Intraday Market Thoughts

Traders' Visibility Clouded

by Ashraf Laidi
May 11, 2020 18:01

Traders' visibility is being further reduced as price consolidation persists in FX and indices in the face of deepening deterioration in macro data. Friday's release of the US jobs report showing a drop of 20.5 mln jobs and a 14.7% jobless rate prompted Minneapolis Fed's Kashkari to predict that the worst is yet to come for the US economy. A confrontational ECB response to Germany's constitutional part to challenge the latest asset purchases. The PBOC said will use “more powerful” policies. A new Premium trade was opened today and another on Friday. The USDJPY trade was closed for 110 pips.

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Traders' Visibility Clouded - Gold Brent May 11 2020 (Chart 1)

US indices have been in a relatively quiet range, with the DOW30 not showing a daily % change of +(-) 3% in over 4 weeks, while the S&P last changed by more than  3% in Apr 20. Bond yields are on the rise, VIX fell below its 100-DMA and EURUSD remains stuck near 1.08.

Goldman Sachs equity strategy team released a report, predicting indices will fall by 18% in the next 3 months. They expect a 27% drop in capital expenditure and zero plans for growth this year, adding that the bulk of the last 6 weeks' gains were driven by FOMO (fear of missing out).

As countries and cities deal with the challenging task of gradual re-opening, traders keep an eye on any evidence indicating a reversal in the recent declining trend of Covid19 cases. China has already announced that the Northeastern city of Shulan has been put in partial lockdown since Saturday. Further adding to the confusion/consolidation is the swinging pendulum around the US-China trade rhetoric.


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