Weekly Outlook | Peace Talks Failed – Risk Sentiment Suffering

The rally in stock markets in the past two weeks was mainly fueled by the returning positive risk sentiment, initiated by calming words in regards to the war against Iran. US President Trump and the leaders from Iran agreed on a truce, which will be valid for another week. In the meantime, peace talks have not led to an agreement and abandoned over the weekend. Observers were hopeful, that underlying issues can be solved.

In the meantime, oil prices have lost momentum again. USOIL is now trading below the USD 100 level but might now resume momentum again. With no breakthrough in the talks the market might remain volatile. For now traders will continue to watch the situation as even the truce might not remain in place for long. With only limited news this week, the geopolitical situation remains in focus.

Important events this week:

– US core producer price index– The index of producer prices might move markets this week. Last week, the pce price index came out as expected whereas the consumer price index even fell. Subsequently the US- Dollar lost some momentum again. The core ppi is expected unchanged at 0.5% on a monthly basis. Especially with the ongoing geopolitical tensions, a rise in prices might spark further headwinds for the equity market. 

USDX weekly chart

The Dollar index shows, that the price has been weakening on the technical as well as psychological resistance level of 100.00. A break above that level will indicate fresh strength of the Dollar, whereas currently the charting pattern above shows, that the price might weaken further. The Dollar- index has broken the 50- moving average zone, which means that a further selloff might be likely for now. The index might now test previous lows at about 97.50. The index will be released on Tuesday, 14^th of April at 14:30 CET. 

– AU Unemployment rate– The unemployment rate is acting as good guidance for an economy. With the recent two rate hikes in Australia, a rise in unemployment could be likely, as companies might invest less due to the rise in capital expenditures. And indeed, the rate has been rising from 4.1% to 4.3% in February as the recent data from March shows. 

AUDUSD weekly chart

With a potentially rising unemployment rate the AUD might push lower again. The crucial part will be the technical resistance zone at 0.7100. A break above might unleash positive momentum. A push lower might cause a retest of the recent support zone at 0.6850. A slide below that zone might then cause a retest of the 50- moving average, which will likely act as a support level. Recently the AUD has been mostly rising due to the weakness of the Dollar and the positive risk sentiment in markets. But this situation might change now. Yet the economic data might also add fresh volatile this week. The data will be released on Thursday, 16^th of April at 04:30 CET.