Trading Week Ahead: 13th-17th April 2020
Key Events and Data Releases This Week
Easter Bank Holiday – NZD, AUD, CHF, EUR, GBP & CAD
RMB Chinese Trade Balance
USD US Retail Sales Core Retail Sales
CAD BOC Monetary Policy Report, BOC Rate Statement, Overnight Rate, BOC Press Conference
AUD Australian Employment Change, Unemployment Rate
USD Unemployment Claims
RMB Chinese GDP, Industrial Production
(Times adapted to AEDT timezone)
In a small surprise, last week we saw substantial gains from the major risk currencies (AUD, EUR, GBP, CAD) and equities as coronavirus curves in some European countries started to fall. The curves have dropped, yes, but sadly, death rates are still happening. Although the epicentre has now moved to America, with the country registering the highest number of cases for infection and deaths globally, U.S. equities shock off these morbid numbers to rally throughout the week. Stimulus packages are now up and running in most affected countries, but through government-induced lockdowns, job losses and their financial effects continue to mount.
A New Bounce for the DOW
Looking at the Dow US30 chart above, we can see how the market has started to discount the ongoing negativity, adding 11.68% for the week. The buying was also driven by news the Federal Reserve plans to inject further 2.3 trillion dollars into the economy through a variety of lending programs to help businesses and local and state governments. Last week’s rally touched the 50% Fibonacci retracement point. The 61.8% point is located just above 25,170. Why is this important? If you follow Fibonacci retracements, 50% is seen as a normal area, and technical analysts like to see this level reached by a counter-trend as if it turns from this level it remains a normal trend. Rallies in bear markets can have a habit of going deeper on sharper moves, so a move to 61.8 remains normal if you’re gauging the retracement off Fibonacci. Please note as with most things these are guides and not an exact science. Risk currencies also finished the week with good gains as did gold. As USD strength retreated, the precious metal added over 4%, while the AUDUSD gained 5.56%, retaking the .63 handle.
Updates to Look Out For This Week
This week focus will remain on news that continues to suggest that the curves relating to the pandemic are decreasing, with some countries’ lockdown dates already extended out to early May. With China having now exited lockdown, including the pandemic ground zero city of Wuhan, traders will be watching just how the country continues to recover. Coming up this week, we have some high profile Chinese data with the trade balance expected to come in a lot higher than the last round of data, and GDP figures to be sharply lower. Industrial production is another expected to come in higher at -7% after the previous -13%. Traders will be looking to see if industrial production figures can beat expectations as that would show stronger signs of recovery and reflects on how fast other nations may recover once their lockdowns are lifted.
The Bank of Canada also meet this week to discuss rates, but based on their surprise cut last time around we shouldn’t be expecting further cuts at this point. The weekly U.S. unemployment claims report could be interesting, with it recently becoming a key indicator of just how badly the virus is disrupting the economy. The expectation is for a drop to 500K, after the 6,606K release last week. Based on the increasing damage COVID-19 continues to wreak across the U.S., that would certainly be a surprise. We are also due new Australian employment data, and we’re certainly thinking it won’t be good on the unemployment front. Employment change could surprise, supported by the thousands of new jobs created by the major supermarket chains, but that’s a maybe.
Oil is another interesting one with the market continuing to look for clarity on a historic production cut. OPEC and its allies failed to secure a deal after Mexico was unable to agree to the proposed cuts. The U.S. has said it could cut 250-300K barrels a day which would cover Mexico’s contribution. Until this is finalized, however, buyers may struggle for motivation.