Daily Report – 27/04/2018

Korea summit: Kim Jong-un, Moon Jae-in meet in historic moment

Dow Jones 24233 / Dax 12583
Oil $67.89/bbl
Gold $1317/oz
UK: Prelim GDP actual 0.1% vs 0.3% expected. BOE Gov. Carney Speaks at 05:00 pm.
EZ: EURO group meeting all day.
North America: U.S. GDP at 03:30 pm.

As expected yesterday the ECB kept its monetary policy guidance unchanged. Draghi: “We continue to expect interest rates to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases” even though he was optimistic in his tone and downplayed the recent deterioration in data; he stated “Following several quarters of higher than expected growth, incoming information since our March meeting points towards some moderation”. While he refrained from discussing their monetary policy plans including the end of asset purchases, it is clear that the ECB’s goal today was to reaffirm their confidence in the economy. With this in mind the Euro should have gone higher and not lower. What happened, the market couldn’t overcome the good data from the U.S. and in the near term the U.S. will increase interest rates whereas the ECB will not be raising interest rates until 2019. The Euro broke the 1.2117 level. Now we need to see stronge r confirmation before stating that the Euro will trade in a new lower range. Next main supports come at 1.2045 and 1.1956.

This morning, BoJ held rates at -0.1% and the yield curve control with the 10 year JGB target of zero. However in a surprise move it removed the timing of its inflation target, which is seen slightly dovish. At the press conference Kuroda said “Price target forecast was ‘just a forecast'”, changed language to emphasize it’s a forecast, not a limit; and BoJ “to consider further easing if momentum towards 2% price target weakens” this will put the Yen under pressure.

The US 10 year yield has dropped back under 3.0% again, yet interest rate differentials are still favoring strong dollar. This is likely to continue today if the US Q1 GDP numbers confirms the strong path. The dollar could hold to its past week gains and get further up.

Today’s Snapshot
DAX-M18 Last 12583

The DAX is retesting the 12600 level that worked well as strong resistance last week. Yesterday and after the ECB press conference ended, the Euro started dropping, and Dax gained momentum. Now the pivot point stands at 12465 with support levels at 12312and 12256. A close above 12600 suggests the bulls are finding traction, with opening to 12745 and 13000 next resistance levels. On the hourly chart the momentum outlook is still uncertain, and the hourly RSI needs to push into the 70s to suggest positive momentum is growing.

 

Written by
Nehmat Harb
Financial Advisor

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