Dax hits 2019 high as EURUSD drops to 1-week low

Summary:

• German stocks hit YTD highs despite soft PMI data

• US markets little changed after mixed economic releases

• EURUSD hits 1-week low

• GBPUSD struggles to rise despite retail sales beat

• Crypto news: Bitcoin continues higher

 

After strong Chinese data for March there was a broad expectation that German (and European) industry recovers as well. That did not happen. German manufacturing PMI inched up but just by 0.4pts to 44.5 pts. and that’s a recessionary level again. French manufacturing does better but remains below 50 pts. as well (49.6 vs 49.7 in March). A solid situation in services, especially in Germany where the index inched up from 55.4 to 55.6 pts. remains a consolation prize and means that GDP growth will not collapse for now. However, services sector is lagging in economic cycle and will not hold up unless the industry recovers. There’s small negative reaction on DE30 but the index remains in a short term upwards trend. Will it be at risk given such a dreadful situation in German industry? The initial reaction saw the Dax fall lower by around 40 points, but this was short-lived and the market has since recovered and rallied above 12200 to hit a new high for 2019.

 

Yesterday was a bit of a negative one for the broader US markets with the S&P500 fading after a bright start to end lower. An inverted hammer of sorts can be seen on the D1 candle with recent highs of 2923 possible resistance - and less than 1% from the all-time high set back in September 2018. 2890 is the first level of potential support at the daily low but a drop below there would open up the chance of a move to 2865. At the time of writing the market is little changed on the day and just above the 2900 handle. In terms of US data, Retail sales M/M rose by 1.6% vs 1.0% expected, bouncing back from a -0.2% print last time out. The core reading was also good, showing an increase of 1.2% vs 0.7% exp and a prior reading of -0.2% - revised higher from -0.4%. While the monthly reading marks a decent beat, the longer term view is not quite so positive, with year-on-year figures remaining fairly low compared to recent years.

 

The divergence of US retails sales and European PMIs has weighed on the EURUSD. The pair has declined by a little over 50 pips on the day, falling back below the 1.13 handle in the process. Given the quiet nature of the market of late, today’s move is pretty sizable and price has also fallen to its lowest level in over a week. Recent lows and a double bottom around 1.1180 could now be seen as a key level to watch if price falls further.

 

An unexpected rise in UK retail sales for March caused a pop higher in the pound with the currency bouncing from the $1.30 handle in response but the strength has proved short-lived and as the dust settles the pair is back near its daily lows. A 1.1% rise in month-on-month terms represents a big beat on the -0.3% expected, and the prior reading was revised higher by 20 basis points to 0.6% for good measure. The year-on-year reading was a bumper +6.7% after 4.0% last time out, but this is to last March falling out of the data set, which was a very bad month for consumer spending due to adverse weather effects caused by the Beast from the East.

Bitcoin has stalled recently after the huge rally seen since the beginning of April. The price is consolidating after experiencing hefty gains in recent days. The ongoing pullback resembles the correction seen  on February 24. Looking ahead, it is hard to predict when we may see another jump in the Bitcoin price but a relatively small correction we’ve seen so far may suggest that bulls maintain control. From a technical standpoint, the key psychological level is localised at $6000.