European and U.S. GDP data published this week

Hi Everyone,

This coming week is heavy on the economic data front. Both the Boj and the Fed are publishing their monetary policy statements and interest rate decisions, on Tuesday and Wednesday respectively. Preliminary U.S and Euro Area first quarter GDP data will be published on Thursday and Friday, while Chinese PMI numbers on Friday help to gauge the expansion of the world’s second largest economy.

We saw volatility in markets last week when President Biden shed light on his proposed tax hikes, in order to finance the American Family Plan. The details about the US $ 1.5 trillion plan aiming to fight poverty, reduce childcare costs, provide free prekindergarten as well as college and establish a national pay leave, will be published this week. Proposed tax hikes are concentrated towards the high-income earners by eliminating certain tax provisions, nearly doubling capital gains tax rate, as well as raising top marginal income tax rate to 39.6% from current 37%. Risk assets, such as equities, reacted with shedding gains while safe havens, including the dollar and Yen, rose.

Preliminary GDP numbers are published later this week for the U.S. and the Euro Area. Thanks to a notably successful vaccine rollout and continuous fiscal stimulus in the States, the divergence in GDP growth between the U.S. and the Euro Area is expected to be remarkable. The Euro Area is projected to shrink -0.8%, with a number of key economies struggling with the third wave of COVID-19. The U.S., on the other hand, is enjoying re-opening, with 50% of the population having received at least one jab, while the taps of both monetary and fiscal stimulus are still flowing. Q1 expansion has been upgraded to 6.5% on an annualized basis by analysts, up from 4.3% in the previous quarter. Atlanta Fed has published a higher estimate of 8.3%, after taking into consideration the latest housing data. Residential real estate, expanding 20% in March to 1.7 million units sold, has gotten a real boost with the mortgage rate touching a historical low of 2.65% in January this year. The rates have inched higher since, currently near 2.97%, and likely to put brakes on the demand at some point.

Retail spending, contributing roughly 30% to GDP, has also been robust in Q1. Notwithstanding negative 2.7% print in February, largely due to a hangover after a jump of 7.7% in January data, retail spending is at historic levels. March numbers jumped 9.8% compared to previous month, bolstered by the direct stimulus checks sent to individuals. Retail spending has likely reached its peak and will start rolling over from here, since the next round of stimulus, once its approved, will be aimed at infrastructure re-building. Retail momentum might carry on for a couple of months, but should stimulus driven consumption subside, retail spending is likely to take a hit. Especially with holes in the labor market as 17 million Americans are still receiving some sort of jobless benefits and U6 unemployment rate at 10%.

S&P 500 was flat with gaining 0.13% to 4180.18, overbought on both daily and weekly charts. Nasdaq-100 shed 0.72% to 13941.44 points. Russell 2000, representing U.S. small and medium companies, rose 0.41%. Russell 2000 has been consolidating since early March, forming a double bottom on the daily chart. The dollar index DXY lost -0.86%, marking this the third consecutive week the Greenback has slid. Gold gained 0.04%, after a hammer candlestick on the weekly chart. Oil futures shed 1.66% ahead of the OPEC meeting this week.

Have a great trading week ahead!

Trading on margin products involves a high level of risk

In The Spotlight

DateCurrencyEventPrevious Consensus 
MondayUSDDurable Goods – March-1.2%2.5%
TuesdayJPYBoJ Monetary Policy Statement and Interest Rate Decision-0.1%-0.1%
WednesdayAUDCPI (QoQ) – Q10.9%0.9%
WednesdayUSDOPEC Meeting
WednesdayCADRetail Sales (MoM) – February-1.1%-3.0%
WednesdayEURLagarde Speech
WednesdayUSDFed’s Monetary Policy Statement and Interest Rate Decision0.25%0.25%
ThursdayEURGerman Preliminary Harmonized CPI (YoY) – April2.0%2.0%
ThursdayUSDPreliminary GDP – Q14.3%6.5%
FridayCNYNon-Manufacturing PMI – April56.352.6
FridayCNYNBS Manufacturing PMI – April51.951.4
FridayEUREuro Area Preliminary Core CPI (YoY) – April0.9%0.9%
FridayEUREuro Area Preliminary GDP (QoQ) – Q1-0.7%-0.8%

* In USD millions

• Euro Area and U.S. GDP growth
GDP data shows the monetary value of all the goods and services produced in an economy. A negative number indicates a contraction of economic activity while a positive number shows an expansion. A better than expected GDP growth is generally positive for currency, whilst a print below expectations tends to be negative.

• Australia, German and Euro Area CPI
CPI, or inflation measures the rise in consumer prices in an economy over a certain period of time. Generally, both high and negative inflation are bearish for currency, while positive and low inflation, in line with expectations, is bullish

Market Sentiment

EURUSD pair keeps trending higher with momentum indicators supporting moderate bullish trend while price is trading above 8-day exponential moving average (EMA). Price is overbought on the daily chart since mid-April with Stochastic currently near 88; however, further upward momentum is supported by ADX of 28 and pointing higher. Support level is near 100-day simple moving average (SMA) near 1.20550, while resistance is near upper Bollinger Band 1.21500. DMI+ of 28 signals that bullish momentum prevails. Resistance levels are near 1.21520 and 1.21700, while support is near 1.20600 and 1.20350.

Resistance: 1.21520
Support: 1.20600

GBPUSD is still finding support near 8-day EMA and 50-day SMA near 1.38700. Should the price move decisively higher from 50-day SMA levels, further bullish momentum would be confirmed. Bullish short- and long-term trend is confirmed by moving averages currently below the price, supporting a move higher. Energy in the trend seems weak as ADX is currently near 8. Resistance levels are near 1.39190 and 1.39340, while support is near 1.38430 and 1.38320.

Resistance: 1.39190
Support: 1.38430

NZDUSD trending higher with momentum indicators supporting weak bullish momentum. Price is currently overbought as Stochastic is 81 since mid-April. Price has recently pierced 50-day SMA, indicating that bullish momentum is likely to accelerate. Resistance levels are near 0.72280 and 0.72400, while support is near 0.71700 and 0.71500.

Resistance: 0.72280
Support: 0.71700

XAUUSD is trending higher with price finding support near 8-day EMA. Short-term momentum indicators are increasingly bullish but 200-day SMA is still above the price. Stochastic oscillator signals overbought levels but the indicator is pointing lower. ADX of 25 signals a moderate energy in the trend. Resistance levels are near 1,788.70 and 1,794.40. Support is near 1,773.10 and 1,767.85.

Resistance: 1,788.70
Support: 1,773.10

Kaia Parv, CFA, is an experienced Portfolio and Investment Manager with exposure to both public and private markets. Before joining FXPRIMUS, Kaia was a Senior Investment Associate at EFA Group and a Vice President in Bank of America Merrill Lynch.

Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital. Show Less

risk Show More

Get Started

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

Get Started