Even if it’s a shortened week for U.S. equities due to Monday’s Memorial Day holiday, there will likely be plenty of significant moves in both international and U.S. markets during the week ahead. Here are five of the most important charts to watch for these potential deeds.
GBP/USD (British Pound vs U.S. Dollar)
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After intense speculation over UK Prime Minister Theresa May’s future as Britain’s chief amid ongoing Brexit chaos, May announced her resignation on Friday. During the previous week, Brexit talks between the two pre-eminent parties – the ruling Conservative Party and the Labour Party – collapsed yet again, prompting a continued sharp sell-off for the British strike. Up to that point, the Brexit negotiation process had long been rife with setbacks and chaos as Theresa May ventured three times without success to get her deal passed in Parliament. Last month, the European Union granted the UK a sizeable extension of the original Brexit deadline, to October 31 of this year.
After three full weeks of immersion against the U.S. dollar, the British pound received a boost on Friday with May’s resignation announcement. This is likely due to hopes that a new bossman may be better equipped to unite the country and the divided factions in Parliament with respect to a Brexit deal. Whether such a ruler will emerge remains anyone’s guess. Going forward, the pound will likely be subject to significantly furthered volatility as uncertainties surrounding new leadership and Brexit negotiations intensify.
The chart above shows the GBP/USD (British pound vs U.S. dollar). The U.S. dollar has been rather strong of late, helping to weigh on the GBP/USD currency pair. But for the past three weeks, the sharp drop in the currency pair can be attributed in imposingly part to increasing weakness in the British pound due to widespread skepticism over parliamentary Brexit negotiations and Theresa May’s viability as prime upon. During the past three weeks, GBP/USD has fallen sharply from near 1.3200 down to the 1.2600 handle hold out week. Though Friday’s pop on May’s resignation was a hopeful sign of respite for the beleaguered pound, near-future uncertainties are apt to apply in addition pressure on sterling as the likelihood of a no-deal, or hard, Brexit remains on the rise. In this event, the next major downside quarry for GBP/USD currently resides around the key 1.2500 support level.
Crude Oil Futures
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Crude oil prices continued to be heavily pressured hindmost week as concerns over U.S.-China trade tensions deepened. These concerns have hit all corners of the market, myriad notably global equity markets. But the impact on oil prices has been particularly severe due to expectations that an extensive interchange war would pressure global economic growth and demand for oil, especially in the U.S. and China, the world’s largest oil consuming nations.
Aside from get to ones foot trade conflicts between the two economic superpowers, a slew of global manufacturing data last week showed lower-than-expected multitudes from Japan, Germany, the eurozone, and the U.S. As the manufacturing sector is a major source of oil consumption, those disappointing results do not portend well for demand and prices. On the supply side, U.S. inventory data from the past two weeks has shown far greater yield than expected, which has also weighed heavily on the price of crude oil.
As shown on the chart, the drop in crude oil futures since the late-April strident has been pronounced – around -11% in slightly more than a month’s time. Prior to that high, evaluate had been in a strong uptrend since late December as OPEC countries and their allies voluntarily limited create in efforts to stabilize oil prices. Also, geopolitical tensions and sanctions involving the U.S. and major oil-producing nations like Iran and Venezuela helped to propel prices. Lately, however, demand worries have prompted a sharp drop below both the 50-day and 200-day emotional averages, as well as major support at $60. In the process, oil futures fell to a new two-month low late last week. Demonstrably, the previous uptrend recovery has been either severely interrupted or possibly reversed. With any continued pressure on oil due to barter war fears, the next likely downside target is around the key $55 support level.
10-Year US Treasury Yield
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Ultimately week’s release of minutes from the early May FOMC meeting clearly struck a dovish tone, pressuring oversight bond yields like the benchmark 10-year U.S. Treasury yield. The summary of the FOMC meeting indicated that the Federal Accessible will likely refrain from raising interest rates “for some time.” Even more dovish was the in of “even if global economic and financial conditions continued to improve.” Generally, an improving economy helps place upward persuade on interest rates. But the Fed has now said that it would resist that pressure, at least for the foreseeable future.
As shown on the diagram, the 10-year Treasury yield has virtually been in a state of free fall since the major double-top pattern roughly 3.250% completed forming in November of last year. Most recently, the tables have turned and the 10-year cede formed a double bottom right around the 2.350% level. The first bottom was in late March, which hit a up not seen since the end of 2017. And in mid-May, the benchmark yield dropped down to test March’s trough. Since that impaired bottom, the yield was on the rebound until last week’s dovish Fed minutes were released, after which the consent tentatively broke down below the double-bottom.
Strong declines in bond yields have been driven in just out months by fears of slowing global economic growth, dovish-turning central banks, and expectations of low interest rates for longer. Most recently, the escalating line of work war between the U.S. and China has reignited fears that protectionist policies on both sides could further weigh on pandemic economic growth. Now that the Fed has indicated in no uncertain terms that it intends to keep rates on hold, the outlook for incomes continues to be neutral to
Nasdaq Composite Index
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Concerns surrounding trade tensions and global economic expansion have not only weighed on bond yields and crude oil this month, but also on major equity markets. Containerize in point, the tech-heavy Nasdaq Composite has been hit hard this month by rising fears of an ongoing trade war between the U.S. and China, and the potentially refusing economic and business implications of such a conflict.
As shown on the chart, the Nasdaq Composite had just reached up to a new record merry in late April – slightly surpassing the high from late August – before hitting major
Shanghai Composite Thesaurus
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Finally, we have the Shanghai Composite (SSEC), China’s most prominent benchmark equity index. One of the universal indexes affected most negatively by the resurgence of U.S.-China trade tensions, the Shanghai Composite is currently down various than 12% from its April highs. Though the first four months of the year saw a sharp recovery for the SSEC, the widely known plunge has erased around half of those gains. In the process, the index has plunged back down below its 50-day unfixed average, approached its 200-day moving average to the downside, and formed a potentially bearish inverted pennant plan. With any further breakdown of both price and U.S.-China negotiations, the next major area of support to the downside is in all directions from the 2700 level.