Economic Events May 27 - 31, 2019
Source: Economic Events Calendar May 27 – 31 2019 - Admiral Markets' Forex Calendar
All in all, the DAX30 CFD had a tumultuous last week of trading, but with a clear bearish tendency into the second half.
While we favoured the long side in our last weekly market outlook, the announcement of Google banning Android services on Huawei devices pushed equities downward last Monday, since fears among market participants arose that China could begin to attack Apple's presence in the Chinese market, leaving the share price vulnerable to a sharp decline and with the knowledge that Apple has a weight of a little more than 10% in the NQ100 CFD.
While initially, the German index stabilised above 12,000 points, last Thursday the DAX30 CFD finally pushed to new weekly lows and below 12,000 points and only closing slightly above the psychologically relevant level.
If, in the coming week, we again take on bearish momentum, a first target can be found around 11,800/830 points, while a break lower leaves the index then vulnerable for a push as low as 11,500/550 points and only if bulls succeed in reconquering 12,350 points the tide would turn bullish again:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD daily chart (between February 12, 2018, to May 24, 2019). Accessed: May 24, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, meaning that after five years, it was up by 10.5%.
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All in all, the picture in the US dollar didn't significantly change over the last week of trading.
When looking at the Fed Watch Tool, we can still see that market participants expect the Fed to cut interest rates at least once till December 2019, even though the Fed minutes last Wednesday clearly signalled that officials are in no rush to change interest rates – in either direction.
That said, it seems very likely that the push higher in the USD index future was mainly driven by the current weakness in the Euro which has a 58% weight in the basket.
Given the thin economic docket, and if in the coming days, no rhetorical intervention from US president Trump or his administration arrives to down-talk the US dollar, it seems likely that the USD index future will try again to sustainably stabilise above 98.00 points in the aftermath of the Euro-sceptic election result, leaving the European currency vulnerable to another push lower.
While such a substantial break above 98.00 points would level the path up to 100.00/50 points, we should, on the other hand, closely watch the developments in US yields where a push to new yearly lows last Thursday let the USD index future close the week below 98.00 points.
Nevertheless, technically only a drop back below 95.00 points darkens the overall technical bullish picture:
Source: Barchart - U.S Dollar Index - Weekly Nearest OHLC Chart (between May 2016 to May 2019). Accessed: May 24, 2019, at 10:00pm GMT
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In anticipation of a conservative, right-wing-dominated EU election result last Sunday, the Euro dropped already towards and below its current yearly lows around 1.1110 last Thursday.
It seems as if the only reason we didn't get to see a push towards 1.1000 last week can be found in the push lower in US yields and thus in the USD.
Nevertheless, with the election now being through and a clear tendency of Euro-scepticism rising respectively entering the EU parliament in Brussels, further losses in the European currency against the USD seem very likely, especially if the Greenback can stabilise a little.
Below 1.1100, a next target can be found in the region around 1.0900/0950, a more bearish target can probably be found around a gap from April 2017 after the French election around 1.0770.
From a technical perspective, on a daily time-frame only a push back above 1.1260 would brighten the technical picture, a little more conservative above 1.1330:
Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between February 16, 2018, to May 24, 2019). Accessed: May 24, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the EUR/USD fell by 11.9%, in 2015, it fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, meaning that after five years, it was down by 16.5%.
The GBP saw some heavier selling over the last week, and the success of Nigel Farage's Brexit party at the EU election over the weekend, in addition to the ongoing political uncertainty around the Brexit deal, leaves the currency pair vulnerable to further losses in the days to come.
After the break below the February lows around 1.2770 USD, our opinion is that the device in Pound Sterling against the USD should be to "sell the bounce" against 1.2870/2900, while the overall target stays around the Flash Crash lows from January around 1.2100.
Technically, only a push back above 1.3200 would brighten the picture, but seems, given the fundamental situation, quite unlikely:
Source: Admiral Markets MT5 with MT5-SE Add-on GBP/USD Daily chart (between February 15, 2018, to May 24, 2019). Accessed: May 24, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the GBP/USD fell by 5.9%, in 2015, it fell by 5.4%, in 2016, it fell by 16.3%, in 2017, it increased by 7.4%, in 2018, it fell by 5.6%, meaning that after five years, it was down by 22.9%.
Even though with Google banning Android services on Huawei devices last Monday, the next level of escalation in the trade war between the US and China seems to be reached, yet Gold didn't significantly profit, but instead drifted back towards to the crucial region of support around 1,266 USD.
Technically, the Head-shoulder formation in Gold stays in play as long as we trade below the right shoulder at around 1,310 USD.
If the next stint towards and below 1,266 USD is successful, further losses in Gold are to be expected with a first projected target around 1,230/235 USD.
In general, Gold traders should nevertheless remain cautious: any new escalation in the trade war would drive a risk-off-mode in markets, and/or a targeted rhetorical intervention of the Trump administration to drive the US-Dollar lower could result in a sharper push higher in the precious metal, even though not necessarily not above 1,310, leaving the HS-formation in play:
Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between February 22, 2018, to May 24, 2019). Accessed: May 24, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.
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