Equities Rally on Dovish Central Banks

Nikolas Papas

Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).

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Equities Rally on Dovish Central Banks

June 19, 2019

Asian indices finished higher today on dovish Central Banks ahead of Wednesday’s FOMC policy meeting. The Nikkei225 finished 1.72 percent higher to 21,333 the Hang Seng benchmark in Hong Kong, finished 2.29 percent higher at 28,136. The Shanghai Composite finished 1.19 percent higher to 2,922, while in Singapore the FTSE Straits Times index finished 1.47 percent higher to 3,286. Australian equities finished to fresh 11.5 year highs on Wednesday, with the ASX200 closed at 6648 after a gain of 1.2% or 78 points.

AUDUSD Daily Chart

European session started higher today in a quiet session amid renewed worries about trade relations between the US and China and a rise in geopolitical tensions. DAX30 is adding 0.77 percent to 11,999 CAC40 is 0.07 percent higher at 5,389 while the FTSE MIB in Milan is trading 0.35 percent lower at 20,552. The London Stock Exchange is 0,02 percent lower to 7,356 as the Brexit uncertainty continues.

In commodities markets, crude oil made an impressive rally yesterday during US session at 54.07 despite geopolitical tensions around the globe. Oil is down almost 18% from the high in late April, wiping out about half of its rally earlier this year, due to increased global trade worries. Brent oil also trades higher to $62,27 per barrel as major oil producers have yet to agree on adjustments on output. Gold trades flat at 1,345 as bulls are in full control. The precious metal holds above all the major daily moving averages and strong resistance will be met at 1,357 the yearly high.      

In cryptocurrencies market, bitcoin (BTCUSD) continues higher today recovering some of yesterday losses, the daily low for BTC was at 8,930 and the daily high at 9,200. Immediate support for BTC stands now at $9,000 round figure while next support stands at 8,500 the previous week high. On the upside, strong resistance now stands at 9,477 the high from yesterday while I expect extra pressure from sellers at 9,600 and then at 10,000. Ethereum (ETHUSD) trades flat at 267, with capitalization now to 28.7 billion. On the upside, the immediate resistance stands at 287 the recent high while the support stands at 250 round figure, Litecoin (LTCUSD) adds 5 dollars to 134. The crypto market cap now stands above $283.0B.

On the Lookout: President Trump said he “had a very good telephone conversation” with China’s leader President Xi and that they will have “an extended meeting next week at the G20 [summit] in Japan”. This settled some concerns that both leaders might not meet.

Investors focus will be this week on the FOMC meeting today. The US central bank is expected to keep rates unchanged at 2.5% this week. The week also sees the Bank of Japan and Bank of England policy meetings.

In macro news from America, we await the Canadian Consumer Price Index (CPI) report to be released at 12:30GMT. The US EIA weekly crude stockpiles data will drop in at 14:30GMT.  11:00GMT – US MBA mortgage applications w.e. 14 June.

Trading Perspective: In forex markets, USD trades slightly flat at 97.67 ahead of the Fed policy meeting, while the Aussie dollar managed to rebound yesterday from the low around 0.68 to 0.6880 while Kiwi also trades higher at 0.6520.

GBPUSD trades flat at 1.2545 after the rebound yesterday from 1.25, as the bearish momentum for Cable is still intact amid growing concerns over the risk of no deal Brexit. Major support now stands at 1.25 round figure which if broken might accelerate the slide further towards 1.2480. On the upside immediate resistance now stands at 1.26 while more offers will emerge at 1.2641 the 50-hour moving average. Pound shows persistent weakness amid UK political uncertainty and also on the back of global risk aversion, so any uptick can match excess offers.

In Sterling futures markets the open interest increased by 143 contracts, volume reversed three consecutive drops and gained almost 21.7K contracts.

central banks
GBPUSD Daily Chart

EURUSD trades flat just below the 1.12 mark ahead of the important FOMC policy meeting. The pair trades below the 50-day moving average, on the upside the immediate resistance stands at 1.1232 the 100-hour moving, while more offers will emerge at 1.1270 the 100-day moving average. Support stands at 1.12 round figure, while more bids will emerge at 1.1150 two week lows.

In euro futures markets, the open interest rose by around 13K contracts on Tuesday, volume gained nearly 116.7K contracts.

USDJPY is under pressure today down to 108,33, as traders turn cautious ahead of the FOMC policy meeting. The pair hit the low at 108.21 and the high at 108.61. The pair will find support around 108.00. On the upside, immediate resistance for the pair now stands at 109 round figure. The USD price dynamics will continue to drive the pair’s momentum as traders focus shifts to FED next move later today.

In Yen futures markets, the open interest rose by around 3.7K contracts on Tuesday, volume followed suit, up by nearly 88K contracts.

USDCAD is pressured today down to 1.3377 as the sharp rebound in crude oil prices, Canada’s main export item seems to have added further strength in the Canadian Dollar (CAD). The pair will find immediate support at the 200-day moving average around 1.3250 while extra support stands at 1.3200 round figure. On the upside, immediate resistance now stands at the 1.35 zone before an attempt to 1.3560 recent high from 31st May. 

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