Today’s market saw positive price action on healthy risk appetite in global markets but concerns surrounding geo-political issues and economic slowdown weighed market resulting in limited gains.
Summary: Asian and European equities today saw positive price action as risk appetite boomed on expectations of dovish Fed forward guidance. Meanwhile bond market is also seeing some level of demand as concerns of global economic slowdown which spiked following last week’s Bank Of Japan’s statement during interest rate decision update has yet to dissipate from market. Investors are hoping that US Fed may keep interest rate unchanged but forward guidance could take on a dovish tone as US economic data this month showed highly disappointing results. Investors expect that given dovish comments from Fed members earlier this year a continued disappointing macro data outcome from US could lead them to cut rates in the year ahead. As the expectations for dovish Fed caused the US Greenback to trade lower in broad market, major forex currency pairs saw positive price action in Asian and European market hours. European market is seeing mostly positive price action in equities but German market and EURO Stoxx 50 index are seeing dovish price action over news that merger between Deutsche Bank & Commerzbank could result in more than 30000 employees losing their Jobs. However hopes for delay in Brexit deadline continues to underpin market bulls preventing sharp declines.
Precious Metals: Both gold and silver are trading positive in global market today despite increased risk appetite as caution surrounding Brexit uncertainties and concerns of global economic slowdown weigh investor sentiment. Further, weak USD increased participation from emerging markets resulting in precious metals seeing positive price action across the day.
USD/JPY: The pair continued to trade range bound near mid-111 handle since trading session began for the day as increased risk appetite underpinned USD bulls despite Greenback suffering dovish influence from expectations for US Fed’s accommodative stance while lingering influence from concerns of global economic slowdown underpinned JPY bulls resulting in a tight battle between USD & JPY which neither seems to have gained upper hand so far.
AUD/USD: The pair opened on positive note today and saw sharp upside move in early Asian market hours as the bulls found support from weak US greenback in broad market. Further, healthy risk appetite in broad market also supported Aussie’s gains but caution ahead of RBA asst governor Kent’s speech and Meeting minutes update scheduled to release tomorrow capped gains.
On the Lookout: Given the lack of high impact macro data updates today, broad based investor sentiment influenced by cues from overseas markets and headlines driven price action is likely to influence price action in global forex market and US Wall Street during American market hours. Immediate focus of investors is on Australian central bank’s latest meeting minutes scheduled to release during Pacific-Asian market hours tomorrow, third attempt by PM May to get UK lawmakers to accept her Brexit deal and FOMC interest rate decision during Wednesday. Expectations for dovish fed forward guidance is likely to weigh down USD resulting in relatively positive price action of major forex pairs in global market while equity market is likely to see positive price action supported by healthy risk appetite and positive investor sentiment in the market.
Trading Perspective: Positive investor sentiment and risk appetite in global market are likely to influence positive price action in Wall Street equities while weak USD is likely to influence range bound price action with positive bias in major forex currency pairs.
EUR/USD: The pair saw positive price action since start of the day with EURO bulls supported by Brexit delay vote and weak US Dollar in broad market. Further, the pair hit new two week highs on upbeat trade balance data investors now await cues from ECB members’ speech for short term directional cues while they await US Fed forward guidance for directional cues.
GBP/USD: The pair saw uptrend price action early in the day but faced rejection near 1.3300 handle which led to sharp downside move despite weak USD underpinning GBP bulls. This pair has fallen well below 1.325 handle but remains above 1.3200 handle and is expected to continue range bound price action ahead of UK parliament’s third vote on PM May’s deal as investors are unlikely to place any major bets till then.
USD/CAD: The pair saw steady upside price action early in the day despite US Greenback trading weaker in broad market. Dovish crude oil price pressured Canadian Dollar bulls resulting in range bound price action. The pair is likely to trade range bound as crude oil price recovered in late European session limiting USD’s gains but neither side having strength required for breakout.