Major markets traded positive on Sino-U.S. trade-related optimism following week-long cautious trading activity but upside were limited as investors held back from placing major bets owing to lack of key details amid conflicting headlines.
Summary: Global markets are trading positive in both forex and equity market scape for the first time this week as all events that inspired caution and influence from same have come to a pass. Today’s positive price action is the result of news-driven momentum rather than action driven by fundamental support. News hit the market late last night that US officials are considering reversing tariff on Chinese goods in a bid to hasten trade deal between two nations and ease the impact of trade war on US economy. Hopes of a positive outcome in Sino-U.S. trade negotiation has brought on a fresh wave of bullish price action across all major markets as said outcome will help boost economic growth across major global markets. As the trading session comes to close for the week, all major assets are moving up since most risk assets had hit critical support on profit booking activities and risk-averse trading activities suggesting week may close on a positive note.
Precious Metals: Both gold and silver saw steep declines today as risk appetite boomed in market post four consecutive sessions of cautious trading. While weak US dollar owing to dovish fed stance and partial US government shutdown helped limit declines, profit booking activity and increased risk appetite saw fund flow decrease in safe haven market and both metals seeing a significant loss during Asian and European market hours.
AUD/USD: Australian dollar traded positive across today’s Asian and European market hours supported by renewed Sino-U.S. trade deal optimism. The Australian economy is directly linked to Chinese economy owing to high level of trading activity between the two nations such that Australian dollar is viewed as Chinese proxy, as such positive news that boosts Chinese market provides fundamental support to Aussie bulls helping AUD maintain bullish price action today.
USD/JPY: US dollar breached past mid $109 handle in early trade hours on headlines that indicated possible positive outcome between China & U.S in their trade war. However, Treasury department denied the report stating no such decision was considered. While the truth behind this matter is debated, USD lost ground on profit booking as Dollar had been gaining since mid-week owing to a slight pickup in US T.Yield, however, Greenback is still weighed down by political woes in US market resulting in Japanese Yen regaining the upper hand and retaining its position post-mid-day decline. As risk appetite is high in market Japanese yen couldn’t make a breakout resulting in consolidative action slightly above intra-day lows.
On The Lookout: As safe haven demand lowers on trade deal optimism, post a week-long cautious trade, investors are active today with the aim to look out for short term profit opportunities in macro data-driven momentum as they await further confirmation or details on trade talks from headlines before placing any major bets. While no sharp moves or big bets are expected to hit the market today, major assets are expected to close on a positive note following week-long cautious trade activity as risk appetite remains high across major markets. Canadian Core CPI data & U.S. Michigan Consumer sentiment and expectations are the main focus of investors today, but traders are also on the lookout for further Brexit related headlines as it still has some influence over price action in European markets.
Trading Perspective: Risk assets are expected to continue bullish price action and while positive closing for the week is on the table, gains made in early session could be erased owing to possible profit booking activity at E.O.D today.
EUR/USD: EURUSD pair declined from intra-day highs in late European market hours owing to relatively low volatility and lack of catalyst that could help push the pair higher. Given the fact that EURO bulls lack fundamental support to sustain a bullish rally in the immediate market, the pair is likely to stagnate once news driven momentum dies down. As US dollar also lacks the strength to make use of the current opportunity, the pair is likely to stabilize near 1.1400 handle as the trading session comes to close for the week.
GBP/USD: While British Pound retained strength from recent Brexit progress, worse than expected macro data from the UK brought the pair down from intra-day highs. In late European markets hours, the pair has managed to stop further decline and enter consolidative action in the lower half of 1.29 handle. Investors now await further Brexit headline as PM May aims to hold cross-party talks to discuss the future of Brexit. Any news of article 50 extension at this point will help push the pair above 1.30 handle while muted headlines will see the pair continue to move along recent highs.
USD/CAD: The USDCAD pair bears continue forward with overnight decline inspired by Sino-U.S. trade deal optimism. However,the pair managed to rebound from intra-day lows on conflicting headlines. The pair is now trading steady near mid-1.32 handle as USD lacks the strength to recover lost ground and Canadian Loonie is backed by positive price action in the crude oil market. The pair is expected to close the week neutral note as investors are expected to hold back from placing major bets awaiting further clarification on Sino-U.S. trade talk related headlines.