The first full trading week of the second quarter was dominated by strong equities following the Easter break and a relatively weak U.S. dollar. This was the theme in the first couple of trading days of the week, and then the market hesitated.
Out of all trading days of the week, Thursday and Friday are the most important ones for traders. These days are critical for traders willing to roll the positions into the next week and for those forced to exit at prices they don’t want to use. As such, today is critical to see if the market extends the rally seen at the start of the trading week or the recent hesitation turns out to be a reversal?
U.S. stocks remain well bid, with the Dow Jones currently hovering above 33,500 points. The tech index, Nasdaq100, made it all the way up to 13,750, and the S&P500 trades close to 4,100. What else to say about the U.S. stock market, when it remains well bid on dips and consolidates close to all-time highs?
In Europe, things look similar. The FTSE100, in particular, had a strong week, currently sitting at 6,940, eyeing a move to the magical 7,000 level. The German Dax, the French CAC40 or the Spanish IBEX, are all at their recent highs. The vaccination campaign against the COVID-19 virus started to pick up in Europe and the second quarter is expected to see a sharp rise in the number of adult people vaccinated. As such, trades may see the stock market outperforming in the second quarter, especially if restrictions will be lifted toward the end of the quarter.
Gold regained the $1,750 level and remains bid. Ever since it formed a double bottom below the $1,700 level, bulls stepped in and sent the yellow metal higher. Crude oil has no direction while close to the $60 mark, but the bias here looks rather bearish than bullish.
The Bank of England Quarterly Bulletin is interesting for the British pound traders. Speaking of the British pound, it had a terrible weakness, being one of the weakest major currencies. Violent events in Northern Ireland have put the pound under pressure, and now it broke below a bearish continuation pattern.
Canadian dollar traders have a strong interest in today’s economic data. The Unemployment Rate and the Employment Change are due, and the market expects a sharp improvement in the labor data. However, the Canadian dollar may not care about the data, as it emerged as one of the strongest currencies during the pandemic. What may move the Canadian dollar today is rather a move lower in the crude oil prices, than the labor market data.
With no important events out of the United States, the focus at the end of the week will be on the stock market and anything that may transpire from the ongoing IMF Meetings.
Markets to Watch
Dax, GBPUSD, AUDUSD – markets in focus today.
Dax had a terrific rally recently – it broke out of an ascending triangle in February and rallied ever since. Conservative traders may decide to book some profits for at least two reasons. One is that the market already reached the triangle’s measured move. Another is that the measured move of the first bullish flag was also reached. While yet another bullish flag formed, caution at current levels would do no harm.
The GBPUSD pair had a terrible week and the chances are that today will be no different. On the bigger picture, it fell out of the right shoulder of a head and shoulders pattern. Moreover, the recent price action broke lower from a bearish flag. All in all, the pair remains bearish, with the market participants eyeing a move back to the 1.35 area.
The Reserve Bank of Australia was extremely vocal against the Australian dollar’s strength at this week’s monetary policy meeting. It included some warnings in its statement, and so the Aussie pair had a hard time advancing. As such, look for it to resume the bearish trend, with the first target around 0.74.
Winners and Losers
GBP is the main loser of the week, while the EUR remained relatively well bid.