Investors around the world were given some much-needed Christmas cheer during the weekend after President Donald Trump and China’s Xi Jinping called a halt to their painful trade war for 90 days while they try to resolve their tariff differences.
Rodrigo Catril, senior strategist at National Australia Bank commented:
“Can the US and China really resolve their differences in 90 days? It seems that more details and signs of progress will be needed if the initial trade truce warm fuzzy feeling is to be sustained.”
EURUSD started the European trading session in positive mood trading at the high range of the day around 1.1390. Some positive news from Italian politics has given extra power to EUR, after rumors that Italian government could reduce the budget deficit to around 2.0% (from 2.4%), although nothing has been confirmed so far.
Today’s move enhanced the short term bullish bias as the pair holding above the hourly Moving Averages. Nothing worth mentioning in the Eurozone calendar today.
GBPUSD was underperforming major partners yesterday as Brexit related uncertainty confuses traders and increases the pair volatility. According to Karen Jones, Analyst at Commerzbank, GBP/USD pair has started to erode the bottom of its 4 month trading range and will find initial resistance at the 55 day MA at 1.2971 and the resistance line at 1.3018, and while capped here it will remain offered.
“Support at 1.2711/1.2662, the August low and 3 month support line is being eroded. Below 1.2662 would trigger further weakness to the 61.8% Fibonacci retracement of the 2016-2018 advances and the June 2017 low at 1.2593/89. Above 1.3018 lies the November 14 high at 1.3072. Further resistance comes in at the 1.3175 November high below which we will retain a longer term bearish bias.”
“A rise above the July, September and October highs at 1.3258/1.3363 would put the June high at 1.3473 on the cards.”
I expect the Australian Dollar, New Zealand Dollar, and Norwegian Krone as the major currencies which are poised to enjoy the rally in recent commodity prices and the reduced pressure on the global economy.
European stock markets all are trading in the red as yesterday’s risk appetite fades away and concerns about US-China trade deal resurface. Germany’s DAX30 gives up 0.49% to 11.409, France’s CAC is lower by 0.54% at 5022 and FTSE in London is trading 0.65% lower.
Asian shares ended the day lower, with Japan’s Nikkei 225 index down 2.4% to 22,035.08 and the Kospi in South Korea gave up almost 1% to 2,112.54. Hong Kong’s Hang Seng dropped 0.48% to 27,036.96 and the Shanghai Composite index was flat at 2,654.69.
Crude oil prices trading higher ahead of an OPEC meeting on Thursday, where producers are expected to cut production in 2019.