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S&P 500 and NASDAQ made record highs overnight but sentiments turned around in Asia. Weaker than expected China PMIs raised doubt on the sustainability of the post lunar new year recovery. There is even question on whether slowdown has bottomed. Nevertheless, Chinese stocks remain resilient so far, with Shanghai SSE staying comfortably above 3000 handle.

In the currency markets, Australian Dollar is the weakest one for today for its economic tie with China. New Zealand and Canadian Dollars are the next weakest. Yen is the strongest one for now, followed by Sterling and then Swiss Franc. The big picture could drastically change in European session with Eurozone GDP featured. We'd finally see how bad the slowdown in Eurozone was.

Technically, Dollar and Yen remain generally in corrective mode and consolidations are set to extend further. It should be a matter of time when the two resume recent rises. The question is who'd be stronger. Judging from the price actions in USD/JPY, Yen is having a slight upper hand.

In Asia, currently, Hong Kong HSI is down -0.48%. China Shanghai SSE is up 0.43%. Singapore Strait Times is down -0.31%. Japan remains in the ultra-long 10-day holiday. Overnight, DOW rose 0.04%. S&P 500 rose 0.11%. NASDAQ rose 0.19%. 10-year yield rose 0.031 to 2.536.

China PMI manufacturing dropped in April, no upward turning point

China's April PMIs came in all weaker than expected. The results raised much doubt on the case of recovery in the economy. And, they suggested that even the post lunar new year seasonal rebound in Mach couldn't sustain. The official PMI manufacturing dropped to 50.1, down from 50.5 and missed expectation of 50.6. Official PMI non-manufacturing dropped to 54.3, down from 54.8 and missed expectation of 55.0.

Caixin PMI manufacturing dropped to 50.2 in April, down from 50.8 and missed expectation of 50.2. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: "In general, China's economy showed good resilience in April, yet it stabilized on a weak foundation and is not coming to an upward turning point. The Politburo meeting signalled that in the first quarter of this year China had adjusted its countercyclical policy marginally. As pressure on the economy remains in the second quarter, we expect that there will be minor adjustments to the policy but not a turnaround."

New Zealand business confidence dropped to -37.5, soft patch proving reasonably long-lasting

New Zealand ANZ Business Confidence dropped slightly from -38.0 to -37.5 in April. Agriculture has the least confidence at -62.9 while manufacturing at -25.8 was already the best. Activity Outlook improved from 6.3 to 7.1. Agriculture outlook was the best at 20.0 while retail was worst at -7.5.

ANZ noted that the economy is "experiencing a soft patch that is proving reasonably long-lasting". Steadily declining GDP is expected to continue to middle of this year. However, , easier monetary conditions and policy certainty should see momentum recover, assuming the global outlook continues to improve.

Also, "cost pressures are expected to dissipate as capacity pressures wane, reducing the pressure on firms' profitability." ANZ expects RBNZ to cut the OCR, starting in August, to support growth in inflation.

UK GfK consumer confidence unchanged at -13, a case of 'Keep Calm'

UK GfK consumer confidence was unchanged at -13 in April, matched expectations. Joe Staton, Client Strategy Director at GfK, says:  "We have reported a -13 headline for the past three months and it appears it's a case of 'Keep Calm' when it comes to how confident consumers are feeling right now.  Despite political carry-on in the Westminster bubble with the clock ticking on Britain's eventual departure from the EU, consumers are holding firm and remain unshaken by the daily headlines of turmoil and intrigue, although we remain in negative territory."

Eurozone GDP to highlight a busy day

Looking ahead, the economic calendar is very busy today. Q1 GDP from Eurozone, France and Italy will be the major focus in European session. Germany will also release Gfk consumer confidence, import price, unemployment and CPI. Eurozone will release unemployment rate. Swiss will release KOF economic barometer.

Later in the data, Canada GDP will catch most attention. IPPI and RMPI will also be featured. From US, employment cost, S&P Case Shiller house price, Chicago PMI, pending home sales and consumer confidence will also be featured.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7042; (P) 0.7052; (R1) 0.7066; More...

AUD/USD dips mildly after recovery from 0.6988 lost momentum. But it's staying well above 0.6988 temporary low. Intraday bias remains neutral first. More consolidation would be seen. In case of another rise, upside should be limited by 0.7081 minor resistance to bring fall resumption. Prior break of 0.7003 suggests resumption of whole fall from 0.7295. On the downside, break of 0.6988 will extend the fall from 0.7295 to 100% projection of 0.7295 to 0.7003 from 0.7205 at 0.6913. Decisive break there will indicate further downside acceleration.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD rose 0.06% against the USD and closed at 0.7057.

LME Copper prices declined 0.3% or $17.0/MT to $6376.0/MT. Aluminium prices declined 0.9% or $16.0/MT to $1816.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7047, with the AUD trading 0.14% lower against the USD from yesterday’s close. Overnight data showed that in Australia, private sector credit demand rose 3.9% on an annual basis in March, less than market expectations. The private sector credit demand had advanced by a revised 4.1% in the prior month.

Elsewhere in China, Australia’s largest trading partner, the NBS manufacturing PMI unexpectedly declined to a level of 50.1 in April, defying market consensus for a steady reading. In the prior month, the NBS manufacturing PMI had registered a reading of 50.5.

The pair is expected to find support at 0.7031, and a fall through could take it to the next support level of 0.7015. The pair is expected to find its first resistance at 0.7066, and a rise through could take it to the next resistance level of 0.7085.

Going forward, traders would await Australia’s AiG performance of manufacturing index and the CBA manufacturing PMI, both for April, salted to release overnight.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Gold declined 0.43% against the USD and closed at USD1282.00 per ounce, amid strength in the US equities and following stronger than expected US consumer spending data.

In the Asian session, at GMT0300, the pair is trading at 1283.50, with gold trading 0.12% higher against the USD from yesterday’s close.

The pair is expected to find support at 1279.47, and a fall through could take it to the next support level of 1275.43. The pair is expected to find its first resistance at 1287.97, and a rise through could take it to the next resistance level of 1292.43.

The yellow metal is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Silver declined 0.83% against the USD and closed at USD14.96 per ounce, led by losses in gold prices.

In the Asian session, at GMT0300, the pair is trading at 14.96, with silver trading marginally higher against the USD from yesterday’s close.

The pair is expected to find support at 14.88, and a fall through could take it to the next support level of 14.79. The pair is expected to find its first resistance at 15.07, and a rise through could take it to the next resistance level of 15.18.

The white metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Crude Oil rose 1.00% against the USD and closed at USD63.54 per barrel.

In the Asian session, at GMT0300, the pair is trading at 63.46, with oil trading 0.13% lower against the USD from yesterday's close.

The pair is expected to find support at 62.72, and a fall through could take it to the next support level of 61.97. The pair is expected to find its first resistance at 63.93, and a rise through could take it to the next resistance level of 64.43.

Moving ahead, investors will keep a close watch on the weekly crude inventories data from the American Petroleum Institute (API), due later in the day.

Crude oil is showing convergence with its 20 Hr and 50 Hr moving averages.

New Zealand ANZ Business Confidence dropped slightly from -38.0 to -37.5 in April. Agriculture has the least confidence at -62.9 while manufacturing at -25.8 was already the best. Activity Outlook improved from 6.3 to 7.1. Agriculture outlook was the best at 20.0 while retail was worst at -7.5.

ANZ noted that the economy is "experiencing a soft patch that is proving reasonably long-lasting". Steadily declining GDP is expected to continue to middle of this year. However, , easier monetary conditions and policy certainty should see momentum recover, assuming the global outlook continues to improve.

Also, "cost pressures are expected to dissipate as capacity pressures wane, reducing the pressure on firms' profitability." ANZ expects RBNZ to cut the OCR, starting in August, to support growth in inflation.

Full release here.

UK GfK consumer confidence was unchanged at -13 in April, matched expectations. Joe Staton, Client Strategy Director at GfK, says:  "We have reported a -13 headline for the past three months and it appears it's a case of 'Keep Calm' when it comes to how confident consumers are feeling right now.  Despite political carry-on in the Westminster bubble with the clock ticking on Britain's eventual departure from the EU, consumers are holding firm and remain unshaken by the daily headlines of turmoil and intrigue, although we remain in negative territory."

Full release here.

China's April PMIs came in all weaker than expected. The results raised much doubt on the case of recovery in the economy. And, they suggested that even the post lunar new year seasonal rebound in Mach couldn't sustain. Hong Kong stocks trade lower after the release but China Shanghai SSE is steady so far. In the currency markets, Australian Dollar is clearly knocked down by the releases.

The official PMI manufacturing dropped to 50.1, down from 50.5 and missed expectation of 50.6. Official PMI non-manufacturing dropped to 54.3, down from 54.8 and missed expectation of 55.0.

Caixin PMI manufacturing dropped to 50.2 in April, down from 50.8 and missed expectation of 50.2. Looking at the details, output and total new work both rose slightly, but with margin fall in overseas new work. Relatively subdued demand conditions led firms to remain reluctant to expand their inventories. Overall inflationary pressures softened. On the positive side, one-year outlook for production improved to an 11-month high.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

"The Caixin China General Manufacturing Purchasing Managers' Index eased to 50.2 in April, down from a recent high of 50.8 in the previous month, indicating a slowing expansion in the manufacturing sector.

1) The subindex for new orders fell slightly despite remaining in expansionary territory. The gauge for new export orders returned to contractionary territory, suggesting cooling overseas demand.

2) The output subindex dropped. The employment subindex returned to negative territory after hitting a 74-month high in March. According to data from the National Bureau of Statistics, the surveyed urban unemployment rate remained at a relatively high level despite edging down in March, suggesting that pressure on the job market remained.

3) While the subindex for stocks of purchased items returned to contractionary territory, the measure for stocks of finished goods fell more markedly. The gauge for future output edged up, pointing to manufacturers' desire to produce and stable product demand. The subindex for suppliers' delivery times rose further despite staying in negative territory, implying improvement in manufacturers' capital turnover.

4) Both gauges for output charges and input costs edged down. There were only small changes in upward pressure on industrial product prices. We predict that April's producer price index is likely to remain basically unchanged from the previous month.

"In general, China's economy showed good resilience in April, yet it stabilized on a weak foundation and is not coming to an upward turning point. The Politburo meeting signalled that in the first quarter of this year China had adjusted its countercyclical policy marginally. As pressure on the economy remains in the second quarter, we expect that there will be minor adjustments to the policy but not a turnaround."

STOCKS

Global equities broadly remain positive except for Shanghai which has room for more fall. Sensex and Nifty can see some upticks within their sideways range. Japanese markets are closed for the entire week on account account of public holidays.

Dow (26544.39, +11.06, +0.04%) has turned up from its 21-day moving average support (26370) and retains our bullish view intact for a test of 26700 in the near term and target 27000 eventually in the coming weeks.

The support at 12240 is holding well on DAX (12328.02, +12.84, +0.10%) and keeps the oulook is bullish for a rise to 12450-12500.

Shanghai (3086.85, +24.35, +0.80%) is seeing some short covering which can take it higher to 3100-3130 in the coming sessions and the downtrend is likely to resume thereafter towards 3050.

Sensex (39067.33, +336.47, +0.87%) retains its 38500-39500 sideways range. It can rise to 39500 - the upper end of the range while it sustains above 39000.

Nifty (11754.65, 112.85, 0.97%) is heading towards the upper end of its 11550-11800 range. A break above 11800 will see a further rally to 11900.

COMMODITIES

The corrective rally in gold has room to extend in the near term. Silver is mixed and can trade sideways. Copper, though has bounced, remains vulnerable for a fall again. Oil, with key resistances ahead, remains bearish.

Gold (1282) has support at 1275. While above this support a corrective rally to 1292 or even 1300 is possible before it falls back to 1275-1270 levels.

Silver (14.94) is mixed and can oscillate between 14.80 and 15.10.

Copper (2.89) has bounced but has resistance at 2.92 (21-day moving average). The outlook is bearish for a fall again to 2.85-2.84 while copper remains belo 2.92.

The resistance at 64 can cap the current bounce-back move in WTI (63.35). A pull-back thereafter will drag WTI to 62 and even 61.5

Brent (71.82) is bearish and can dip to 71 in the near term. The resistance at 72.70 can cap the upside and will Brent pressured for a fall to 70-69.8 in the coming days.

FOREX

US Dollar may see some fall in the coming sessions especially after the recent rally from 96.70 to 98.30. Aussie and Euro looks bullish while Euro-Yen could be stable with a slight rise in the coming sessions. Dollar-Yen is ranged and is unable to give directional clarity for the medium term.

98.32 on the Dollar Index (97.81) has held well last week and the index could test 97.50-97.30 on the downside before again rising back towards 98.25 in the medium term.

The Euro (1.1189) has risen well from 1.11 and while the rise sustains, 1.1225-1.1230 looks possible in the coming sessions. Immediate view is bullish. On the 3-day candles, there is scope for a rise towards 1.13.

The Euro-Yen (124.90) could rise towards 125-126 in the near term before falling from there back towards 124. Immediate view is bullish.

Dollar-Yen (111.59) is trading in a very narrow range. Broad 111-112.00/50 could be the region of trade in the near term. Thereafter, whether the pair would move above 112.50 or fall below 111 is unclear just now. We would wait for price confirmation to give directional clarity for the medium term.

The Aussie (0.7049) could test 0.710-0.715 on the upside. Immediate support at 0.70 is holding well for now and while Aussie trades above 0.70, view is bullish.

USDCNY (6.7387) may rise just now but is likely to face rejection near 6.75/76 levels from where a fall back to 6.72/70 is a possibility. Watch immediate resistance near 76.75/76

Dollar-Rupee (70.01) may test 69.75/80 before 70.25/50 on the upside. Note that 70.25/50 is an important resistance zone and while that holds, Dollar-Rupee could be stable for sometime in the 69.75-70.25/50 zone. NDF quotes 69.82 just now.

INTEREST RATES

The German 30YR (0.65%) and the 10Yr (0.006%) are testing immediate resistance trend-line and could fall towards 0.60-0.50% and -0.1% in the near term if the resistance holds. The 5Yr (-0.417%) and the 2Yr (-0.577%) could have some ore room on the upside for a few sessions before falling from there.

The German-US 10YR (-2.52%) is testing the earlier support turned resistance which if holds could push the yield spread lower towards -2.55%. A fall in the spread could push Euro lower in the medium term.

The US 10Yr (2.53%) and the 30Yr (2.96%) have resistances at 2.55% and 2.98% respectively and could soon see a fall from these levels in the coming sessions.

The 10Yr GOI (7.5258%) has support at 7.50% which if holds could soon push the yield higher towards 7.60/65% in the coming sessions. Downside could extend to 7.45% on a break below 7.50% but overall we see a gradual rise to 7.65% while above 7.45/50%.

SPX closes off record high as Alphabet earnings disappoint

Benign inflation data helped US indices climb higher early in yesterday’s session, only to retreat off the highs as Alphabet’s earnings report missed expectations.

US30USD Daily Chart

The US30 index rallied for a second consecutive day yesterday but failed to break above this month’s high of 26,666

Rising 55-day moving average support is at 25,992 today with this month’s high of 26,666 and the October high of 26,939 likely resistance points

US pending home sales are expected to rebound in March, rising 0.5% m/m following a 1% drop in February.

DE30EUR Daily Chart

The Germany30 index advanced for a second day yesterday, touching the highest in seven months at one stage

The index is nearing the October highs while the 55-day moving average looks poised to cross above the 200-day moving average in the next few days. This may be interpreted as a longer-term bullish signal

Euro-zone economic growth is seen accelerating mildly in Q1. Forecasts suggest a 0.3% q/q expansion from +0.2%.

CN50USD Daily Chart

China shares extended the rebound from four-week lows yesterday amid a generally upbeat Wall Street

The 23.6% Fibonacci retracement of this year’s rally is at 13,272 while the rising 55-day moving average is at 12,939. The index has traded above this average since January 18

China’s April manufacturing PMI came in at 50.1, below forecast and a deterioration from March’s 50.5 reading. This could hinder market sentiment.