bonds hold ground, at a minimum this should set the stage for a rebound in metals.
Technicals: Gold has responded well to major three-star support at 1719.8-1723.3, a level in which it responded well to one week ago. Silver responded to major three-star support at 24.77-25.00, a pocket aligning multiple technical levels, including the low from March 5th. Given the electronic close yesterday, the tape seemed bleaker, but it is terrific to see the turn overnight and into the opening bell. The Pivots align with our momentum indicators and bring a point of balance; continued action above ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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