Asia buys equities, euro, ahead of a busy week
Equities advanced strongly during the Asian trade on Tuesday and euro was gaining while the yen and the Swiss franc were giving back gains from previous days. This means that sentiment is definitely up ahead of the busy week, despite a warning signal from Moody’s on Japanese rating (taken under review).
One might conclude that those moves are irrelevant since they occurred during the (relatively thin) Asian trade and since the full package of key (US) data is still ahead. However:
- Such a strong improvement in sentiment ahead of four days full with uncertainty means that investors think the levels on equities and pairs with the euro are attractive and want to position themselves for some positive surprises (even though – as we pointed yesterday – the data may struggle to meet the consensus);
- Key levels of resistances were broken on both S&P500 futures and EURUSD; that may encourage technical driven players to join with the buyers regardless of the underlying picture.
So to sum up, while the key releases are still ahead and we think that the data might disappoint, today’s Asian session shows that investors are far from panicking.
EURUSD – wave 5 possible
Jean-Claude Juncker said yesterday that terms of aid for Greece will be worked out by the end of June. This may mean another month of uncertainties but it didn’t stop the euro from gaining during the Asian trade. The pair broke an important level of resistance at 1,4340 and moved sharply up, getting close to another resistance of 1,4420.
A decisive rebound may suggest that the pair completed a prolonged correction as a wave 4 of a greater structure begun in January this year and is now rising along the final wave 5th. Breaking 1,4420 should confirm this. A range for wave 5 is usually hard to predefine as it may exceed wave 3 (most common), match it (in this case it looks credible as that would also match wave 5 with wave 1) or be kinked. In any case wave 5 should move up to at least 1,4565.
Events to watch – Conference Board and Chicago PMI in US, flash HICP in the zone
The key data from US this week include labor market and the ISMs. However, Conference Board sentiment index is important too (10.00 ET, 16.00 CET, consensus 66,5 pts.) and the Chicago PMI (9.45 ET, 15.45 CET, consensus 62,6 pts.) will be the final indicator ahead of the industrial ISM. The Bank of Canada will decide on rates today yet not move is expected (9.00 ET, 15.00 CET). In Europe, the euro might be affected by the flash inflation data from the euro zone (5.00 ET, 11.00 CET, consensus 2,8% y/y).
|
Przemysław Kwiecień PhD, Chief Economist |
 |
Disclaimer, investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more
