Bitcoin bounces, earnings and ECB ahead

Overnight Headlines

*Asian stocks follow Wall Street higher after record closes Friday

*USD turning lower this morning, support at 91.49 on USDX

*Bitcoin rebounds from Sunday’s 14% plunge

US equities closed at record highs thanks to better-than-expected retail sales and weekly jobless claims. Both the S&P500 and Nasdaq broke all-time highs, while European stocks also enjoyed stellar weeks. US futures are currently in the red.

USD has had a bad April so far, the weakest of the major currencies as the EUR/USD cross flirts with 1.20. Investors are increasingly buying into the Fed’s insistence that it will not change monetary policy and keep it highly accommodative.

Market Thoughts – Busy week, but trends to continue

Earnings are front and centre for traders this week as a mix of companies report in the US from IBM and Coca-Cola to Netflix and American Airlines. These are some of the first major post-pandemic cyclical companies to post results, giving us a feel for who might be the winners and losers in the new/old recovering global economy.

The Fed is now in the blackout period ahead of its meeting next week which means there are no Fed speakers to listen out for. And with little US domestic data to drive sentiment, we could see a continuation of the recent benign market trends. So, a softer dollar should remain, helping commodities which are unsurprisingly consolidating recent gains today, and stock markets pushing higher. Notably, the VIX, Wall Street’s “fear gauge”, that shows implied volatility over the next 30 days in the S&P500 printed its lowest readings since the pandemic erupted. All calm then, though this is known as being a classic contrarian indicator…

Chart of the Day – EUR/GBP turning lower

There’s lots going on this side of the pond this week with an ECB meeting and a data deluge in the UK. That said, not much is expected from ECB President Christine Lagarde, with some of the heavy lifting done at the last meeting and focus on June’s meeting when more policy changes are forecast. GBP has been hit by a squeeze of long positions recently, but the UK is still set to enjoy a growth advantage over its continental peers this quarter.

Capturing all this price action is the EUR/GBP cross which looks to have made a top last week. The solid bounce this month was not wholly unexpected after this year’s strong downtrend, but prices have struggled recently and failed to break above the late February spike at 0.8731. A bearish candlestick printed on Friday, failing and rejecting that high again and we should now see the bearish bias resume if we get a daily close below 0.8639. The pair is trading beneath the 50-day EMA this morning so bears will target 0.86 and then 0.8538.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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