Key Chinese interest rate cut & comments from China on constructive trade talks drive market. Amid lack of macro data updates, traders await further headlines on a trade deal for short term trading cues.
Summary: Global equities are off to a positive start on multiple geopolitical cues. Following comments from White House advisor last Friday that trade deal could be signed soon, headlines from China on Saturday stating that China and USA had constructive talks in a high-level phone call which included Vice President Liu He.
US trade representative Robert Lightizer and trade secretary Steven Mnuchin helped improve optimism surrounding trade deal proceedings. While the headlines hinted at no concrete proof of progress yet, positive comments from both nations involved in trade talks have helped drive speculative bets on an upward arc with strong positive support in the short term.
Further, headlines from China earlier today stating that a key interest rate has been reduced for the first time since 2015 by five basis points also came as a positive influence from a fundamental perspective.
Following upbeat price action in major indices and equities and indices from the Asian market, European equities also opened positive for the week. However, gains were capped as investors in the European market remained cautious over lack of an update from the US on tariff over EU auto imports.
In the forex market, major currency pairs traded positive but remained well within familiar price levels as traders awaited proof of solid progress in trade talks.
Precious Metals: Rare metals saw a sharp decline in price action today as risk appetite boomed in the global market. Positive cues stemming from trade deal optimism and Chinese interest rate cut decision greatly eased demand for safe-haven assets overshadowing slide in USD resulting in profit booking activity and lack of fund flow to gold and silver keeping them steady near intra-day lows.
Crude Oil: Crude oil price inched higher in the global market over rising optimism surrounding the Sino-U.S. trade deal. Chinese rate cut cues also pushed short term demand outlook in favor of crude oil bulls. But worries surrounding spike in crude oil supply in the early half of 2019 continued to pressure crude oil keeping gains in check ahead of upcoming major OPEC summit next month.
AUD/USD: The pair failed to gain positive momentum despite broad-based risk on investor sentiment and optimism surrounding trade deal as AUD remained under pressure from escalating tensions in Hong Kong. Further, a lack of economic data release/high impact event updates from the local market also weighed down AUD while weak USD helped cap decline albeit pair maintaining clear dovish bias.
On The Lookout: The main focus of investors in now on Sino-U.S. trade deal related headlines. While recent updates may paint a rosy picture in short term, it is nothing more than speculative, broad market investor sentiment influenced rally which is likely to evaporate in the near future over lack of proof unless something concrete pops up within the next 48 hours. China’s decision to the east key interest rate is a welcoming move but the impetus from the same is likely to be short-lived if the trade war continues to drag on.
On the Brexit front, UK election polls continue to maintain a steady majority in favor of conservative party underpinning GBP. Traders’ immediate focus is on public appearance and speech from UK leaders Boris Johnson and Jeremy Corbyn later today at a business conference.
Comments from the major figures are likely to provide short term profit opportunities for traders of GBP on speech-driven momentum. While the economic calendar schedule for the day is silent, the week ahead will see two major events – the release of Fed meeting minutes and first public speech from new ECB head Christine Lagarde since she officially took the role of President off European Central Bank.
Trading Perspective: Forex market is set to see price action remain range-bound with positive bias while traders await further updates on trade deal proceedings for short term trading cues and directional bias. Given the lack of major macro data updates from the US economic calendar, health risk appetite will continue to keep US Greenback pressured nearly one-week lows.
Broad-based risk appetite and optimism surrounding trade deal kept US futures trading in international market positive ahead of Wall Street opening which along with bullish cues from Asian and European markets suggests Wall Street is likely to see positive price action as trading session opens for the week later today.
EUR/USD: The pair is trading positive in the global market today as broad-based positive investor sentiment and optimism surrounding the Sino-U.S. trade deal provided EURO bulls with positive influence. However, lack of cues from the European market to provide fundamental support kept the pair capped around mid-1.10 handle while USD’s weakness continues to drive short term rally. The pair sees strong support and resistance near the 1.1000 and 1.1080 handle during American market hours.
GBP/USD: The pair is trading positive with clear fundamental support as election polls hint at the majority for the conservative party. The majority in favor of conservatives increases odds of orderly Brexit at earliest underpinning GBP, further weaker USD in the global market also added support for GBP bulls allowing the pair to move above the mid-1.29 handle. Traders now await comments from Boris Johnson & Jeremy Corbyn during their public appearance later today for short term profit opportunities.
USD/CAD: The pair is trading with positive bias despite broad-based USD’s weakness over lack of pull from Canadian Loonie. While oil price saw spike earlier in the day, it faded as trading session progressed leaving Canadian Loonie with a lack of fundamental support to make use of broad-based risk on trading activity for a bearish breakout. However, the pair remains well below the 1.3250 handle and seems likely to breach the 1.3200 handle if prevalent risk on investor sentiment remains steady during American market hours.
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