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Market Wrap - March 2019

   

The most significant issue this month has been Brexit and the ongoing concerns over the departure of Great Britain from the European Union.  Significantly, embattled British Prime Minister Theresa May already under growing pressure to her leadership and scrambling to win over opponents to her Brexit withdrawal plan, has had the process removed from her control.  United Kingdom lawmakers voted to take control of the Brexit process away from the PM's ailing government.  Lingering trade talks between the United States and China which have been having a flow on effect into many markets around the world, seems to have taken a back seat to Brexit and broader concerns about global growth. 

EURUSD

During the month of March, the EURUSD has continued to trade around the current key level of 1.13, mainly moving between 1.12 and 1.14.  It has finished off the month by moving sharply lower from a six-week high around 1.1450, back down below the 1.13 level.  In the couple of weeks prior to the decline, the EURUSD rallied well and returned above the current key level of 1.13 after dropping sharply to an 18-month low around 1.1175.   For the last few months now the EURUSD has been content to trade within a narrow range enjoying support from 1.13 and meeting resistance at the 1.15 level, and these two levels continue to play a significant role. 

Brexit is having far reaching consequences which obviously affects the European Union too.  The European Union announced that it had completed its preparations for a “no-deal” Brexit.  “As it is increasingly likely that the United Kingdom will leave the European Union without a deal on 12 April, the European Commission has today completed its ‘no-deal’ preparations,” the European Commission said in a statement.  “While a ‘no-deal’ scenario is not desirable, the EU is prepared for it,” the commission’s statement said. It also noted that, since December 2017, the European Commission “has published 90 preparedness notices, 3 Commission Communications, and has made 19 legislative proposals.”

 EURUSDvDaily-2

GBPUSD

Like the EURUSD, the GBPUSD has been down and up during the month of March sticking to the current key level of 1.32.  In the last week or so to finish the month, the sterling has stuck quite close to this level as if it is waiting for its next major move.  On a couple of occasions during the month it has fallen sharply to multi-week lows before rallying strongly and keeping within touch of the key 1.32 level where it spent most of the last several weeks trading around.  In this same period the GBPUSD has increased in volatility but kept right around the 1.32 level.  Several weeks ago, the GBPUSD fell sharply from an eight-month high back down below the key level of 1.32 before rallying again and reaching a nine month high a few weeks ago.

After a narrow majority of voters called for Brexit in a June 2016 referendum, Britain remains as divided as ever.  United Kingdom lawmakers have voted to take control of the Brexit process away from the PM's ailing government.  Working late into Monday night, British MPs voted to pass an amendment proposed by a cross-party group of lawmakers in the hope of finding a Brexit solution. The measure passed with 329 votes in favour of the proposal and 302 voting against.  The passing of the “Letwin amendment” looks to change the rules of Parliament, allowing lawmakers to set a timetable for debate and subsequent votes on alternative outcomes for Brexit.  MPs are now expected to control business in the House of Commons in order to hold the series of votes on different Brexit outcomes. This takes the power away from the government and allows MPs to put forward business motions relating to the U.K.’s departure from the EU. 

 GBPUSDvDaily-2

AUDUSD

The AUDUSD has experienced a relatively flat March finishing the month quite close to where it started – right around 0.7100 level.  After starting the month falling sharply back down to support at 0.7050 and a little below, it then rallied well to return to its prevailing range in between 0.7050 and 0.7150, whilst meeting resistance at the key 0.7150 level.  It is currently relying heavily on support from 0.7050 which has supported the currency pair several times in the last few months.  It is currently trading around another key level of 0.7150 and this with 0.7050 and 0.7300 are playing a major role in the price action of the AUDUSD presently. 

As widely expected, the Reserve Bank of Australia (RBA) held its record low cash rate at 1.5% at the beginning of the month, where it has remained since August 2016.  Australian unemployment has dropped below 5% for the first time in eight years, staring down a slowing economy.  In seasonally adjusted terms, the unemployment rate was 4.9%, its lowest level since June 2011.  When you dig deeper into the numbers, the decrease in unemployment was largely driven by fewer people looking for work, with the participation rate slipping.    Also the rate of job creation slowed with 4,600 new jobs over the month, a marked step down from the 39,100 jobs in January.  It is broadly accepted that the market is all but convinced that rate cuts are on their way, almost fully pricing in a cut by August.

 AUDUSDvDaily-2

US30

US equities have also been relatively flat during March trading mainly within a narrow range between 25500 and 26000.  It has finished the month just easing slightly down towards the bottom of the range, after spending the previous week rallying well.  The start of the month saw the index ease from a three-month high around 26200, and it has been content to settle within the narrow range after moving so well for a few months.  At the end of January, the 25000 level offered some resistance to the index however this was quickly broken through, only for the level to prop up the index since, and this level remains key, along with the short-term levels of 25500 and 26000.

In a recent interview on CBS News’ 60 Minutes, U.S. Federal Reserve Chairman Jerome Powell said that interest rates can remain on hold as the central bank waits to see how conditions evolve, indicating that there’s no clear time limit to the Fed’s current pause.  Now after their two-day Federal Open Market Committee meeting, that plan has now been officially stated as there will be no more rate rises in 2019.  On Wednesday, the U.S. Federal Reserve (Fed) held interest rates steady and its policymakers abandoned projections for further rate hikes this year as the U.S. central bank flagged an expected slowdown in the economy.  In a unanimous move that aligned with market expectations, the FOMC made a sharp dovish turn from policy projections just three months earlier.

 US30vDaily-2

Gold

Gold has steadily moved higher throughout March reaching a one-month high around $1325 in the last week.  To start the month, gold rallied well to return to back above the current key level of $1300, after it dropped so sharply to finish last month.  Gold has continued to enjoy solid support from the key level of $1300, allowing it to resume its uptrend.  The significance of $1300 is for several weeks, gold met stiff resistance at this level, after enjoying a healthy surge higher throughout December.  The $1300 level is likely to continue to play a role should gold decline a little and look to ease lower. 

Ongoing concerns over the global economy are keeping gold well supported presently.  Data released last week in the United States, underscored growing pressure on the U.S. economy, as the number of Americans filing applications for unemployment benefits increased more than expected last week while new home sales fell more than expected in January.  Then the ongoing United States - China trade dispute and its potential impact on global growth has been pushed back further, as more work is needed in U.S. - China negotiations, U.S. Treasury Secretary Steven Mnuchin said last week.  Meanwhile, comments from China’s Premier about a slowing economy suggest that one of the world’s biggest economy is struggling, which is offering gold a bit of support.

 XAUUSDvDaily-2

UKOil

Generally, oil has very slowly but steadily climbed higher throughout the month of March, before finishing out the month consolidating for a couple of weeks.  A week or so ago oil reached a four-month high above $68, before easing slightly and trading just above $67.  Oil has enjoyed a very solid start to the year rallying from 16-month lows below $50 at the end of last year, back up to the key $58 level and beyond, after its doom and gloom to close out 2018.  The $58 level continues to play a role and provided some support several times earlier in the year, however more recently the $63 level has provided resistance to oil so this level may offer some support if it declines from its current levels. 

Oil has continued to be influenced by several external factors, mainly ongoing concerns about global growth and where the global economy is heading, as well as OPEC supply cuts.  One of the main drivers is the recent two-day Federal Open Market Committee meeting, where the U.S. Federal Reserve (Fed) officially stated that there will be no more rate rises in 2019.  The Fed also held interest rates steady and its policymakers abandoned projections for further rate hikes this year as the U.S. central bank flagged an expected slowdown in the economy.  This along with weak factory data from the United States, Europe and Asia led to the inversion of the U.S. Treasury yield curve for the first time since 2007.

 UKOilvDaily-2

 

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Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.

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