It’s not just the US-Iran conflict, major central bank decisions, and major US tech earnings that will come into the picture this week. Just keep in mind that the shenanigans at the end of the month are also things to consider in the coming days. Yes, we are already at the end of another crazy month in the markets.
According to Credit Agricole, their consolidation model at the end of the month indicates a strong sell-off in the dollar after evaluating all the usual drivers.
“Global stock markets were broadly flatter during April. In the foreign exchange market, the US dollar was broadly weaker during the month.
Overall, movements in equity markets, when adjusted for market capitalization and FX performance this month, suggest that month-end portfolio rebalancing flows are likely to be low. Strong selling in the US dollar across the boardWith the strongest sell signal in the case of the US dollar against the euro.”
Their argument suggests that EUR/USD makes higher moves, all other things being equal. The pair had a somewhat mixed start this week, as it bounced higher yesterday after finding support from its 200-day moving average last week. However, near-term gains are more limited near the 200 hour moving average – which currently stands at 1.1742. This is before any possible talk about visiting the 1.1800 level.
Just be careful that these end-of-month consolidation calls are not the be all and end all of determining price movements. At such a time, key risks remain paramount and the largest driver of price movement. This is just part of what will fuel trading sentiment as a whole in trying to get a better handle on how the markets behave as we look to close out April.
