Markets Turn Back To Risk-On Trading

RISK SENTIMENT IMPROVED

Yesterday, most of the EU indices managed to close in positive territory, boosted by reports that the EU economy could grow faster than expected in 2021 and 2022. This is due to an increase in vaccinations and the removal of lockdowns. The European Commission have upgraded their forecasts in relation to the EU economy. Also, the positivity partially comes from the EU’s new recovery fund, called the Next Generation EU, which includes around 750bln euros, where approximately half of it should be distributed as grants.

EURO STOXX 50 — TECHNICAL OUTLOOK

Euro Stoxx 50 reversed sharply to the upside yesterday, breaking above a short-term tentative downside resistance line taken from the high of May 10th. This morning, the index continues make its way higher, as it climbs above all of its EMAs on our 4-hour chart. The price is also still trading above the 3695 hurdle, marked by the inside swing high of May 12th, which could be seen as a positive. As long as it remains above that hurdle, we will aim slightly higher in the near term.

USD/CAD — TECHNICAL OUTLOOK

Yesterday, USD/CAD broke above its short-term tentative downside resistance line taken from the high of April 21st. And although the pair made its way a bit higher, it received a hold-up near the 1.2180 barrier. In order consider a further move higher, at least in the near term, a push above that barrier is required. Until then, we will remain cautiously-bullish.

US RETAIL SALES AND UOM CONSUMER CONFIDENCE

Today will be a relatively quiet day in regards to the economic data. The main event will be the release of the US retail sales figures for the month of April, both core and headline. The core MoM retail sales figures are forecasted to have fallen drastically, going from +8.4% to +0.7%. The MoM headline one is also expected to decline heavily, going from +9.7% to +1.0%. If that’s the case, this could have its negative effect on the US dollar and on some retail stocks. Since the beginning of the pandemic, retail sales figures have been on a choppy ride, with huge swings in either direction, comparing to the pre-pandemic movement.

AS FOR THE REST OF TODAY’S EVENTS

Canada is expected to the show its manufacturing sales figure on a MoM basis for the month of March. The forecast currently stands at +3.5%, which is a decent increase from the previous -1.6%.

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