Tuesday May 4th, 2021

The US$ rallies, oil prices extend gains, equity markets are mixed and US yields strengthen as safe-haven buying returns. Fed Chair Powell comments yesterday described the US recovery as “patchy” and stressed that unemployment in the lower wage bracket is still elevated. The US$ is expected to extend its gains with markets optimistic for strong US Factory Orders today and is expected to set the stage for a strong NFP on Friday.  Surging covid cases added to the return to safe-haven US$ buying today. India reports another +350k day of new viruses cases, Indian cases passing 20 million, while global cases hit +153 million. President Biden continues to make his case to raise corporate and HNW individual taxes to support his US$4.1T in planned stimulus spending. In other news Sino/US tensions increases after the US Foreign Secretary comments on 60 minutes on Sunday and EU moves towards the US ahead of the G7 meeting this week. In the currency markets CNY holds steady, while Asian currencies weaken 0.25% on average vs US$. Trading currencies weaken across the board with MXN & JPY down 0.3%, ZAR drops 0.4%, while AUD & NOK are lower 0.55% and NZD falls 0.9% vs US$. Intraday focus will be on US Goods & Services Trade Balance (Mar) and US Factory Orders (MOM- Mar) for intraday direction.

Oil prices rise on China, US and European demand growth optimism as covid lockdown restrictions ease and vaccinations continue to pick up pace. C$ retraces from its 3-year on a strengthening US$ after the Fed Chairs comments on Monday, but as oil prices continue to rise expect the loonie to find support into the mid 1.23’s. Canadian manufacturing grew for its 10th straight month in April, and the focus shifts to today’s Canadian International Merchandise Trade (Mar) for signs of further growth. C$ remains at critical levels, in the short-term momentum favors C$ stronger. Support (Key pivot) at 1.2246 (Feb2018), if breached look for 1.2057 (Sep2017) while resistance sits at 1.2360, if breached expect a move back to 1.2430. 

Euro under fresh selling pressure on US$ strength. Safe-haven US$ buying on surging international virus cases and ongoing dovish fed comments capped the Euro short term strength. Europe is loosening its covid restrictions, welcoming travels and the EU’s vaccination campaign is picking up momentum which should provide an underlying support to the single currency into Q2. Focus shifts to US data releases for intraday direction. Support drops to 1.1975 and resistance lowers to 1.2085.

EURGBP trades lower as Eur bears the brunt of the US$ strengthening. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP weakened on a stronger US$, Scottish elections, BOE and Brexit concerns. Post Brexit France rejects the UK provisional changes to fishing licenses and tension begin to rise. The SNP has pledged to call for a second Scottish independent vote if they win the majority in the Scottish parliament. Today, better than expected UK Factory activity (Manufacturing PMI) grew at its fastest pace since 1994. New orders also grew at their fastest pace in 8 years, with 2/3rd of companies expecting even greater growth into 2022. Overall businesses are expecting less covid disruptions into 2022, optimism grows for a stronger economic recovery and client confidence is seen as growing with more planned new product launches. Super Thursday BOE meeting will be watched closely to see if the BOE will taper asset purchases. Support at 1.3835, while resistance sits at 1.3935.