CHILE: Further Fiscal Consolidation Requires Spending Restraint
Jun-04 11:18
- USDCLP continues to trade in a range, with the pair edging down by 0.2% yesterday, but remaining around the 940 level. Despite this, a bear threat remains present with sights still on 914.00, the Mar 18 low. Resistance to watch is 961.64, the Apr 30 high.
- Today, a modest rise in copper prices may provide a small tailwind for the peso, although local catalysts remain light. On the data front, no macro figures are due, with focus ahead on nominal wages tomorrow and May CPI stats on Friday, where headline inflation is seen holding at 4.5% y/y. The latter data will be of interest given the central bank’s more dovish tone in recent weeks, which has raised speculation that it could resume its easing cycle in the next couple of meetings.
- Separately, recent fiscal data revealed that soft core revenue growth was masked by a jump in mining revenue in April, while the government continues to front-load spending.
- Although the 12-month fiscal deficit edged down to 2.6% of GDP, Itau believes that the structural deficit target seems challenging and that further fiscal consolidation rests of on additional spending restraint and continued revenue improvement.
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Historical bullets
USD: The Dollar is still pushing lower
May-05 11:17
- Further intraday lows for the Dollar, nothing fast, 1 pip at a time, but it has been a one way move so far during the early European session and into the US one.
- EUR, GBP, NOK, AUD, JPY, PLN, ZAR, and CAD are all at session high, and this is more of a pure FX move, given the lack of moves in Equities or eve Bonds (Yield).
- AUD is still the best performer and is still eyeing a test to the 0.6500 handle.
EQUITIES: EU Bank put fly
May-05 11:01
SX7E (19th Sep) 160/155/150p fly, bought for 0.20 in 6k.
OUTLOOK: Price Signal Summary - Bear Threat In Oil Futures Still Present
May-05 11:00
- On the commodity front, Gold is trading higher today. Recent weakness appears to have been a correction. The yellow metal breached the 20-day EMA. A continuation lower would highlight a deeper retracement and open the 50-day EMA, at 3115.11 - a key support. The primary trend direction remains up. A resumption of gains would refocus attention on $3500.1, the Apr 22 high and bull trigger. Clearance of this level resumes the uptrend.
- In the oil space, a medium-term bearish trend in WTI futures remains intact and last week’s sell-off reinforces this theme. The move down signals the end of the correction between Apr 9 - 23. The correction allowed an oversold trend condition to unwind. Attention is on $54.67, the Apr 9 low and a bear trigger. Clearance of this level would resume the downtrend and open $53.72, a 2.236 projection of the Feb 20 - Mar 5 - Apr 2 price swing. Resistance to watch is $64.61, the 50-day EMA. Initial resistance is $61.94, the 20-day EMA.
