Nothing significant to really take note of for the day, as the dollar continues to surge higher across the board.The interesting thing to be aware of is again that there are no major expiries seen in and around USD/JPY on the way up, so that leaves plenty of room for price to roam more freely – at least one can interpret it that way.As mentioned earlier in the week, the dollar is pretty much in a league of its own at the moment and there isn’t much to really shake things up before the FOMC meeting on 4 May next week.For more information on how to use this data, you may refer to this post here.

Tesla’s drag was a key talking point yesterday as tech stocks were hammered with the Nasdaq falling near 4%. The chart doesn’t paint a pretty picture with the index down by over 20% now since the turn of the year:

The support from the 38.2 retracement level @ 12,552 is the key one to watch this week with the March 2021 low @ 12,397 adding to some additional downside buffer. But break that region and things could get even uglier and in such a scenario, I can’t see how that would not spillover and impact broader market sentiment.For now, things are calmer heading into the US session but the earlier optimism has certainly been snuffed out. Nasdaq futures are up 0.1% after having been up by around 0.8%. S&P 500 futures are up 0.5% but part of the gains owes to value stocks with Dow futures seen up 0.7%.

Prior -5.0%
Market index 343.1 vs 374.0 prior
Purchase index 234.7 vs 254.0 prior
Refinancing index 930.7 vs 1,023.2 prior
30-year mortgage rate 5.37% vs 5.20% prior

The average rate of the most popular US home loan jumps to its highest since June 2009 and the rising costs have certainly weighed on demand conditions, as mortgage activity slumped heavily once again. The purchase index has fallen to its lowest since May 2020 while the refinancing index is down to its weakest since January 2019.

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A recap of the headlines from today:Russia’s gas ‚blackmail‘ one to watch in the days aheadRussia’s Gazprom: Gas supplies to Poland, Bulgaria halted until payment in rubles is madeFour European gas buyers said to have already paid for supplies in rublesDo take note that transit supplies (since Poland and Bulgaria are considered ‚transit states‘) will continue as they are but in the event that there is any „stealing“, then Gazprom will reduce said supplies by the amount taken away.

Prior 9UK retail sales is seen slumping in April with the first fall in volumes being reported in more than a year. That just reaffirms the likelihood that we are seeing a change in consumption activity/pattern as the cost-of-living crisis intensifies. CBI notes that:“Retail sales were below seasonal norms in April as consumer spending continued to shift back towards services and rising prices impacted households‘ spending power.“

Headlines:USD/JPY surge meets a pause so far on the weekNo reprieve for the euro as 2020 low eyedCable plummets further, falls below 1.2700 to fresh lows since September 2020US futures dribble lower to start the sessionOil and gold face near similar technical configurationsJapan PM Kishida: Rapid FX moves are undesirableBOJ to purchase unlimited amounts of 10-year JGBs at 0.25% on 27-28 AprilECB’s Kazaks says prefers first rate hike to come in JulyMarkets:JPY leads, GBP lags on the dayEuropean equities higher; S&P 500 futures down 0.4%US 10-year yields down 4.9 bps to 2.775%Gold up 0.3% to $1,903.62WTI up 0.6% to $99.12Bitcoin up 0.7% to $40,475It is a bit of a mixed session as we see bond yields retreat after a bit of a rise earlier in the day. The drop in yields comes alongside a fall in US futures as well, in which we saw S&P 500 futures erase gains of 0.3% to be down by 0.4% now. Safety flows perhaps or maybe some month-end moves for the bond market after the relentless selling in April?European stocks are mostly higher but that owes to a catch up play to the sharp bounce in US equities yesterday, so it isn’t really a strong indicator of risk sentiment at the moment.In FX, things are looking more mixed with the yen firming across the board while the dollar is trading in the middle of the pack. The euro and the pound are the weakest currencies with EUR/USD dribbling below 1.0700 from around 1.0720 at the start of the session. The pair is trading at the lows now close to 1.0670, eyeing the 2020 low of 1.0635.GBP/USD is also seeing another down day, falling 0.4% to 1.2685 as sellers continue to keep the pressure towards the September 2020 low of 1.2675.Meanwhile, USD/JPY is seen easing lower from 128.00 to 127.50-60 levels as buyers and sellers continue to duke it out in between the key hourly moving averages here.The aussie and the kiwi are among the better performers with AUD/USD up 0.3% to 0.7200 and NZD/USD up 0.2% to 0.6630 but the gains aren’t amounting to much as compared to the drop in recent days.

Well, in terms of sentiment, not much has changed since my post last week here.I outlined why cable is struggling and the same mood is persisting as we get into the new week. The drop below the 50.0 retracement level @ 1.2830 sees sellers open up the next leg lower and that is towards the 1.2700 level now. The September 2020 low @ 1.2675 is also a key one to watch as a break below this region sets out the next push towards 1.2500 with the 61.8 retracement level sitting @ 1.2495.Month-end flows might make it a bit more tricky but given that the usual suspects will still be at play until the Fed next week, I continue to maintain the view that sterling might not see much reprieve in the meantime.

The Relative
Strength Index (RSI) is a technical indicator that tries to gauge the strength
or weakness of a particular instrument based on a formula that tracks past
prices during a custom period. This makes the RSI a momentum indicator because
it measures the speed of price movements compared to previous periods to
forecast possible inflection points.

 

The RSI is
measured on a scale from 0 to 100 and a default period of 14 most recent
closing prices. The RSI is also said to be in overbought or oversold territory
whether it crosses the 70 or 30 levels respectively on the scale. The idea
behind it is that the price can’t sustain the momentum at such extreme levels
and, even if it doesn’t mean a change in trend, the price may be bound to a
correction so a trader may want to wait before entering at such extreme levels or
even take a counter-trend trade.

 

 

The problem
with this idea is that the RSI can stay in overbought or oversold territory for
a long time and even if pullbacks may occur, they may be really shallow, and
the real correction may take a long time. Below you can see how the RSI stayed
in overbought territory for four months (!) before giving a real correction.

 

 

That’s why
you shouldn’t use the RSI on its own but complement it with other technical
concepts and tools to better structure your trades. For example, in the
previous image of the RSI staying in overbought territory for four months, if
you wanted to take a short you could wait for the price to first break an
upward trendline or for moving averages to cross to the downside to “confirm”
your trading idea. On the other hand, if you wanted to take long positions,
then you could wait for price pullbacks to the moving averages before entering
for a continuation to the upside.

This way you
increase the probabilities in your favour and can avoid being too early or too
late to price movements. Moreover, you should be aware of the fundamental
picture and see if it confirms the technical picture. Once you get a meaningful
catalyst that catches the market attention, you can see the price moving up fast
or down like in the previous chart.

 

This article
was written by Giuseppe Dellamotta.

A momentary breather for the pair? Likely so. The pause comes after some intervention talk last week among Japanese officials, and that kept buyers more guarded in pushing for a move towards 130.00.Since then, the pair has stalled somewhat although the move does reflect action in the bond market as well. 10-year Treasury yields are down 3.8 bps to 2.789% today and that is seeing USD/JPY down 0.3% to 127.75 at the moment.Looking at the near-term chart above, it is also evident that the upside momentum has met a bit of a pause. Price action has fell back below the 100-hour moving average (red line) but is staying somewhat supported above the 200-hour moving average (blue line). That hints at a more neutral near-term bias currently.It’s all about the next move and month-end flows will also factor into trading over the next few days. Equities had looked sluggish mostly but pulled off a bit of a turnaround yesterday, though it isn’t much when you weigh that against the moves throughout the month. The bond market remains key in my view but perhaps there might be more push and pull there from hereon until we get to the Fed next week.As such, that could keep USD/JPY well rested between the 125 and 130 range in the bigger picture. But in the context of price action now, there is minor support around 127.34-45 with the 200-hour moving average a key one to watch as well. As for upside levels, the 100-hour moving average is the first notable level before getting to 129.00 and then the recent highs around 129.40.