European Equities

European Equities Fall on Profit Booking, Wall Street to Trade Positive on Trade Deal Optimism

Following an update from China on trade deal Phase 1’s signing by end of this week, traders await confirmation from the USA for directional cues. 

Profit Booking
Trade Deal Phase 1

Summary: Global equities continued to trade positive as the year comes to close. Broad-based positive economic growth outlook and optimism surrounding the trade deal helped keep market bulls fundamentally supported. While the Asian market saw major indices trade and close on a positive note, the European market saw a relatively subdued activity.

While bulls still reigned supreme in the European market, the profit booking activity which was anticipated to take place last Friday saw a bit of delayed progress and took hold in today’s session bringing the price of major risk assets and indices slightly lower from recent record levels. In the forex market, a softer USD led to other major global currencies seeing sharp gains. 

Precious Metals: Rare metals are seeing positive price action as yearend trading activity boosts demand for safe-haven assets. Amid thin trading volume, traders who wished to safeguard their investments against violent market shifted a significant chunk of their funds into precious metals which along with softer USD have helped keep the price of rare metals trade on a positive note despite risk on market mood. 

Crude Oil: Crude oil price is trading positive in the global market supported by multiple fundamental factors. While optimism surrounding trade deal outcome and upbeat macro data along with extended supply cut from OPEC members do provide fundamental support for crude oil, a major part of today’s influence comes from escalating tensions in the Middle East following airstrikes in Iraq and Syria

AUD/USD: The pair is trading with steady positive price momentum in the international market today. Optimism surrounding Phase-1 of the trade deal and broad-based USD’s weakness provided the initial boost which helped the pair scale the 0.7000 mark but a lack of strength surrounding AUD bulls led to decline below the mentioned price mark. The pair now trades steady above 0.6990 awaiting further market updates and headlines for another chance to attach and break past the 0.7000 handle. 

On The Lookout: As the year-end comes to close, local macro data updates and headlines ruled the market keeping control over short term fund flow direction. However, profit booking activity continued to keep gains in check.

While broad-based optimism surrounding trade deal and hopes for swift Brexit resolution did provide the market with some fundamental support they lost control over price action in the European sessions. But a major breakthrough came in late European session following a  Reuters report which stated that Chinese Vice Premier Liu He is travelling to the USA this week to sign the Phase 1 trade deal and is scheduled to stay there till mid-week next week.

Given the fact that the timeline for the signing of the trade deal was expected to take at least until early to mid-January, the latest headlines which suggest the possibility of a trade deal being signed by end of this week came as a major bullish trigger. However, traders await headlines from the USA to confirm the same before preparing to place any major bet as most major markets close early tomorrow on account of new year’s eve and provide little opportunities for speculative traders to make a profit from in case of lack of further updates from the USA. On the macro calendar front, the US calendar is set to see the release of Pending home sales data and Chicago PMI data.

Trading Perspective: Wall Street futures trading in the international market was positive on trade deal optimism while forex pairs also traded positive on soft USD. Following the latest update from China regarding the Phase 1 trade deal signing time frame, Wall Street is expected to trade near record levels in trading sessions today while the forex market also sees major currency pairs trade on a positive note. 

EUR/USD: The pair is trading with clear positive bias today and saw price scale a fresh 4-month high. The rally was fueled by broad-based trade deal optimism and weakness surrounding USD which helped the pair scale 1.1200 handle. However, lack of strength to follow through with the rally resulted in the pair consolidating near 1.1210 handle awaiting fresh updates from the US macro calendar for short term profit opportunities. 

GBP/USD: While the EU continues to give UK an earful on the possibility of a trade deal being reached with the UK, GBP shrugged off Brexit worries and continued to trade positive well above 1.31 handle. Hopes on PM Johnson taking efforts to ensure swift Brexit, softer USD, and broad-based risk appetite underpin market bulls today. Traders now await a fresh update from the US macro calendar for short term profit opportunities. 

USD/CAD: The pair continued to decline for the 5th consecutive trading session today following a recent sharp spike in crude oil price. News of progress surrounding trade deal also contributed some strength to CAD bulls. Further, a softer USD on broad-based greenback sell-off and escalating tensions in the middle east over air strike in Syria and Iraq led to a sharp spike in the crude oil price which also provided CAD with fundamental support today leading to sharp declines. Traders now await US data for short term profit opportunities. 

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