In May, markets get a correction to their medium-term outlook with 10-year US bonds in the lead. But economic-wise, the US continues to recover at a faster rate than most of the countries while Europe is still struggling with vaccinations. A 10-year bond surge possibility still shadowing the emerging markets.
What Happened in April?
Biden’s Infrastructure Program: Biden revealed his plan worth close to $2 billion which included transportation, research, water network, digital network upgrade, and many more.
Biden’s Family Plan: Biden revealed his social plan worth close to $1.8 billion which includes, child care support, pre-school education, increasing teachers, and many more.
Biden’s Tax Plan: With the fiscal support, Biden’s programs have cost nearly $6 billion. To cover that, Biden proposed a corporate tax increase, income and capital gains tax increase for the wealthy, many possible ways to decrease tax avoidance, global minimum corporate tax, etc.
Vaccine News: Globally more than 1.1 billion vaccines are applied. US and China still in the lead about vaccination numbers. Applied vaccination number grow %89 in April. US adults now have a chance to get vaccinated on demand. AstraZeneca, J&J and Sputnik vaccines still giving doubts about their safety because of the blood clot cases may or may not have connected to them while Moderna and BioNTech look safer and more protective bet.
Bank of Canada’s Tapering Decision:

Bank of Canada is the first to taper around its peers, its massive asset purchasing program. Asset-purchases decrease to C$3 billion from C$4 billion and change their forecast of rate hikes to 2022 from 2023. After the decision CAD gains against USD reached %3. Other central banks probably follow the footsteps of BOC but rather slowly.
Taper Tantrum Fears:

Tapering fears ease a little in April because of Powell’s strong and clear messages. But this will be temporary at best. The general opinion in the markets, 10-year rates to close the year, between %2 to %2.5. Strong job growth and over %2.5 CPI may bring back taper tantrum fears earlier than expected.
Job Market:

The sentence we all heard from the Powell’s speeches: “Until significant improvement in the Job Market”. Total non-farm payrolls still below %5.5 from the pre-Covid levels. But this may not be the case in a few months. The US expected to create around 1 million jobs in April and this positive trend may continue as fast vaccinations continue.
Rising Commodity Prices:

Rising oil prices, China’s aggressive importing and stocking, production problems due to Covid-19 and fast recovering, loose economy. There are lots of factors fueling the commodity prices and the effects may continue at least till FED’s tapering. Surging commodity prices affecting PPI rates and firms will reflect to consumers.
Eurozone and US Inflation:

Inflations came close to 2018 levels as the global economy recovering from the pandemic. More efficient vaccinations from the US may cause inflation spread to widen more between the two economies. Normally this is giving EURUSD a positive push but the possibility of inflation surging higher than %3 may cause concern for tapering and flip the positive effect to a negative one if the economy gets hotter.
What to Expect From May?
Rising Bond Rates: Canada is the first country to start tapering and they will not be the last. As fears growing so is the bearish pressure for bonds. Markets, generally speaking, expect 10 year US bonds to rise over %2 in 2021. If this rise will be fast it may cause panic in the markets.
Tax Increase: Tax increase discussion in the US or around the world may have a big impact, especially capital gains tax.
Covid-19:

US and Europe including the UK starting to control the spread of the virus with heavy restrictions (for the Eurozone) or fast vaccinations (for the US) or both (the UK). But some countries in the Eurozone will start to ease restrictions in May and this may cause some headaches for later dates if vaccinations don’t pick up soon. Meanwhile, the real danger is in India. Daily cases close to 400k and there are some reports of lack of oxygen and other medical supplies in the hospital. With India’s huge populations in mind, this may present a much worse situation than Italy if not received enough help from other countries.
Central Banks:
• RBA: May 4
• BOE: May 6
• TCMB: May 6
• RBNZ: May 26
Seasonality Tables:



Dollar Index:

91.300 will be important at the first week of May. 90.000 is a key support and above if the price is able to hold above 91.300, 92.150-93.000 levels may become possible targets for up moves. Below 90.000 is a dangerous zone for the dollar index
Gold:


Our gold view did not change much since our post FOMC analysis. 1755-1765 zone will be critical support. As long as gold holds above this support the is no problem being bullish and if the price able to pass 1800 too trend may have turned to the north for XAUUSD. But ETFs continue to decrease positions and up moves getting weaker. Because of that, below 1755-1765 pricing will be dangerous for gold bulls.
EURUSD:

EURUSD had a nice run in April surge to over 1.21 from 1.17. But a correction was due. 1.20 level and the 200-day MA can create powerful support. If EURUSD able to hold above this support we may see a weaker uptrend. But below the 200-day MA EURUSD may have sold fast in May. Euro positions from the COT reports suggest a medium-term bear market is possible for EURUSD.
Nasdaq:

Nasdaq may have formed a double top. If the price turn to the south from below 14250, the 100-day moving average will be a good target. And, if Nasdaq breaks this moving average which is holding since 2020 May, down moves may deepen. Despite fundamentals showing overpriced stocks, betting against Nasdaq is a dangerous thing to do (see seasonality chart above). Over 14.250 another surge is not a low possibility for the index.