Aside from cautious reopenings around the world because of the coronavirus, the main economic focus entering last week was the US Non-Farm Payroll data.  Although the staggering number of jobs lost was 20,500,000, the markets seemed to take the numbers in stride as the data was near expectations. In addition to the payroll data,  Germany’s Bundesverfassungsgericht called on the ECB to prove QE was necessary over the last 5 years, the US and China continued to try to complete Phase One of the Trade Deal, and the Turkish Lira made all-time lows vs the US Dollar.  This week the focus will remain on the slow reopening of countries and US states.  All eyes will continue to focus on the coronavirus numbers.  We also have the much-anticipated Bitcoin “halving”!

Will the ECB be able to respond to the inquisition from the German Constitutional Court the Central Bank must prove that QE, and the 2 trillion Euro amount, was necessary?  If they can’t the Bundesbank will pull German government debt from the ECB holdings.  Most likely, the ECB  will be able to provide enough evidence for their actions, however this raises red flags for the future.  Will the ECB be willing to pull the trigger if more QE is necessary in Europe, especially considering the uncertainty surrounding the coronavirus? (Note that the current request from Germany does not involve PEPP).  Or, will the Central Bank be hesitant and concerned about additional lawsuits?

There continues to be lots of “he said, she said” between China and the rest of the world regarding the origination of the coronavirus.  However, while the US tries to push China to complete the trade agreement, China seems to be more hesitant, looking to “create a favorable atmosphere and conditions”.  Watch to see if words get heated this week.

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The Turkish Lira fell to new lows vs the US Dollar as the USD/TRY traded above 7.0831 to a high on Friday of 7.2683.  Turkish authorities blame speculators for the Lira’s depreciation and regulators banned local banks from making transactions with BNP Paribas, Citibank, and UBS.  As we cautioned last week, watch for continued volatility if the USD/TRY continues to press higher.

***Due to ongoing market volatility and the current impact on Turkish lira, pricing and overnight financing charges on TRY markets may increase during this period. If you are holding a position in these markets please ensure your account is adequately funded to maintain these positions.***

This week Crypto currency traders will be focusing on the Bitcoin “halving”.  Bitcoin has bid up from 3850 on March 13th to yesterday’s highs of 10074 in front of the halving.  Traders should be cautious as to if the move was a “Buy the rumor, sell the fact” heading into the be event. In addition, on Thursday macro hedge fund manager Paul Tudor Jones wrote to clients that he is investing in Bitcoin as an inflation hedge.  This also helped Bitcoin in its aggressive move.

Attention may turn to back to politics once again as Nebraska goes to the polls to vote in their primary.  Although Joe Biden has locked up the bid for the Democratic Nominee to face incumbent Republican President Donald Trump for the US Presidency, formalities need to be taken care of for the remaining states who have not yet held primaries.  Many states had to postpone primaries due to the coronavirus, with some taking place in July.  Watch for heated rhetoric to start back up from each of the candidates as the primaries continue.

Turning our attention to the markets, it’s been a relatively quiet week, considering the horrible US jobs data and uncertainly surrounding Germany and the ECB.  The S&P 500 is still grinding higher, looking past the coronavirus, closing up nearly 3.5% this week, above 2900.  This move occurred despite the shooting star candlestick formation last week.  (This pattern will not be invalidated until price moves above 2965).  EUR/USD was down 1.3%, however the Euro was down nearly double that amount vs the commodity currencies of Aussie, Kiwi, and Loonie.   Crude Oil was up another 24% this week, closing near $24.50 as OPEC production cuts began.

The economic calendar is fairly light this week.  Notable events include the RBNZ Interest Rate Decision,  Q1 GDP from the EU and UK,  Australia employment, and a host of data from China on Friday.  US Fed Chairman Powell also will speak on Wednesday.   Other economic events are as follows:

Monday

  • Japan: BOJ Summary of Opinions

Tuesday

  • Australia: NAB Business Confidence (APR)
  • China: Inflation Rate (APR)
  • US: Inflation Rate (APR)

Wednesday

  • Australia:  Westpac Consumer Confidence (MAY)
  • New Zealand: Interest Rate Decision
  • UK:  GDP Growth Rate (Q1)
  • US: PPI
  • US: Fed Chairman Powell Speech
  • Crude Inventories

Thursday

  • Australia: Employment Data
  • Germany: Inflation Rate
  • US: Initial Jobless Claims

Friday:

  • China: Industrial Production (APR)
  • China: Retail Sales (APR)
  • China: Unemployment Rate (APR)
  • Germany: GDP Growth Rate (Q1)
  • EU: GDP Growth Rate 2nd Est (Q1)
  • EU: Employment Change (APR)
  • US: Retail Sales (APR)
  • US: Michigan Consumer Expectations (MAY)

Chart of the Week: Bitcoin Weekly

Source: Tradingview, FOREX.com

Bitcoin has rallied 163% from its March lows as we head into the “halving” next week.  The cryptocurrency put in a false breakdown down from the symmetrical triangle it has been in since its highs back in December 2017 to the lows in January 2018.  The pair is currently trading near resistance, including:

  1. The psychological 10,000 level
  2. Horizontal resistance
  3. The downward sloping upper trendline from the long-term triangle
  4. The 61.8% Fibonacci retracement level from the June 24th, 2019 highs to the March 13th lows.

Support on the downside includes last weeks lows at 8528, the bottom trendline of the long-term triangle near 8000 and horizontal support near 7470.  Watch for volatility around Bitcoin around the “Halving”.

Powell’s speech on Wednesday was announced late Friday afternoon.  Perhaps this may be the event to watch this week.  Otherwise nothing else stands out as a catalyst to move the market.  Continue to pay attention to headlines surrounding the coronavirus.

Please stay safe and always wash your hands!

***Due to ongoing market volatility and the current impact on Turkish lira, pricing and overnight financing charges on TRY markets may increase during this period. If you are holding a position in these markets please ensure your account is adequately funded to maintain these positions.***

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