Heading into Easter weekend, with the weather heating up the well-pressed shirts minus suit jackets have been spotted in many business centers globally. The return of Game of Thrones also keeping many of us debating potential plot twists as it relates to the 7 kingdoms, but what about the markets? Even with Spring upon us the markets have still not fully sprung into action. With record uncertainty surrounding Brexit, the trade war amongst many other fundamentals, traders have stayed on the sidelines awaiting the next directional shift.
This may have come last night in the form of Chinese GDP numbers coming in better than expected at 6.4%. So far today this has led to European Indices trading higher, as well as the EURO trading at its highest point in 3 weeks against the DOLLAR. CNY also gained on USD, reaching its strongest point since February. Earnings season in the US has also seen a boost to equity trading with the likes of Morgan Stanley posting higher earnings than expected.
With the positive news cycle coming in, how exactly have the markets reacted, or are we still anticipating the next wave of action?
After a 5 day sell-off, Gold the main reflection of uncertainty against the Dollar has reached its lowest point this year trading at $1,273. Even though this breakout from its floor may suggest a change of direction, the 14 day RSI shows this as being oversold meaning buyers may already be lurking. Recent history has also shown such breakouts as being false, so it may seem that consolidation will continue, with the potential for this to re-enter the $1,300 region, where it has spent the majority of 2019.
Since re-entering the $1.30 – $1.32 range in February, GBPUSD hasn’t seen much in the way of clear direction. The cable story has been one of buying support, sell resistance. With lack of Brexit clarity causing traders to mainly stick to technical analysis for guidance. Another extension announced this time for Halloween means many may continue to trade this short-term until significant news is announced on either side of the Atlantic, stronger equity earnings from those announced in the US or continued growth of indices attempting to break historical highs may see USD react.
Ultimately the “calm before the storm” means many are in good positions to position themselves for eventual shifts, and as we know from history when the consolidation finally does end, those who anticipated and don’t react will be primed to survive the storm in its fullest glory.
Senior Market Analyst