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Market movers today

Today is victory day in Russia. We expect President Putin will escalate his rhetoric against the West. The market reaction is uncertain and will depend on the possibility of a Russian attack on other countries.

In Norway, we get industrial production figures for March.

During the rest of the week, focus will particularly be on US CPI figures.

We will also follow discussions on the EU's sixth sanctions package and if an agreement for a Russian oil embargo is found.

The 60 second overview

Victory day in Russia: While fighting continues in Eastern Ukraine, Russia celebrates the victory day today. Putin could use the occasion to formally declare a war against Ukraine, which so far has been dubbed 'a special military operation' by the Russian side. Declaration of war would enable Russia to mobilize more troops from its reserves, and further increase the pressure following only very limited progress over the past weeks. See our earlier take on the topic in Research Russia-Ukraine - Several signals point to an escalation in the war in Ukraine as Victory Day looms, 26 April.

China: Chinese trade balance recovered in April, as exports rose 3.9% y/y and imports remained unchanged y/y in dollar terms, both slightly stronger than consensus expected. The figures are affected by base effects and rising prices, and both import and export volumes likely declined m/m. China is being hit by both weakening export demand, which was evident in the latest round of PMIs, but also the prolonging Covid-restrictions. Over the weekend, authorities of Shanghai once again tightened the city's lockdown measures, with no end in sight in the near-term. Asian stocks have declined in early Monday trade, and oil prices have moved slightly lower due to rising recession risks, even though EU is set to discuss the Russian oil import ban further this week. China is likely to stick with the controversial 'zero-Covid' strategy for now, while increasing stimulus measures to support the economy. Chinese April credit data will be released this week, giving the latest sense of the strength of infrastructure stimulus.

US Jobs Report: US nonfarm payrolls grew by 428k in April, broadly in line with expectations despite the slight negative revisions. Wage growth moderated, but it still remained above pre-Covid levels at +0.3% m/m. With record high job openings, labour force participation still subdued and fast wage inflation, the overall picture of tight labour market conditions continue to support the case for fast Fed hikes, with around 68bp priced in for the next June meeting. See the details in our US Labour Market Monitor - Record-high job demand supports the case for more aggressive Fed tightening, 9 May.

Equities: Equities were lower on Friday with in new round of stagflation fears fuelled by the US job report. Hence value, defensive and low vol best performing while cyclical growth got heavily beaten down. Growth stocks down more than 20% year to date while value down only 4%. Since our latest strategy change 7 March, value has outperformed growth by 5%. The preference for value also visible in the US session at Friday with Dow -0.3%, S&P 500 -0.6%, Nasdaq -1.4% and Russell 2000 -1.7%. The risk appetite remains sour this morning with US futures lower and European futures even lower. Sentiment in Asia very negative as well with Japanese stocks down 2.3% this morning. Hang Seng (China) closed for Buddha's Birthday holiday.

FI: The continued rise in yields and widening of spreads is seen as the result of rising possibility of a 'disorderly' exit by ECB given the combination of liquidity tightening. as discussed in COTW: Introducing ECB 'LT': QT in liquidity, 6 May, early rate hikes from ECB and no clear strategy to avoid fragmentation of the EU sovereign bond and corporate credit markets.

FX: On Friday, EUR/USD ended the day nearly where it started around 1.055, as markets appear to have settled on the view that the Fed was indeed hawkish, irrespective of hiking 50bp while 'ruling out' 75bp. EUR/GBP moved further up now trading around 0.855, as relative rates have started to support the cross slightly. EUR/NOK and EUR/SEK moved sideways around 10.00 and just below 10.50, respectively. EUR/CHF moved back above 1.04.

Credit: Credit markets had yet another tough day on Friday, with iTraxx Xover and Main closing 9.5bp and 2.2bp wider, respectively. Had it not been for a strong end to the session, the indices would have widened twice as much.

Last week closed on a negative note, as US NFP data came in stronger-than-expected, revived Federal Reserve (Fed) hawks, and sent the major US indices lower. And the new week starts on a negative note, as well, after the Chinese Li Keqiang warned that the jobs situation in China is getting ‘complicated and grave’ as the government’s zero Covid policy is taking a heavy toll on the country’s economy, and impacts the rest of the world negatively, as well.

So negatively, that Saudi Arabia decided to cut oil prices for buyers in Asia from record highs pointing at the slowing demand in China. Saudi lowered all grades for the northwest Europe region and almost all for the Mediterranean, as well. However, crude oil kicked off the week under positive pressure, as leaders of the G7 nations pledged to ban the Russian oil on Sunday.

As the Russian oil ban has already been widely priced in, the positive impact will certainly remain limited, yet the worsening situation in China and Xi government’s stubbornness in keeping a Mission Impossible in place will likely cost more to China and to the world economy in terms of growth, and oil demand in the coming months. That could slow down the broader oil rally. Yet, news that Biden’s administration’s plan to buy crude to refill these strategic reserves is a sign that the drop in demand will certainly match the tighter global supply.

Jobs done; inflation next

The US NFP printed 430K new nonfarm job additions in the US last month, the unemployment rate came in a relatively low, but higher-than-expected 3.6%, and the average earnings increased a slightly less than the expectations, but not enough to cool down the Fed hawks.

The US 10-year yield closed the week above the 3.10% and the dollar index advanced to a fresh almost two-decade high.

On Wednesday, the US will reveal its latest inflation figure, and the CPI is expected to have eased to 8.1% in April, from 8.5% printed a month earlier.

If the jobs data couldn’t improve sentiment, as a strong data would fuel the hawkish Fed expectations, and a soft data would fan the recession fears, sign of softer inflation could improved appetite in risk assets, and trigger a positive correction in US indices.

In the FX and crypto

The EURUSD is preparing to clear support near 1.05. The only thing that could help the bears change their mind is a soft US inflation data, which would cool down the Fed hawks, confirming that the Fed’s efforts to slow inflation are paying off, meaning that it would not need to get too aggressive to bring inflation down toward its 2% policy target.

If we see the Fed hawks relax, we could also see recovery in cryptocurrencies, which trade closely, and positively, to the risk assets, and especially to tech stocks.

Bitcoin dived to the lowest levels since January over the weekend. The next natural target for Bitcoin bears is the $30K psychological support.

Daily Pivots: (S1) 160.39; (P) 161.00; (R1) 161.68; More...

Intraday bias in GBP/JPY remains neutral as the corrective pattern from 168.40 is still extending. Break of 159.59 will extend the correction from 168.40 lower. But downside should be contained by 61.8% retracement of 150.95 to 168.40 at 157.61 to bring rebound. On the upside, firm break of 168.40 will resume larger up trend.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 150.95 support holds, even in case of deep pull back.

Daily Pivots: (S1) 136.89; (P) 137.53; (R1) 138.31; More....

Intraday bias in EUR/JPY remains neutral as consolidation from 139.99 is still extending. In case of another decline, downside should be contained by 38.2% retracement of 124.37 to 139.99 at 134.02 to bring rebound. On the upside, firm break of 139.99 will resume larger up trend for 144.06 medium term projection level.

In the bigger picture, up trend from 114.42 (2020 low) is in progress. Such rise is seen as the third leg of the pattern from 109.30 (2016 low). Next target will be 100% projection of 114.42 to 134.11 from 124.37 at 144.06. In any case, outlook will now remain bullish as long as 124.37 support holds, in case of deep pull back.

Daily Pivots: (S1) 0.8507; (P) 0.8550; (R1) 0.8589; More...

Intraday bias in EUR/GBP remains on the upside for the moment. Current rally should now target 0.8697 medium term fibonacci level next. On the downside, below 0.8500 minor support will turn intraday bias neutral first. But outlook will stays bullish as long as 0.8465 resistance turned support holds.

In the bigger picture, a medium term bottom could be in place at 0.8201, on bullish convergence condition in daily and weekly MACD. Rise from there could either be a correction to the down trend from 0.9499 (2020 high), or a medium term up trend itself. In either case, further rise should be seen to 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Sustained break there will target 61.8% retracement at 0.9003.

Daily Pivots: (S1) 1.4812; (P) 1.4891; (R1) 1.4991; More...

Intraday bias in EUR/AUD remains neutral for the moment. On the upside, break of 1.5053 will resume the rebound from 1.4318, and target 61.8% retracement of 1.6223 to 1.4318 at 1.5495. On the downside, break of 1.4597 will bring retest of 1.4318 low instead.

In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend form 1.9799 (2020 high) is still expected to continue. On resumption, next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). However, firm break of 1.5354 will indicate medium term bottoming and bring stronger rally.

Daily Pivots: (S1) 1.0354; (P) 1.0403; (R1) 1.0472; More....

Intraday bias in EUR/CHF remains on the upside at this point. Current rise from 0.9970 should target 100% projection of 0.9970 to 1.0086 from 1.0400 at 1.0516 next. On the downside, below 1.0331 minor support will turn intraday bias neutral and bring consolidations first. But further rally will remain mildly in favor as long as 1.0186 support holds.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.

Daily Pivots: (S1) 1.0487; (P) 1.0543 (R1) 1.0603; More...

Intraday bias in EUR/USD remains neutral as range trading continues. In case of another recovery, upside should be limited by 1.0756 support turned resistance to bring fall resumption. On the downside, firm break of 1.0470 will resume larger down trend to 161.8% projection of 1.1494 to 1.0805 from 1.1184 at 1.0069.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1185 support turned resistance holds. The break of 1.0635 (2020 low) now raises the chance that it's resuming long term down trend from 1.6039 (2008 high). Retest of 1.0339 (2017 low) low should be seen next. Decisive break there will confirm this bearish case.

Daily Pivots: (S1) 1.2285; (P) 1.2332; (R1) 1.2389; More...

Intraday bias in GBP/USD remains on the downside at this point. Firm break of 161.8% projection of 1.3641 to 1.2999 from 1.3297 at 1.2258 will extend recent down trend to 200% projection at 1.2013 next. On the upside, break of 1.2637 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, based on current momentum, fall from 1.4248 (2018 high) at least at the same degree as the rise form 1.1409 (2020 low). That is, fall from 1.4248 could be a leg inside the pattern from 1.1409, or resuming the longer term down trend. In either case, deeper decline is expected as long as 1.2999 support turned resistance holds. Next target is 1.1409 low.

Daily Pivots: (S1) 0.9845; (P) 0.9869; (R1) 0.9909; More....

Intraday bias in USD/CHF remains on the upside for the moment. Current up trend should target 261.8% projection of 0.9149 to 0.9459 from 0.9193 at 1.0005 next. On the downside, break of 0.9708 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Sustained trading above 100% projection of 0.8756 to 0.9471 from 0.9149 at 0.9864 will pave the way to 161.8% projection at 1.0306, which is close to 1.0342 (2016 high). This will remain the favored case as long as 0.9459 resistance turned support holds.