Draghi speech and earnings from major US firms to provide directional cues for Wall Street activity today.
Summary: Following upbeat earnings from Microsoft and Tesla, Wall Street closed on a positive note yesterday. Asian market saw major indices and equities follow cues from the US market and trade on positive note across Asian market hours. The European market opened on a positive note and saw major indices see sharp upside move influenced by upbeat Auto sector earnings report from Germany. Traders, however, kept trading activity limited to speculative bets as they awaited cues from ECB President Draghi’s speech in a press conference as the market prepares for his last speech as Head of ECB. Any comments from policymakers which hints at a change in current policy decisions could provide a major shift in directional bias preventing traders from placing major bets. In the forex market, most major global currency pairs are trading with dovish note despite prevalent risk-on trading sentiment on dovish macro data induced cues and rebound in USD.
Precious Metals: Rare metals are trading flat but the bias remains slight in favor of safe-haven assets as traders took on cautious tone ahead of ECB Draghi’s speech. Despite firm USD, traders choose to divert funds to rare metals to safeguard their investment from any sharp price swings on unexpected comments from the head of ECB in his last official speech before he steps down.
Crude Oil: Crude oil gained a sharp boost over an unexpected drop in US EIA weekly stockpile data. Further news of US removing sanctions on Turkey stating the ceasefire in Northern Syria is now permanent was also looked on as a sign on improved economic conditions in the eastern European region which helped improve demand to supply outlook in favor of increased demand underpinning crude oil bulls.
AUD/USD: The pair is trading with dovish bias as Australian Debt sales missed target and services PMI saw a disappointing outcome. However, the pair has recovered some of its recent loss and is trading on a relatively flat note as AUD bulls retain some momentum from the overnight rebound. But, prevalent risk-averse sentiment in the forex market exerts pressure on AUD bulls keeping the price below the mid-0.68 handle.
On The Lookout: All eyes are fixed on ECB press conference today as traders get ready to send off the current head of ECB Mr. Mario Draghi in his last official speech later today. Any comments from policymakers that hint at a shift in current policy stance can greatly affect the European economy and this has caused investors to await the speech for directional cues and short-term profit opportunities. Meanwhile, proceedings in Brexit are also weighing down the market albeit muted impact on account of the shift in investor focus to ECB press conference.
The EU member council has voted to delay the decision on UK’s Brexit extension request which came as a serious blow following recent progress made in Brexit talks recently. However, comments from EU Council President Donald Tusk helped dampen the impact of EU’s decision on the global financial market as Tusk’s recent twitter recommended EU leaders to back UK’s request for an extension until January which would further decrease odds of no-deal Brexit outcome. On the release front, US calendar will see the release of Core Durable Goods Orders, Initial Jobless Claims, and New Home Sales data updates.
Trading Perspective: Forex market is likely to see range-bound price action with prevalent bearish bias in US market hours as investor sentiment retains a cautious tone. On earnings calendar schedule, the US market will see quarterly reports from 3M, Amazon.com, Alliance Data Systems, American Airlines, Baxter, Citrix Systems, Intel, Comcast, Dove, Hersey, Twitter, and Visa. US futures trading in the international market saw positive price action as cues from positive earnings reports from Microsoft, Tesla and Lam Research underpinned market bulls ahead of Wall Street opening. This combined with upbeat forecasts on US tech and financial service sector stocks hints at positive activity in the US market later today.
EUR/USD: The pair traded flat ahead of ECB Draghi’s speech with bias in favor of USD over worse than expected macro data outcome in the EU region. Lack of directional bias ahead of Draghi’s speech also contributed to range-bound action. Traders await Draghi’s speech and US data for short term profit opportunity and directional bias.
GBP/USD: The pair is trading with clear dovish bias today as the EU decided to delay approving UK’s request for Brexit deadline extension. This caused the pair to decline below 1.29 handle but the further loss was capped on EU Tusk’s twitter helped improve mood surrounding Brexit outcome. Traders now await US data for short term profit opportunity but pair is unlikely to reclaim 1.29 handle during US market hours.
USD/CAD: The pair recovered from 3-month lows hit in intra-day session earlier today as a modest uptick in USD over risk-off trading activity in the forex market improved support for USD bulls. But gains were capped and pair remains below the 1.3100 handle as CAD remains supported by upbeat crude oil price in the global market. Traders now await US data for short term profit opportunities.
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