Risk on or Risk off | Market Outlook, Apr 8th, 2019

Market Outlook

Risk on or Risk off

Gold was under pressure last week as risk sentiment improved as Chinese data showed its economy turning around and there was positive outlook expected from US-China trade. Gold made unsuccessful attempt to break through $1300 but failed. It was well bid near the crucial support of $1280, bouncing twice from those levels.

Bears have full grip on EURUSD as it remained pinned down on gloomy economic outlook and a helpless European central bank. 1.1180 was held for the week but needs to be seen how long it can hold.

GBPUSD continued to whipsaw on ‘Deal-No Deal’ circus playing out in London. EU has eased a bit in its rhetoric as it realizes that a hard brexit would hit them, one which they look keen to avoid. PM May after failing to get support from his own party has now turned to garner support from opposition party members as she tries to get the deal done.

WTI Oil traded higher hitting multi month highs of 63.08. Successful cooperation between Russia and OPEC in cutting production, disappearing Venezuela oil production and expiring exemptions granted to buy Iranian oil all provided support to Oil bloc. Strong US stock markets was an added bonus.

Gold has strong support at $1279/$1283 and should be expected to hold. Strong ETF inflows provide support on the fundamental side. Last Friday NFP showed more jobs been added but the fine print showed earning taking a hit. There are warning signals coming in from various parts of the economy and that should help Gold hold on to $1279. On the upside, psychological $1300 would be the first level of resistance.

EURUSD would have a crucial week as ECB meets on Thursday. ECB press conference and wording in the press release would be closely watched to see how ECB plans to fight recession clouds gathering over EU area. On charts 1.1200/1.1180 has provided support earlier and last week too buyers emerged at those levels to keep Euro above the 1.1200 handle. However any growth worries or concerns about ECBs ability to prop up growth in EU area would make 1.1200 level tough to hold.

Crude strong rally is expected to continue targeting 63.70 and higher. The only concern for the rally would come from the realization that higher oil prices would impact economic growth. Trump being a strong advocate of lower oil prices and after having tweeted twice about it in the last 2 weeks, soon pressure on OPEC would start to build to increase production. Till then bulls have it their way.

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