After the bullish start of the year, the rand has started to weaken since the last Thursday. Let’s point out the main factors affecting the ZAR and set the key levels for this week’s trading.
Morning brief for April 26
Growing appetite for risk meant safe-haven assets fell out of favor. Global equities rallied to an all-time high this month as European political risk abated ("dog days are over" for Europe as Florence Welch from Florence and the machine would say). US President Donald Trump is preparing to unveil a tax plan today that would include a slashing of the of the corporate tax rate and lower taxes on offshore earnings stockpiled by US businesses oversee. The threat of a US government shutdown was eliminated after Trump consented not to demand fundings for his border wall with Mexico. Overall, the absence of the fresh news can be a lull before the storm as investors wait for some risks this week with Bank of Japan and European Central bank meetings, geopolitical tensions simmering around North Korea.
In currency markets, the euro rallied to 1.0945. The near-term outlook is tilted to the upside, but the single currency should move well above 1.2950 to indicate that an extension towards 1.1000 is not far off. Tomorrow traders will be watching for the European Central Bank meeting. While most analysts don’t expect extreme changes in the ECB’s monetary policy stance, they might send a small signal towards reducing the stimulus they provide to spur Eurozone economic growth.
Aussie was the main loser of the Asian session. It dropped to 0. 7520 on the Australian CPI data. Annual core inflation data accelerated to just below the lower end of the RBA’s target. The central bank might be willing to introduce a cut tax at the upcoming meeting. Fortunately for AUD, the Reserve Bank of Australia tend to focus on the labor market conditions (job growth and wage growth) which are still slow for the RBA to cut rates.
The British pound is consolidating in the range of 1.2750 – 1.2900 (last week high). It is a sign that the recent upward momentum is waning, and that a slide towards the nearest supports at 1.2752, 1.2620. if GBP manages to reclaim 1.2900, it might rise higher towards 1.2950. yesterday the UK’s Telegraph reported that Britain will have to pay into the EU budget up until 2020 in exchange for a sensible EU offer on a transition deal. The pound stayed intact after the announcement. This news might be important further.
USD/CAD spiked to 1.3625 overnight on the news that the US placed tariffs on Canada’s soft lumber exports. Canadian PM Trudeau refuted the baseless allegations of US commerce department on lumber and claimed that he will vigorously defend interests of softwood industry in Canada.
US crude futures lost a few points after yesterday’s industry report showed a surprise increase in the US stockpiles. Crude oil WTI futures were down to $49.45. Brent oil futures are quite steady. They hover around $52.50 level.
If we look at the daily charts of the US dollar index and the USD/JPY pair, we will see a misleading trend.
Britain has to leave the European Union in 66 days. Will it leave with a trade deal (good for the GBP) or without one (bad for the GBP)?
The last "Pennant" pattern has been broken, so bulls found resistance at 1.2915. Nevertheless, the market is likely going to move on, so we should...
USD/CHF remains weak across the board and stays strong with a bearish consolidation below the 200 SMA at H1 chart…
There's no any reversal pattern so far, so the market is likely going to test the nearest resistance area in the short term...