Escalating trade war woes, disappointing macro data updates, China’s stance on ceasing trade talks until US makes amends cause European markets to bleed red.
Summary: Major benchmark indices and equities continue to bleed red as trade war woes escalate to new heights. In latest development earlier today, China’s commerce ministry stated that talks should be based on mutual respect and unless US corrects its wrong course of action, there will be no further trade talks. Given Trump administrations clear aim at crippling China’s growth as technological giant and China’s firm stance on taking abuse from U.S. but not surrendering and retaliating in force, situation has now developed into point where trade war is likely to extend into prolonger duration. This could be viewed as another cold war this time with China replacing Russia. Dovish cues from Asian market and disappointing macro data outcome in European calendar, European indices and equities also fell sharply since trading session began for the day. Forex market continues to show some resilience against bear’s downward force but price action displays high level of bearish tone hinting tides are in favor or market bears.
Precious Metals: Both gold and silver are trading positive in the global market today. As equities and benchmark indices fell sharply across the trading session, demand for safe haven assets grew large in both forex and commodities. However, strong dollar capped precious metals from scoring sharp gains resulting in range bound price action with positive bias.
Crude Oil: Crude oil price continues to fall sharply as EIA US weekly crude oil stockpile also saw sharp growth in inventory data similar to API weekly crude oil stockpile data released earlier this week. Further, Sino-U.S. trade war escalation also added pressure to crude oil bulls resulting in today’s dovish price action.
AUD/USD: Australian dollar suffer sharp losses today as US-AU government bond yield spread widened in favor of US Greenback. Further, prevalent risk averse investor sentiment added pressure to AUD bulls which was under high level of stress over RBA rate cut expectations. This factor led the pair to decline below 0.6900 handle scaling new multi-month lows.
On The Lookout: With China making clear its intentions to cease further trade related negotiations unless US does away with demands it has deemed unreasonable, tensions are at all time high in the global market. All eyes are focused on further developments with investors expecting some form of retaliation from US government during North American market hours later today. This has caused investors to book profits and diverts funds to safe haven assets and currencies causing sharp change in price dynamics across all major global markets. Investors now await release of ECB meeting minutes and macro data updates from Canada and U.S. for short term profit opportunities. Forex market is likely to see range bound price action with limited prospect for declines while equities are likely to suffer sharply.
Trading Perspective: US Wall Street is likely to see subdued opening on cautious investor sentiment today. Traders expect US to retaliate in some form as part of its process to try and make China bend the knee. This has already caused global market to suffer but doesn’t seem to end anytime soon which suggests that Wall Street is likely to see price action from earlier this week repeat itself today.
US Market: As trade tensions escalate and China announced its intention to cease further trade talks temporarily, risk averse investor sentiment in dominating price action in the global market. This has caused US index futures trading in the international market to bleed profusely. Traders now await US new home sales data for short term profit opportunities.
EUR/USD: The pair is trading with dovish bias across the day. While trade war woes pressured euro initially, disappointing Euro area macro data added strength to market bulls while US Dollar scaled new monthly highs on account of risk averse investor sentiment. Traders now await ECB meeting minutes and US new home sales data for short term profit opportunities.
USD/CAD: The pair is trading flat but price action so far has displayed some level of bias in favor of US Greenback. As Dollar index rose to new monthly highs, US Greenback also gained strong positive influence amid risk averse investor sentiment and week crude oil price in the global market. Traders now wait for Canada’s whole sales data and US new home sales data for short term profit opportunities.