Not even agreeing to disagreeing – EU style – Market Analysis – April 23

Not even agreeing to disagreeing – EU style – Market Analysis – April 23

Definitely and as expected, EU leaders ended their talks yesterday without reaching any specific agreement.

They did agree that the crisis caused by the pandemic needs financial support to be tackled with it. Still, they delegated this task to the European Commission so that they can assess it and establish an adequate form of financing. In short, nothing. The market does not need bureaucratic task forces but awaits immediate action.


The result has been no other than the sales of Euros against all currencies already pressed down in the morning after the publication of the European PMI figures with dreadful data, PMI manufacturing 33.6, and PMI Services 11.7.

Europe's lack of decision or, in the best of cases, the delay in taking measures can have irreversible consequences and cause the EU itself and, therefore, the Euro as its currency to be questioned.


We will need to be attentive to the evolution of spreads between the sovereign bonds of peripheral countries and the Germans.


Also, with a special interest in the BTP (Italian 10-year bond) that, if sold in the market despite the program of support of the European Central Bank, will awaken once again the fear of a crisis similar to that of 2012. With it, the selling pressure in the Euro will intensify.


EURO Crosses


EUR/USD has so far been trading at the 1.0770 support but needs a close below this level to make its way to the next level around 1.0656.



EUR/JPY, however, was more aggressive in the drop at first, breaking the support at 116.50 and falling to 115.60, but this first bear impulse was halted by the announcement of Bank of Japan thinking of removing the limit for its bond purchase.

An increase in its asset purchase program would mean an additional injection of market liquidity that could initially weaken the Yen. The pair momentarily recovered the lost territory and then fell back with the disappointing news of the non-decision of the European leaders. In this area, it only finds support around 115.00.



USD denominated equities

GOLD continues with a strong bullish momentum near a first resistance level around the maximum reached on April 14 at $1748.

The fundamental reasons for this trend are evident, the unprecedented monetary injection of central banks that depreciates the value of the fiat currency whilst keeping Gold as a reserve asset.

And these fundamentals will not change in the short or medium-term given the need to maintain monetary support measures. Above mid-level support at $1748, the next theoretical target is at 2012 highs around $1,800 an ounce.


Stock markets have continued their roller coaster movement. The OIL has stabilized, for the moment, although as the expiration of the WTI front contract approaches, the tension will increase due to the lack of spare capacity. This stability of Crude Oil that, until now, maintained a certain correlation with the stock markets, has lent support to these, regardless of the severity of the economic figures that will gradually put pressure on the earnings of the companies.

Disappointing news from Gilead Sciences (listed on the Nasdaq exchange) about the failure in the initial test for a drug against the Coronavirus, which had raised hopes at first, has caused a drop from daily highs in all indexes but still without definitely breaking down. USA500 needs to trade below 2773 to start a new bearish leg.


By: Miguel A. Rodriguez Ruiz

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Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

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