Weaker yuan is a clue from China to the US
Today Beijing has lowered the official yuan rate to its lowest since February 2008.
The offshore exchange rate, USDCNH, reflects the height of disputes between the two major economies. At the same time, the official rate can be considered a very reliable indicator of the mood of Chinese politicians.
Offshore yuan rose to 7.15 – this is the area of peaks, where USDCNH grew amid aggravation of relations between China and the United States last year. That is, market pressure on the exchange rate was not as intense as before.
This is a clear clue from Chinese bureaucrats that they intend to use the cheaper renminbi rate as a measure to support China’s export competitiveness. The lower exchange rate has always been a reason for anger from the US, and it promises to be the same this time.
Today Beijing has lowered the official yuan rate to its lowest since February 2008.
The offshore exchange rate, USDCNH, reflects the height of disputes between the two major economies. At the same time, the official rate can be considered a very reliable indicator of the mood of Chinese politicians.
Offshore yuan rose to 7.15 – this is the area of peaks, where USDCNH grew amid aggravation of relations between China and the United States last year. That is, market pressure on the exchange rate was not as intense as before.
This is a clear clue from Chinese bureaucrats that they intend to use the cheaper renminbi rate as a measure to support China’s export competitiveness. The lower exchange rate has always been a reason for anger from the US, and it promises to be the same this time.
Bitcoin retreats in the background of market and governments pressure
Bitcoin lost 5% or $440 in 24 hours, and at the beginning of the new working week is changing hands for $8,800. Formally, we are witnessing evidence of a continued long-term downward trend, which goes through highs of 2017, 2019, and early 2020. If the 200-day moving average of $8,400-$8,500 will be unable to resist pressure, there is a risk of falling towards $7,500 (50-day average) and even $7,000: levels that act as an essential psychological and technical benchmark. But is it so bad for the crypto market to have a sharp and “bloody” sell-off after encountering a hard resistance of around $10,000?
Bitcoin lost 5% or $440 in 24 hours, and at the beginning of the new working week is changing hands for $8,800. Formally, we are witnessing evidence of a continued long-term downward trend, which goes through highs of 2017, 2019, and early 2020. If the 200-day moving average of $8,400-$8,500 will be unable to resist pressure, there is a risk of falling towards $7,500 (50-day average) and even $7,000: levels that act as an essential psychological and technical benchmark. But is it so bad for the crypto market to have a sharp and “bloody” sell-off after encountering a hard resistance of around $10,000?
Ifo's German business climate index exceeded expectations in May, which helped the euro trade Monday. The indicator of business conditions increased from 74.2 to 79.5 (78.3 expected). The growth was due to an increase in the expectations component from 69.4 to 80.1. As the markets try to look forward, their attention is entirely focused on the "glimmer of hope" regarding business prospects in connection with the easing restrictions.
In the previous recession, this indicator reached its bottom in December 2008, had begun to add long before the contours of economic collapse became apparent in the German economy in 2009. It is also essential to understand that Ifo reversal rarely reverses the euro against the dollar.
Instead, we can talk about the reverse relationship: the weaker euro exchange rate encourages the optimism of export-oriented Germany. Thus, it isn't easy to rely on current data as a signal of further strengthening of the single currency.
In the previous recession, this indicator reached its bottom in December 2008, had begun to add long before the contours of economic collapse became apparent in the German economy in 2009. It is also essential to understand that Ifo reversal rarely reverses the euro against the dollar.
Instead, we can talk about the reverse relationship: the weaker euro exchange rate encourages the optimism of export-oriented Germany. Thus, it isn't easy to rely on current data as a signal of further strengthening of the single currency.
Which instrument do you see as the most interesting to trade this week?
Final Results
39%
EURUSD
39%
Gold
10%
Crude Oil
13%
Stocks and Indices
Over the last day, 90.2K new cases of COVID-19 were detected worldwide vs 96.5K day ago and 88.6K this day a week ago. The number of recovered was 63.8K (54.2K earlier). The total number of cases is 5.59M, of which 2.88M is active, 2.37M recovered, and 347.9 died. The five countries with the highest daily growth are the US (19.8K), Brazil (13.1K), Russia (8.9K), India (6.4K), Chile (4.9K). Spain revised its data, taking away 1915 deaths and about 400 cases of infection, which embellished the general statistics for the day.
Double test for the bulls on S&P500
Futures on the S&P500 (SPX) exceeded 3000 this morning. In 2019, the index managed to take this round mark not from the first attempt, making it a critical resistance.
The importance of this level is now further enhanced by the fact that the 200-day average passes near it. This level is a significant trend indicator for large investment banks. Unofficially, this level separates the downtrend from the uptrend. Many traders refrain from buying the asset that trades below the 200-DMA, and moves above this line serves as buying signal.
Thus, the closing of the trading session today above 3000 for S&P500 may serve as a strong signal for a further rally of the American market and spur growth in the world markets.
However, despite the importance of this moment for the psychology of market participants, one should be very careful.
Futures on the S&P500 (SPX) exceeded 3000 this morning. In 2019, the index managed to take this round mark not from the first attempt, making it a critical resistance.
The importance of this level is now further enhanced by the fact that the 200-day average passes near it. This level is a significant trend indicator for large investment banks. Unofficially, this level separates the downtrend from the uptrend. Many traders refrain from buying the asset that trades below the 200-DMA, and moves above this line serves as buying signal.
Thus, the closing of the trading session today above 3000 for S&P500 may serve as a strong signal for a further rally of the American market and spur growth in the world markets.
However, despite the importance of this moment for the psychology of market participants, one should be very careful.
Over the last day, 92.1K new cases of COVID-19 were detected worldwide vs 90.2K day ago and 94.8K this day a week ago. The number of recovered was 65.1K (63.8K earlier). The total number of cases is 5.69M, of which 2.9M is active, 2.43M recovered, and 352.2 died. The five countries with the highest daily growth are the US (19.0K), Brazil (15.7K), Russia (8.9K), India (5.8K), Peru (5.8K). Last Friday, reported a sharp jump in serious and critical cases (+9.1K), but since then, this figure has slightly decreased from 53.6 to 53.1K.
S&P500 fails to cross Rubicon on its first attempt
The S&P500 index exceeded 3000, while the Dow Jones index rose above 25000 on Tuesday during the day. As the close of the trading approached, both indices failed to stay above these psychological levels. The S&P500 found itself under increased pressure in the last trading hours of Tuesday.
It is worth paying more attention to investors’ activity as the closing of trades approaches. Hence, we take it as a signal that the “sell on growth” approach is still in place. Close the day below the 200-DMA is a signal that participants were not ready to switch to buying just two months after the huge collapse.
The S&P500 index exceeded 3000, while the Dow Jones index rose above 25000 on Tuesday during the day. As the close of the trading approached, both indices failed to stay above these psychological levels. The S&P500 found itself under increased pressure in the last trading hours of Tuesday.
It is worth paying more attention to investors’ activity as the closing of trades approaches. Hence, we take it as a signal that the “sell on growth” approach is still in place. Close the day below the 200-DMA is a signal that participants were not ready to switch to buying just two months after the huge collapse.
EURUSD turned to growth and approached 1.1000, near which the 200-day average passes. On the news about the upcoming 750B euro stimulus package, EURUSD has jumped above this limes. Both are psychologically important. Their breakdown often leads to a significant increase in purchases. Also, for the euro, this may be a signal for the end of the downtrend since 2018.
Before one jumped into the market, it is prudent to wait for the end of this epochal battle of bulls and bears. It should be borne in mind that the pair "likes" to make false breakdowns of the 200-day average, but then returns to the prevailing trend. It is more careful to give time until the end of the month.
We are now witnessing a similar battle for the 200-day average and psychologically important round level of 3000 at S&P500. It may well turn out that both essential instruments for world markets synchronously successfully overcome them or fail. And this will be the strongest signal, perhaps for several months or even quarters ahead. It is better not to rush, and wait for confirmation with closing the week and month below or above 200-day averages and marks of 1.1000 and 3000 for EURUSD and S&P500, respectively.
Before one jumped into the market, it is prudent to wait for the end of this epochal battle of bulls and bears. It should be borne in mind that the pair "likes" to make false breakdowns of the 200-day average, but then returns to the prevailing trend. It is more careful to give time until the end of the month.
We are now witnessing a similar battle for the 200-day average and psychologically important round level of 3000 at S&P500. It may well turn out that both essential instruments for world markets synchronously successfully overcome them or fail. And this will be the strongest signal, perhaps for several months or even quarters ahead. It is better not to rush, and wait for confirmation with closing the week and month below or above 200-day averages and marks of 1.1000 and 3000 for EURUSD and S&P500, respectively.
Over the last day, 106.5K new cases of COVID-19 were detected worldwide vs 91.8K day ago and 102.5K this day a week ago. The number of recovered was 66.8K (65.1K earlier). The total number of cases is 5.79M, of which 2.94M is active, 2.50M recovered, and 357.5 died. The five countries with the highest daily growth are Brazil (22.3K), the US (20.5K), Russia (8.3K), India (7.3K), Peru (6.1K). Brazil came first in the number of new cases. Over the week, the share of the US in total cases has declined from 31% to 30%, Spain - from 5.49% to 4.9%, the UK - from 4.88% to 4.6%. The share of Brazil increased from 5.8% to 7.16%, Russia - from 6.06% to 6.40%.
US market stars drop off the radar
FAANG idea has worked out powerfully in the last two months.
Stocks of Amazon, Netflix, and Facebook – not only quickly recovered from the collapse in March, but also updated historical highs with a large margin. Microsoft and Apple have returned to their peak levels reached earlier this year. However, they’ve been feeling worse than the market in general in recent days.
Amazon experience profit-taking recently
Boeing and Ford, as well as the banking sector, have been growing weaker than others since March’s collapse, but are showing more positive momentum since May 15.
FAANG idea has worked out powerfully in the last two months.
Stocks of Amazon, Netflix, and Facebook – not only quickly recovered from the collapse in March, but also updated historical highs with a large margin. Microsoft and Apple have returned to their peak levels reached earlier this year. However, they’ve been feeling worse than the market in general in recent days.
Amazon experience profit-taking recently
Boeing and Ford, as well as the banking sector, have been growing weaker than others since March’s collapse, but are showing more positive momentum since May 15.
Is Bitcoin the new Netscape?
Bitcoin is again above $9K, but there is not much excitement among market participants. Bitcoin decreased by almost 4% in the last week. After halving, the new driver for the crypto sphere is the approaching launch of CBDC (central bank digital currencies) projects.
However, from the position of Bitcoin-maximalists, this is the most astonishing point of view. It turns out that the base crypto idea has outlived itself. In this way, Bitcoin looks like the hero of the Dot-com bubble – Netscape, that gave the technology itself and set the overall direction but could not ride the wave.
Bitcoin is again above $9K, but there is not much excitement among market participants. Bitcoin decreased by almost 4% in the last week. After halving, the new driver for the crypto sphere is the approaching launch of CBDC (central bank digital currencies) projects.
However, from the position of Bitcoin-maximalists, this is the most astonishing point of view. It turns out that the base crypto idea has outlived itself. In this way, Bitcoin looks like the hero of the Dot-com bubble – Netscape, that gave the technology itself and set the overall direction but could not ride the wave.
Consumer inflation in Germany slows further. Published preliminary estimates showed a 0.1% price decline in May, and 0.6% to this month year ago, from 0.9% in April and 1.7% in January-February. On average, analysts expected a slight, 0.1% increase this month.
In theory, the weakest consumer inflation in four years may give the ECB space to soften monetary policy as it reflects a deterioration in consumer activity.
The reaction of the single currency may not be as sharp as before. Investors and traders are also putting their weight on the stimulus announced by European Commission yesterday and budget expenditures, as well as negative rates in the Euro-region, which will allow the ECB to continue to nod towards fiscal policy. The combination of the ECB’s inaction and low inflation is a plus for the euro, as it retains its real (adjusted for inflation) purchasing power.
In theory, the weakest consumer inflation in four years may give the ECB space to soften monetary policy as it reflects a deterioration in consumer activity.
The reaction of the single currency may not be as sharp as before. Investors and traders are also putting their weight on the stimulus announced by European Commission yesterday and budget expenditures, as well as negative rates in the Euro-region, which will allow the ECB to continue to nod towards fiscal policy. The combination of the ECB’s inaction and low inflation is a plus for the euro, as it retains its real (adjusted for inflation) purchasing power.
Signs of recovery in the US labour market
Last week, the number of initial claims for benefits exceeded 2.12 million. This is the smallest number in ten weeks, but still historically unseen levels. The number of new claims is falling extremely slowly, noting further cuts in business.
However, data on continued claims for benefits gave an important positive signal, decreased by 3.86 million over the week. People are returning to work (or finding a new one). Of course, the United States is only at the beginning of the road, and the number of continued claims is unlikely to return to the pre-pandemic level of 1.7 million in the foreseeable future. Although, this is the first sign that the lowest point for employment (and markets) may be behind us.
Last week, the number of initial claims for benefits exceeded 2.12 million. This is the smallest number in ten weeks, but still historically unseen levels. The number of new claims is falling extremely slowly, noting further cuts in business.
However, data on continued claims for benefits gave an important positive signal, decreased by 3.86 million over the week. People are returning to work (or finding a new one). Of course, the United States is only at the beginning of the road, and the number of continued claims is unlikely to return to the pre-pandemic level of 1.7 million in the foreseeable future. Although, this is the first sign that the lowest point for employment (and markets) may be behind us.
Over the last day, 116.3K new cases of COVID-19 were detected worldwide (new record) vs 106.5K day ago and 107.1K this day a week ago. The number of recovered was 82.4K (66.8K earlier). The total number of cases is 5.91M, of which 2.96M is active, 2.58M recovered, and 362 died. The five countries with the highest daily growth are Brazil (24.1K), the US (22.7K), Russia (8.4K), India (7.3K), Peru (5.9K). Brazil came first in the number of new cases. The rate of closed cases is 49.8%, of which 12.3% died, this number decreased from 22% in early April.
EURUSD and S&P500 gave a strong bullish signal. Is growth ahead?
The two most closely monitored instruments of the world markets, EURUSD and S&P500, signal a breakthrough of their downtrends.
Closing the week and month above the 200-day average and significant round mark will allow us to speak about a technical break of the downtrend formed in early 2018. And it is interesting because the fundamental reasons for this downtrend are gaining strength again.
Technically, Euro is now quite low by historical standards, that means the absence of sellers. Moreover, it receives support from the SNB, which is selling francs for the euro.
Thus, markets are generating very volatile growth based on technical factors and short-term impulses, but without taking into account the fundamental weakness. This is a very fragile structure that could collapse at any moment.
The two most closely monitored instruments of the world markets, EURUSD and S&P500, signal a breakthrough of their downtrends.
Closing the week and month above the 200-day average and significant round mark will allow us to speak about a technical break of the downtrend formed in early 2018. And it is interesting because the fundamental reasons for this downtrend are gaining strength again.
Technically, Euro is now quite low by historical standards, that means the absence of sellers. Moreover, it receives support from the SNB, which is selling francs for the euro.
Thus, markets are generating very volatile growth based on technical factors and short-term impulses, but without taking into account the fundamental weakness. This is a very fragile structure that could collapse at any moment.
Americans unprecedentedly saved in April, and that isn’t good
April data on US personal spending and income showed a very wary mood of the Americans. A recent publication notes income growth by 10.5% in April (vs -7% expected) after a decrease of 2.2% in March. But the rate of outlays cut doubled to 13.6% after 6.9% a month earlier.
The share of savings to disposable income reached an unprecedented 33%
It is positive that revenues showed a sharp increase, and did not collapse, as was expected, despite the drop in employment. This remains the hope of a recovery in demand. It is alarming that the US population is unprecedentedly saving, which portends a prolonged economic downturn amid cost-cutting.
April data on US personal spending and income showed a very wary mood of the Americans. A recent publication notes income growth by 10.5% in April (vs -7% expected) after a decrease of 2.2% in March. But the rate of outlays cut doubled to 13.6% after 6.9% a month earlier.
The share of savings to disposable income reached an unprecedented 33%
It is positive that revenues showed a sharp increase, and did not collapse, as was expected, despite the drop in employment. This remains the hope of a recovery in demand. It is alarming that the US population is unprecedentedly saving, which portends a prolonged economic downturn amid cost-cutting.