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AETOS Market Commentary 01/05/2019

AETOS Capital Group Partnership



The Euro rose to 1.1214(+30 pips) on Tuesday against the greenback. The EUR/USD pair surged to 1.1228 Tuesday, as the dollar extended its previous decline amid a cautious stance ahead of Fed's monetary policy meeting this Wednesday, and as EU data resulted upbeat.

German´s May GFK Consumer Confidence Survey came in unchanged at 10.4, but the preliminary estimate of EU Q1 GDP printed 0.4%, better than the 0.3% expected and above the previous 0.2%, the first sign that the Union's economic slowdown may be close to a bottom. Germany also released the first estimates of April's inflation, which rose by 2.1% YoY from 1.4% in March.

Furthermore, US equities were up ahead of the opening, with sentiment boosted by positive headlines correlated to US-China trade talks. US data, on the other hand, came in positive as the CB Consumer Confidence Index surged in April after March's decline, printing 129.2 while Pending Home Sales rose by 3.8% in March. The dollar recovered some ground as risk-aversion took over the financial markets during US trading hours with Wall Street dipping in the red after Alphabet Inc., Google's parent company, released a disappointing earnings report, although equities bounced back, putting the greenback again under pressure by the end of the day.

Most major markets will remain closed Wednesday amid Labour Day, although is not a holiday in the US and the Federal Reserve will unveil its latest monetary policy decision, followed by a press round from chief Powell. Seems unlikely that the central bank will change its 'patient' stance, with the focus mostly on possible future rate moves. Ahead of the event, the US will release the April ADP employment survey and the Manufacturing official and Markit PMI for the same month, with the ISM index seen revised lower to 55.0.

EURUSD 4 Hour Chart


The In the 4 hours chart, the 100 SMA is directionless(Red Line), converging with a strong resistance area at 1.1224 while the 20 SMA(Aqua Line) heads higher below the current level, and as technical indicators barely correct overbought conditions, all of which keeps the risk skewed to the upside.


The Kiwi is currently trading at 0.6647, falling by 22 pips from where it opened against the greenback. The New Zealand fell alongside bond yields after mixed employment data crossed the wires. While the unemployment rate fell to 4.2 percent and beat the 4.3 percent forecast, the participation rate and employment change disappointed.

In fact, labor force participation fell to its weakest point since Q2 2017. The undershooting data is a deviation from the country’s overall economic trajectory which has seen indicators fall in line with analysts’ expectations for the past few months. Slower growth in employment undercuts inflationary pressure which the RBNZ has reiterated is still below its two percent target.

This gives the central bank further impetus to cut rates following its meeting in March that sent the New Zealand Dollar tumbling. This was subsequently followed by weaker-than-expected CPI in April, likely a result of the ailment caused by reduced consumption as a result of fewer hirings . The monetary policy statement from the March 27 meeting cited “reduced momentum in domestic spending” and slower global growth as key concerns that caused the central bank to pivot to a more dovish disposition.

Much like what ECB officials said in March, risks have broadly tilted towards the downside. The cycle-sensitive New Zealand Dollar will continue to monitor US-China trade talks as the two appear to be closing in on a deal.

NZDUSD Daily Chart


The outlook for the Kiwi pair is currently bearish as it is currently trading below its 20 SMA(Red Line), and 100SMA(Blue Line). Moreover, the pair is currently stuck in a downward channel, first level of resistance will be set to 0.6882. Support will be set to 0.6577.


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Source: https://www.aetoscg.com/uk/market-commentary
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