STATE OF THE MARKETS
Stocks mixed as the Dollar rally continued. US stocks closed mixed on Wednesday after mixed earnings reports while the Dollar continued to rally past the 103.50 handle as cash demand continued to build amid expected Fed’s 50bps hike in May. Dow (+0.19%) and S&P (+0.21%) eked minor gains while Nasdaq (-0.01%) and Russell (-0.34%) closed in the red. Demand for bonds was muted, sending yields higher with the 10Y benchmark rising back to 2.83% as inversion with the 7Y (2.85%) maturity continues.
In the commodities market, despite Dollar strength, crude was well bid and resilient to close unchanged around $101.50/bl while gold continued its free fall to break below the $1,880/oz barrier. Elsewhere, iron ore pulled back to deeper support as investors weighed the impact of diminishing global growth. The commodity settled lower, around $151.60/tn as New York closed.
In the FX space, King Dollar trumped across all horizons alongside its neighbor Loonie. Demand for safe haven Yen remained in the medium term while short term traders were seen quick in selling the strength following the long term trend. Kiwi and King Dollar were synching across horizons, sending signals that the turnaround is near.
On Thursday, markets continue to look for progress after Russia shut its gas to Poland and Bulgaria, while waiting for earnings reports from Amazon (AMZN), lntel (INTC), McDonalds (MCD), Merck (MRK), Apple (AAPL), Mastercard (MA) and Caterpillar (CAT) as well as the latest US jobless claims, GDP and Fed’s balance sheet to assess the health of the US economy.
OUR PICK – Crude Oil
Demand outgrow supply and the risk of EU ban. This week has seen strong bids to keep crude oil above $100/bl and we believe it’s the algo that is keeping price elevated despite the US and EIA members SPR release. Research pointed to a quick price escalation if the EU fully banned Russian crude which could see Brent to $185/bl and crude to $128/bl. At this point, the market is waiting and we would cut losses if the price closed below $92.50/bl on the weekly. Short term risk remains, however, that price could test below $97.50/bl in the event of inventories increased.
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