Easing Sino-U.S. trade tensions and China’s confirmation to move ahead with upcoming trade talks helped improve investor sentiment. But caution still remains prevalent as investors await further updates and progress on trade talks.
Summary: US Wall Street yesterday saw major indices and equities trade in red but closed well above intra-day lows as investors and analysts in US markets bet against possibility of US President Donald Trump’s threat coming to pass. Further, tensions eased in global markets as Chinese authorities confirmed today that Chinese delegates continue to prepare for their trip to U.S. for trade related negotiations. This helped improve investor sentiment but caution still ruled the market capping gains in Asian equities. While European markets yesterday saw one of the biggest yet sell-off for the year on Sino-U.S. trade tensions yesterday, improved investor sentiment has helped stabilize the scenario. Given the trade dependent nature of European markets, the tariff woes caused due to Trump’s America first approach against its allies continues to remain a thorn for investors capping major moves resulting in European market seeing range bound price action with bearish bias. As investor sentiment improved in the global market, forex market is seeing some level of risk on trading activity today.
Precious Metals: Precious metals trade flat in the global market today as cautious investor sentiment has helped prevent decline but improved risk appetite in market hinders positive price action. Both Gold and Silver are trading flat with price action slightly edging into bear’s territory now and then resulting in range bound price action across European market hours.
Crude Oil: Crude oil price continues to trade in red in the global market but yesterday’s American market hours saw crude oil bulls erase intra-day declines and stage solid recovery action as investors and analyst interpretation of Trump’s tweets changed. Analysts stated the threat is unlikely to come to reality and is most likely a negotiation tactic which helped crude oil recover but investors continue to exercise caution resulting in today’s dovish price action.
AUD/USD: The pair scaled new weekly highs at 0.7047 in Asian session as Australian Central Bank kept policy rate unchanged. Positive cues from Asian markets helped the pair maintain bullish price action for a while but the pair has since began a downward rally as caution in market outweighed positive investor sentiment resulting in USD gaining upper hand during European market hours.
On The Lookout: Geo-political events remain in focus as equity market today displays dual tone activity. Update from China stating that trade talks between US and China will proceed as planned helped improve investor sentiment and risk appetite in the global market. While this provided some level of positive strength to market, investors choose to retain caution. Especially since European market is trade dependent and suffers as long as trade war remains active. Investors await further updates and signs of progress before placing major bets. This has greatly limited trading activity despite market displaying considerable trading volume in major assets. With both major UK political party at odds over Brexit proceedings which have come to a standstill and local election results causing both major parties to suffer, political tensions is at all time high in UK. Amid increasing calls for PM Theresa May to resign from her post is set to meet Sir Graham Brady when key issues relating to cross party talks and further Brexit proceedings are likely to be discussed. Meanwhile, Investors await macro data updates for short term directional cues.
Trading Perspective: Post yesterday’s fate defying price action in US Wall Street and change in market perception of ongoing political and trade war related proceedings, Wall Street is likely to see range bound price action today with considerable positive support on improved investor risk appetite.
EUR/USD: The pair continues to trade trapped within previous session’s price range limits. Euro bulls continue to receive support from the fact that investor’s mood improved as concerns on Sino-U.S. trade talks eased but prevalent caution in the market and dovish German macro data weigh down EURO providing support for USD resulting in range bound price action. Traders now await US Job opening data update for short term trading cues.
GBP/USD: Despite slight recovery in Pacific-Asian market hours, the pair began to decline as cross party talks relating to Brexit proceedings remain at standstill. Increasing political tension and pressure surrounding PM May asking for her resignation also pressures British Pound putting the pair on bear’s path. Traders now await US Job opening data update for short term trading cues.
USD/CAD: The pair saw some level of decline in Pacific-Asian market hours as crude oil price recovered during American market hours. Easing Sino-U.S. trade tensions also provided some support in early hours. But the pair held above 1.34 handle which proved to be boon for USD bulls as crude oil price declined in late-Asian and European market facilitating the pair to climb back above mid-1.34 handle. Traders now await US Job opening data update for short term trading cues.