Macro data updates to dictate price action mid lack of headlines surrounding geopolitical events.
Summary: Global equities rebound as Middle Eastern tensions ease over lack of fresh developments. As both US and Asian market sessions passed without any major retort or headlines from the US & Iran, the pressure from the recent airstrike and resulting tensions finally eased in the global market. This along with positive fundamentals from trade deal optimism ahead of Jan-15’s Sino-U.S. meeting resulted in major equities recovering some of its steep loss incurred at the start of the week.
In the European session, upbeat earnings data from Rolls Royce provided auto-trade dependent European economy with positive fundamentals adding to broad-based risk appetite resulting in major indices and equities opening and trading with a bullish note. In the forex market, major currency pairs continued to decline as lingering caution in the global market provides bias in favor of safe-haven currencies and US greenback.
Precious Metals: Having scaled fresh 6-yr highs in the previous sessions, the price of gold fell today as Middle Eastern tensions eased up a bit. However, lingering safe-haven demand and caution ahead of Sino-U.S. meeting and tensions surrounding the possibility of war breaking out in the Middle East has helped cap gains keeping the price of both gold and silver well near recent highs.
Crude Oil: Following previous session’s sharp spike, crude oil price eased up in the global market as tensions in the Middle East failed to materialize anything concrete enough to worry about the possibility of disruption in crude oil supply or war breaking out anytime soon. However, OPEC’s supply cut agreement continues to offset glut scenario predictions helping oil bulls retain most of the recent gains.
AUD/USD: The pair is trading with a dovish note in the global market despite today’s prevalent risk on investor tone. Increasing fears of a rate cut from RBA weighed down AUD bulls while broad-based risk currencies sell-off and demand for the US Greenback given its status as pseudo safe haven currency also added pressure to the AUD resulting in dovish price action across the day.
On The Lookout: While lack of updates surrounding Middle Eastern tensions helped the market recover some of the losses sustained yesterday, it still remains in the center of investors’ focus as many view the current scenarios as the calm before the storm. Any retaliation from Iran now or even signs of efforts from Iran to boost its nuclear fuel enrichment activity is expected to trigger a harsh reaction from the US which could break out as another war.
Aside from this Middle Eastern crisis, UK parliamentary session begins today for a detailed review on the Brexit bill post which is expected to see green light by the conclusion of the session coming Thursday. In US market hours today, traders are expected to focus on economic calendar update from the US and Canada for short term profit opportunities. The US calendar will see the release of trade balance data, factory orders data, API weekly crude oil stockpile data and ISM Non-Manufacturing Employment/PMI data while the Canadian calendar sees the release of Ivey PMI data.
Trading Perspective: Prevalent demand for safe-haven assets and firm USD are expected to keep major forex pairs subdued amid mixed investor sentiment in the global market. However, easing Middle Eastern tensions and upbeat cues in the European market suggest possibility along with flat activity in US futures trading in the international market suggests a neutral opening of Wall Street today.
EUR/USD: The pair is trading price action trapped within a short price band as neither side has the strength required for decisive breakout. Amid mixed market sentiment, the pair has managed to rebound around 1.1170 handle but gains were capped as USD also traded firm in the international market. Traders now await US data for short term profit opportunities.
GBP/USD: The pair is seeing sharp price swings post new year as updates on Brexit and geo-politics has caused a spike in market uncertainties. Having continued across the day to try and gain solid support at the 1.3200 handle, the pair saw repeated failures resulting in GBP finally falling below the mid-1.31 handle. Traders now await US data for short term profit opportunities.
USD/CAD: The pair is trading positive as USD gained strength on broad-based risk currency sell-off and the demand stemming from its status as Pseudo safe-haven currency. This along with a decline in the crude oil price which resulted in CAD bulls losing strength helped USD reverse loss incurred in the previous session. The pair is steady above 1.30 handle while traders await data from US and Canadian calendars for short term profit opportunities.
