Daily Outlook

The Australian Dollar is trading lower after RBA’s Governor Stevens remarks over inflation targeting but it was supported by risk sentiment overnight. The AUD started selling on Glenn Stevens’ Q&A session yesterday as the market interpreted his remarks as dovish and provided hints for further rate cuts, with his commitment to 2-3% inflation targeting. Interestingly, rate cut expectation derived from ASX 30 Day Interbank Cash Rate futures does not indicate significant changes. The AUD recovered as European and US equity markets staged a strong rally. The largest mover was GBP/AUD breaking 4-month high, up 1.6% to high 2.0438 (AUD/GBP at 0.489); driven by latest poll trending to “Bremain” and BOE officials cautioning Brexit’s repercussions.

European stocks were in buoyant mood with Euro Stoxx 50 futures broke above 3,000 psychological level, up 2.74%. Risk events including Austrian election and Brexit fears dissipating helped risk sentiment. Lower EURUSD rate, with increasing odd of US Fed hike (up from 33% to 37%) may also have driven flows or higher allocation to European stocks. S&P500 is up 1.37% led by the financial and construction sectors. The market believes the US banking sector may stand to gain from higher interest rates. Data for US April new home sales surged to eight-year high.

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Trade AUD/USD Intraday: key resistance at 0.7200. Pivot: 0.7200 Our preference: short positions below 0.7200 with targets @ 0.7165 & 0.7140 in extension. Alternative scenario: above 0.7200 look for further upside with 0.7225 & 0.7255 as targets. Comment: the upward potential is likely to be limited by the resistance at 0.7200. Supports and resistances: 0.7255 0.7225 0.7200 0.7186 Last 0.7165 0.7140 0.7105

Trade GBP/AUD intraday: the RSI is overbought Our pivot point stands at 2.0232. Our preference:the upside prevails as long as 2.0232 is support. Alternative scenario: the downside breakout of 2.0232 would call for 2.0167 and 2.0129. Comment: the RSI is trading above 70. This could mean that either the pair is in a lasting uptrend or just overbought and that therefore a correction could shape (look for bearish divergence in this case). The MACD is positive and above its signal line. The configuration is positive. Moreover, the pair is trading above both its 20 and 50 MAs (respectively at 2.0101 and 2.0143). Finally, the GBP/AUD is trading above its upper Bollinger band (standing at 2.0276). Supports and resistances: 2.0588 ** 2.0549 * 2.0510 ** 2.0472 2.0353 last 2.0256 2.0232 ** 2.0167 * 2.0129 **

Trade Euro Stoxx 50‏ (Eurex)‏ (M6) Intraday: the upside prevails. Pivot: 2950.00 Our preference: long positions above 2950.00 with targets @ 3012.00 & 3035.00 in extension. Alternative scenario: below 2950.00 look for further downside with 2920.00 & 2898.00 as targets. Comment: the RSI is bullish and calls for further advance. Supports and resistances: 3070.00 ** 3035.00 ** 3012.00 ** 2996.00 Last 2950.00 ** 2920.00 ** 2898.00 **

Trade S&P 500‏ (CME)‏ (M6) Intraday: bullish bias above 2055.00. Pivot: 2055.00 Our preference: long positions above 2055.00 with targets @ 2080.00 & 2093.00 in extension. Alternative scenario: below 2055.00 look for further downside with 2041.00 & 2031.00 as targets. Comment: the RSI is bullish and calls for further upside. Supports and resistances: 2105.00 ** 2093.00 ** 2080.00 ** 2068.25 Last 2055.00 *** 2041.00 ** 2031.00 **