Australian dollar stalls as dirt flies

As we head into tomorrow night’s US core PCE read, markets were largely calm though commodities rebounded after a recent battery. The AUD ignored it anyway. DXY and EUR were stable:

Australian dollar was stable if a bit stronger on the crosses:

Gold fell. The oil chart is shaping for a bullish breakout:

All dirt popped as a new Goldman report argued that China is now irrelevant to commodity prices. Good luck with that:

EM stocks look more promising. FYI, I am bullish the Shanghai bourse as the Chinese economy slows and yields fall:

Junk is fine:

US yields lifted:

Stocks were becalmed:

Westpac has the data:

Event Wrap

US GDP in Q1 was unchanged at 6.4% annualised in its second estimate (vs 6.5% expected). Personal consumption was revised higher, from 10.7% to 11.3% (vs 10.9% expected). The GDP deflator rose from 4.1% to 4.3% – the highest since 1990, the core measure up from 2.3% to 2.5%. Durable goods orders in April fell 1.3% (vs +0.8% expected), largely due to transportation, although March was revised from +0.8% to +1.3%. Excluding transportation, orders rose 1.0%, following a 3.2% (was 2.3%) March rebound. Non-defense capital goods orders excluding aircraft surged 2.3%.

FOMC member Kaplan said the jobs market might be tighter than the data indicates. He said it is possible that labour supply rises less than expected and “it is our view that this possibility should be kept in mind as policy makers assess the appropriate stance of monetary policy.”

US President Biden is expected to announce a $6tr budget on Friday, according to NYT, which would take government spending to its highest sustained levels since 1945.

Event Outlook

New Zealand: Ahead of the May release, the ANZ consumer confidence index has been firming on the improvement in economic conditions. The monthly employment indicator is a relatively new release, based on data from income tax filings. We’re expecting a 0.5% rise in filled jobs in April. Business surveys have pointed to a firming in hiring in recent months. In addition, the absence of international tourists will be less of a drag on the demand for workers through the middle part of the year, with the winter months typically the low season for visitor arrivals.

Euro Area: May economic confidence will be buoyed by the prospects of Europe’s H2 rebound (market f/c: 112.1).

US: April wholesale inventories are expected to rise 0.7%, and should be supportive of demand as we move through the year. April personal income should snap-back 14.3%, following a +21.1% spike from the stimulus in March. Meanwhile, personal spending is set to lift 0.5%. Against this backdrop, the April headline PCE deflator is expected to print a 0.5% gain on the month (3.5%yr), with the core PCE to post a similar monthly increase (market f/c: 0.6%mth, 2.9%yr). Finally, the May Chicago PMI is set to remain broadly stable at 68.0.

No much new for forex so let’s take a look at some technicals courtesy of Commerzbank:

EUR/USD–Massive divergence of the daily RSI reflects a loss of upside momentum EUR/USD

Current Position: Tiny longs from 1.2025 partially covered 1.2230.

Recommended trade: Raise the profit stop from1.2145 to 1.2155. Exit the remainder

EUR/USD new high has not been confirmed by the daily RSI, which is now seeing major divergence. We have partially covered our long positions and would tighten up stops for the rest. Trendline support lies at 1.2162 and while above here scope remains for a test of 1.2349, the 2021 high. However we look for this to hold for now. Our longer term target is 1.2556/1.2619, the 2018 high, the 200 month moving average and the 55-quarter ma. Where are we wrong? Below the uptrend we would allow for some slippage to the 1.1994/86 band of support (mid March highs and the 22nd April low). Key support is 1.1865 (2020-2021 uptrend). Short term trend (1-3weeks): The market is bid above 1.1845. Targets the 1.2243 February high and then the 1.2349 2021 high. Longterm trend (6-9months): Targets 1.2556/1.2619, the 2018 high, the 200month moving average and the 55-quarter ma.

Possible if Europe speeds up faster than China slows down which does look like the base case for Q3 now. So that will weigh on DXY for another quarter. And AUD:

AUD/USD is sidelined near term above the near term pivot at .7675 (low 4th May), while it holds, a neutral to positive stance is maintained. Should this be eroded, then potentially we will see a slide to .7533 the April low and the 200-day ma at .7519. Rallies are again likely to struggle on moves to the .7837/91 band of resistance (recent highs), and we will need a close above here to confirm upside intent.

Where are we wrong? Above .7891 would allow for gains to the end of February high at .8007. Longer term the .81352018high is in play. The 200 month ma lies at .8263. Short term trend (1-3weeks): Bid above the 200-day ma. Long term trend (1-3 months): Longer term the .81352018 high is in play. The 200 month ma lies at.8261.

If we do get that pop above 80 cents again, I will be piling assets offshore!