U.S. Brief, May 04 – Top Trade Setups in Forex – Mixed Risk Sentiment In Play!

The U.S. stock indexes slid for a second session, pressured by lower share prices of technology giants. The Dow Jones Industrial Average fell 622 points (-2.6%) to 24,723, the S&P 500 dropped 81 points (-2.8%) to 2,830, and the Nasdaq 100 tumbled 282 points (-3.1%) to 8,718.

Energy (-6%), Automobiles & Components (-5.2%) and Retailing (-4.96%) sectors suffered the most significant losses. Tesla (TSLA -10.3%), Amazon.com (AMZN -7.6%), Alphabet (GOOGL -2.2%) and Apple (AAPL -1.6%) showed weakness.

XAU/USD – Ascending Triangle Pattern 

The safe-haven-metal prices flashing green and recovered gradually from the intraday low to above $1,700 level mainly due to risk-off market sentiment in the wake intensifying trade tussle between the United States and China. On the other hand, the positive news from Gilead about the vaccine of virus seems to have eased the coronavirus fears in the market, which turned out to be one of the key factors that kept a lid on any additional gains in the gold prices. 

The yellow metal prices are currently trading at 1,702.27 and consolidate in the range between the 1,692.34 – 1,702.27. However, the gold slipped to $1,692.30 during the early-Asian session, possibly due to U.S. dollar strength. Trump also said that the trade deal with China was now on his second importance to the coronavirus pandemic when he also announced to impose tariffs on Beijing.

Financial traders take this news as a threat to a never-ending trade war between two big economies of the world, and hence, Risk-off sentiment in markets emerged, which helped the commodities and safe-haven assets to pick up the pace. Gold also moved with this reaction of traders and recovered some of its previous day’s losses on Friday.

Gold was dropped after many countries decided to put an end to their coronavirus lockdowns or ease the restrictions, even Prime Minister Boris Johnson has announced to set out a plan next week on how Britain might start returning to their regular life routines. South Africa on Friday took its first step on easing its lockdown, which was one of the world’s strictest COVD-19 lockdown.

At 19:00 GMT, the ISM Manufacturing PMI for April was also released, which came in as 41.5 against 36.7 expected. The Construction Spending from the United States came in 0.9% against the forecasted -3.5% and supported the U.S. dollar. The ISM Manufacturing Prices for April exceeded to 35.3 against 30.7 expectations. The Wards Total Vehicle Sales also exceeded the expectations of 7M and supported the U.S. dollar by coming as 8.6M.

Daily Support and Resistance  

Support Resistance 

1706.9 1734.7

1691.6 1747.2

1679.1 1762.5

Pivot Point 1719.4

XAU/USD – Daily Trade Sentiment

The precious metal gold is trading with a bullish bias, holding mostly below 1,714 resistance level, but it has crossed over the 50 EMA resistance area. Alongside, the RSI is also soaring over 50, suggesting odds of bullish bias in gold. On the higher side, gold’s next resistance is likely to be found around 1,720 and 1,737, while support continues to hold around 1,694 area. In case of a bearish breakout, we may see gold prices holding slipping towards 1,671 level. 

USD/CAD – Bearish Retracement In Play

The USD/CAD pair was closed at 1.40883 after placing a high of 1.41090 and a low of 1.39256. Overall the movement of pair USD/CAD remained bullish throughout the day. The pair USD/CAD reached to fresh 5-day high on Friday above 1.4100 level after the incoming Governor of Bank of Canada; Tiff Macklem suggested that there was the possibility of negative interest rates was on the table if the circumstances remain the same.

On Friday, the Bank of Canada Governor Stephen Poloz and the Canadian Finance Minister Bill Morneau held a press conference to announce Canada’s new central bank governor. Stephen Poloz held this position for seven years, and on Friday, he announced that he was stepping down in June 2020. In his replacement, he announced that Tiff Macklem would be the new head of the BoC. 

Macklem said that there was a need to try and overwhelm the crisis to stabilize the economy and restore confidence. Bank of Canada has reduced its overnight interest rates to 0.25%, and it has also started an unprecedented bond-purchasing program of $146B.

Macklem was cautious against negative interest rates and called them too disruptive for an already disrupted financial system. He also added that he was comfortable with the existing rates being as low as the bank would go. He reiterated that when the restrictions would be lifted, it would not be a snap back to normal, but it would be a phased approach where Bank of Canada will play its role in the presence of the virus.

As for the macroeconomics, the Manufacturing PMI from Canada was released, which came in as 33.0 for April against the 46.1 of March and weighed heavily on the Canadian dollar. The weakened Loonie lifted the USD/CAD pair above 1.40 level.

On the other hand, the decline of US ISM Manufacturing PMI to its 11 years lowest level at 41.5, which caused the U.S. dollar weak across the board, restrained the hike of USD/CAD on Friday. The weak U.S. dollar, together with weak Loonie, made it difficult for USD/CAD to cross the 1.41 level.

USD/CAD- Daily Technical Levels

Support Resistance 

1.3928 1.4069

1.386 1.4142

1.3787 1.421

Pivot Point 1.4001

USD/CAD- Daily Trade Sentiment

The USD/CAD was trading bullish around 1.4159 level, but it entered the overbought zone, to drive bearish correction in the market. Below 1.4150, the USD/CAD pair has formed three black crows, which may push bearish retracement. On the lower side, the USD/CAD prices may drop until a 38.2% Fibonacci retracement level of 1.4035 level. Violation of 38.2% Fibonacci retracement can be seen around 61.8% Fibo level of 1.3960. The 50 EMA may extend support to the USD/CAD pair around 1.4025 area. However, the overbought RSI is suggesting a bearish correction. Let’s look for selling trades below 1.4090 to target the 1.4000 level today. 

AUD/USD – Three While Soldiers 

The AUD/USD pair was closed at 0.64175 after placing a high of 0.65110 and a low of 0.64096. Overall the movement of pair remained bearish throughout the day. After rising for six consecutive days, the AUD/USD pair fell for the second day on Friday amid the poor economic data onboard. A sharp fall in the prices of AUD/USD pair after the release of disappointed Manufacturing Index was seen in the Asian trading session.

The AIG Manufacturing Index at 3:00 GMT was released by the Australian Industry Group for the month of April, which showed a massive decline in the manufacturing activity in Australia during the month. The index showed that the manufacturing sector was contracted to 35.8 while the previous month’s index was at 53.7.

At 6:30 GMT, the Product Price Index for the quarter came in as0.2% against 0.3% of the previous quarter. At 11:30 GMT, the Commodity prices index from the Reserve Bank of Australia was released, which showed a decline of -8.1% on a yearly basis in April. 

The disappointing data from the Australian side moved the pair AUD/USD in a downward direction towards its three day low of 0.637. However, the pair managed to close above 0.640 level due to U.S. dollar weakness.

The U.S. dollar remained weak across the board due to sparse ISM manufacturing PMI data, which ended up falling to its 11 years low level at 41.5 and helped AUD/USD to recover some of its daily losses. Mostly the pair showed technical movement on Friday and ignored the U.S. dollar weakness.

AUD/USD – Technical Levels 

Support Resistance 

0.6445 0.6527

0.6398 0.6562

0.6362 0.661

Pivot Point 0.648

 

AUD/USD – Daily Trade Sentiment

The AUD/USD is trading with a bullish bias around 0.6410 and has recently closed three white soldiers pattern above 0.6370 level, which is suggesting that the oversold pair be trading lower to complete the retracement. Overall, the AUD/USD has reached a 23.6% Fibonacci retracement level, along with a 38.2% level, which holds around 0.6449 level. At the same time, the 50 EMA may work as resistance for AUD/USD on the 4-hour timeframe, which marks around 0.6440 level. Let’s look for selling trade below 0.6440 and buying above the same, depending upon a breakout level today. 

All the best for the U.S. Session!

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