Chart of the Day CADJPY
CADJPY Triangle Play - Probable Price Path
More gloomy warnings from Dr Fauci about a second wave of Covid-19 infections with premature re-openings, coupled with Fed warnings about massive business failures (Bullard) and depression risks, as well as banks’ impacted ability to pay dividends (Quarles), weighed on market sentiments overnight. Meanwhile, US inflation fell 0.8% mom (+0.3% yoy) in April, with core CPI slumping by a record 0.4% mom amid the Covid-induced demand shock. Negative rate speculation also persisted despite recent Fed pushback and as President Trump suggested negative rates could be a “gift” to the US economy. The S&P500 declined 2.05% while VIX jumping to 33.04. UST bonds gained with the 10-year yield down 4bps to 0.67%.
While Kashkari was hopeful of a “gradual, muted recovery”, Mester said it isn’t difficult to imagine a “more pessimistic scenario” if unemployment exceeds 20%, and Kaplan opined that the US economy would need more fiscal stimulus if the unemployment rate continued to rise. Meanwhile, House Democrats have proposed a $3 trillion stimulus bill which includes $1 trillion for states and local governments, but is likely to face challenges in the Senate. Republican Senator Lindsey Graham also introduced a measure to sanction China if the latter does not provide a full accounting to any Covid-19 investigation.
Oil: Prices rebounded on Tuesday, with Brent adding 1.2% and WTI closing above $25/bbl to register a 6.8% gain. It is the first time that WTI has closed above $25/bbl in almost three weeks, erasing all the losses from the negative price episode on 21 April. The Brent-WTI spread has also now narrowed to below $5/bbl. Tuesday May 19 is the settlement day for WTI.High risk of pressure on oil prices leads up to settlement day. While negative prices may not recur, oil's is in a downtrend
From a technical and trading perspective, the CADJPY continues to trade with a contracting triangle pattern yesterday's rejection from triangle trendline resistance opens another test of triangle support, as such bearish exposure should be rewarded on a breach of yesterday's low initially looking for a test of 75.00, if sufficient bids fail to emerge here then bears can expect a move to test 73.00 and 72.00 in extension. Only a closing breach of yesterday's highs negates the bearish thesis
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!