Home > Market Recap: Tight Ranges Dominate Financial Markets, End of the Month Flows Loom

Market Recap: Tight Ranges Dominate Financial Markets, End of the Month Flows Loom

EUR/USD is back where it started the trading week. The US Preliminary GDP, key data today.

The price action this week was slow, to say the least. Both the currency and the equity markets moved in tight ranges in the absence of important economic releases to create volatility.

The US equity market indices corrected from the highs, albeit just a little. As such, the S&P500 futures point to 4,184, slightly lower than yesterday’s cash closing. In Europe, the German DAX index is down to the 15,440 area but remains very close to its all-time highs. In fact, this is the feeling on main equity indices – the markets are close to their highs, so we cannot talk about a meaningful correction.

On the currency markets, the US dollar gained some ground the other day, although only timidly. It gained against the euro, as the EUR/USD exchange rate fell from 1.2260 to the 1.2180 range, only to regain the 1.22 level at the start of today’s London session. In other words, the EUR/USD exchange rate is back where it started the trading week, and this tells much about the price action in financial markets these days.

Gold holds above the $1,900 for the moment and keeps the other commodities bid. Crude oil is down about half a percent to $65.90, unimpressed by yesterday’s crude oil inventories data from the United States.

Daily Analysis

The main event of the trading day is the US Preliminary GDP. The market expects the GDP to have grown by 6.5% in the first quarter, but traders should keep in mind that the Preliminary GDP is the second estimate after the Advanced data. Hence, most of the info tends to be priced in by the time of the release.

Markets to Watch

S&P500, USD/JPY, USD/CHF  – markets in focus today.

S&P500

It is hard to have a bearish view of a market so close to its all-time highs. All factors point to more upside, but caution is needed here. First, the pivotal 4,000 level may be retested as the market met tough resistance on its way up. Now, that resistance should act as support. Second, on the move to the upside, the market formed a triangle that broke the upper trendline, retested it, but failed to make a new higher high. This behaviour shows weakness, and unless a new higher high comes, traders should not discount a move back to 4,000.

USD/JPY

Another tight range this time on the USD/JPY pair. The pair remains well bid while close to the 110 level, but has a hard time bouncing. In fact, the 108.50 area served as strong support, and a move below should open the gates for a retest of the 107.50 level.

USD/CHF

In sharp contrast with the USD/JPY pair, the USD/CHF shows signs of life. A falling wedge pattern suggests a reversal might be in the cards, with the 0.91 area acting as a pivotal level.

Winners and Losers

The US dollar gained some ground against its peers in the last 24 hours, and it remains to be seen if this is the theme for the rest of the trading month. The euro looks vulnerable here, in particular against the US dollar.

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