MARKET WATCH
start of last week but shed in what appears to be corrective action. It snapped a three week 7.7% rally with a 1.4% decline. As long as the contract stays above the $63.35 area it may try again at the highs. However, the technical indicators are not very encouraging. On a long-term view, we note that the May contract has not closed below its 100- day moving average since last August. It is found now near $60.60.
INTEREST RATES
Besides a bearish dollar conviction, the consensus
also
celebrated the end of Q1 with its highest close since January 29. The technical indicators are stretched but have not turned down or showed divergences, warning that what seems to be a short-covering rally may continue. With the close above 121-00, the next important
FX
is some leadership rotation in the works. Some may want to see how the market’s breadth evolves in any renewed gains. There is a gap from the lower opening on March 22 (~2696-2710) which also houses the 20-day moving average and retracement objectives, may try to draw prices.
The S&P 500 lost 1.2% in Q1. That made it the second-best performing G7 stock market behind Italy’s FTSE Milan, which rose 2.5%. For many d o l lar - b a s e d investors, the
expected higher
interest rates--rising policy rates, shrinking central bank balance sheet and a large dollop of fiscal stimulus on an economy growing above trend. The 10-year yields rose 33 bp in Q1, but it peaked shortly after the middle of the period near 2.95%. It finished the quarter a little below 2.75%. The market is fishing for the lower end of the range. It may not be far from it. The 2.70% area may offer the first window, and if not, scope exists toward 2.65%. The June note futures contract
technical area is found near 122- 00.
S&P INDEX
In February’s swoon, the S&P 500 held
the 200-day moving
average. It has done so again in late March. That average is found 2590 to start Q2. The technical indicators suggest a low maybe being forged. A close above 2668 or a move above 2675 would be encouraging. Even then, we suspect
sentiment may take longer to repair especially if there
underperformance of many major markets was not sufficient to offset the decline of the dollar. That includes the FTSE 100, DAX, and the Dow Jones Stoxx 600. However, one area of diversification that still paid was in emerging markets. The MSCI Emerging Market Index rose nearly 1.3% in Q1, which was the fifth consecutive quarterly advance.
Marc Chandler
Global head of currency strategy at BBH Brown Brothers Harriman
FX TRADER MAGAZINE April - June 2018 13
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