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  • Writer's picturen ev

Commodities and Equities bounce as inflation rises

Oil, precious metals, indices, and crypto all headed higher today. We have had two 50bps rate hikes by 2 different central banks and we still have the ECB decision tomorrow to get past. I don’t see oil continuing much higher if the inventories are going to keep building like we saw today, especially after the OPEC+ report said they expect global demand to start reducing. Indices also look like they have a bit of room to the downside, so I am not getting too excited by today’s bounce.

Market Wrap

The GBPCAD has risen to the daily resistance level that I pointed out this morning after the Bank of Canada (BoC) raised its interest rate by 50 basis points to 1%. As part of the announcement, the BoC added that it will start quantitative tightening on April 25, which will result in a smaller balance sheet by not replacing government bonds upon maturity.

The Canadian dollar against the pound disregarded the move up in the energy markets as Brent and WTI increased by 2.35% and 1.94% respectively. This rise came even as the report from the EIA this afternoon, showed US commercial crude oil inventories rose by 9.4 million barrels to 421.8 million barrels in the week ending April 8. On average, US crude oil refinery inputs fell by 424,000 barrels per day compared with the previous week. Gasoline production rose by 9.5 million barrels per day as refineries operated at 90 percent of capacity.

However, by the end of the London session, only the pound remained relatively strong against the Canadian dollar as seen in the forex heatmap.

The overall picture is building towards more of a risk-off day, so the bounces in commodities and equities may come undone at the close tonight.

I am waiting to see if the H1 swing high from the 6th of April holds as resistance and if the price of oil comes back into the day’s opening range. Currently, $105 is acting as intraday support for the EIA announcement.

U.S. Treasury Secretary Janet Yellen said earlier today that Europe faces greater risks of recession than the United States. "Particularly in Europe, which is the most vulnerable in regard to the Ukraine crisis, I would worry more about recession prospects," Yellen said during an event hosted by the Atlantic Council.

The Nasdaq liked Yellen’s assessment the most and has led the other US major indices higher today. The tech index is currently up 1.68% for the day but still -2.24% over the last week. A break higher than 14300 could be the first signal that the indices have bottomed out amid higher inflation worries and the start of the earnings season. But there is still an area of imbalance on the daily chart I would like to see tested first.

According to a report released by the Bureau of Labour Statistics, the seasonally adjusted producer price index for final demand in the United States increased by 1.4% in March. This came in much higher than the previous reading and today’s analysts’ expectations.

The best trade today from the London open until the US open would have been shorting the NZDUSD. Looking left there are a couple of areas of balance around the 0.67500 level, so if momentum was to pick up to the downside, I see this pair clearing the 0.67285 swings low and testing the 0.6700, with 0.6650 as the next target. 90% of traders on the ActivTrader platform are shorting the US dollar index, so this is likely to go higher with 100 as a base, which means the rosses like the NZDUSD will accelerate to the downside. We just may need to wait for the ECB press conference before we get that move.


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