Posted May 22, 18:23

Three Big Questions

Three Big Questions Chart
May 22: 

FX and indices remain reluctant to break out of recent ranges as the euro, loonie, gold and the major indices were drawn back lower in Friday Asia & EU before stabilizing in the US session. We await some catalyst to break the recent ranges or reinforce them. As market volumes wind down ahead of the long weekend holiday in the US and UK, it's a good moment to outline the three major themes that will shape the future. And here is a chart from Ashraf illustrating the near perfect symmetry in stock market volatility achived by authorities.

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1) US-China relations

On Thursday US Senators announced a bill that would sanction China over Hong Kong and that was quickly met by Beijing promising counter-measures. The news hurt broad sentiment and pulled the euro back below 1.10.

PREMIUM INSIGHTS Update: May 18, 21:13
Retail Traders Forcing the Issue May 21, 2020 20:22: 

3% +(-) days in indices are becoming rarer by the day as authorities do their utmost to keep some sort of the markets. If reopening the economy is considered to be a near equivalent to monetary easing, then what would it be if the $2.2 trillion stimulus package voted on by the House of Representatives is passed by the Senate? US Treasury Secretary Mnuchin appears confident it will pass, saying “there is a strong likelihood we will need another bill”. The Fed certainly agrees. Meanwhile, Monday's announcement by Germany and France to announce a €500bn EU recovery fund, coincided with the EURUSD's jump on the same day. As much as these developments are considered to be positive for the markets, given the macro realities of 20%-bound unemployment rates, the US and EU stimulus policies are just enough to prevent indices from breaking key support levels (2740s SPX and 23000 DOW30) and US 10-year yield resistance of 0.76%. That is not stopping traders from forcing the issue (more below).


GBP Hit as BoE Re-ponders Negative Rates May 20, 2020 22:56: 

The pound reversed an early gain on Wednesday after the BOE said it would ponder negative rates. GBP lagged on the day while the kiwi led for the second day. The day ahead features several key US sentiment surveys and weekly initial jobless claims.The pound gave back gains after BoE governor Bailey said negative rates were under "active review", making him the 2nd official to open the possibility on the subject, less than one week after he struck down the idea.  Cable had traded as high as 1.2285 and pulled back 55 pips in the aftermath. EUR/GBP rose. After 6 weeks of false breaks and hesitancy, the EURGBP Premium long finally broke out intermediate resistance --currently 150-pips in the green. The Premium video below focuses on metals and indices. 


The Strongest & Weakest

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