Fed to be Patient Raising Rates, Asian Stocks at Four Month High

Nikolas Papas

Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).

Asian Indices Mixed

Fed to be Patient Raising Rates, Asian Stocks at Four Month High

January 31, 2019

Asian stocks finished the session close to four-month highs, following Wall Street indices, after the FED pledged to be patient in raising rates going forward. Shares in Japan was 1.06% higher at 20,773, and the Shanghai Composite index is gaining 0.35 percent. In Hong Kong, the Hang Seng index finished 1.04 percent higher at 27,935, and South Korea’s Kospi added 0.2%. Australian stocks have not been able to replicate the positive performance in other Asian markets with ASX200 giving up 0.4 percent to 5,864.

The spread between the US and German 10-year bond yields fell to 248 basis points today, the lowest level since January 15. Gold extends gains above $1320 targeting the high from May 2018 at 1325.

On the Lookout: The FED kept interest rates unchanged as expected but has changed its view to a more dovish position on both interest rates and the balance sheet. Goldman Sachs is calling for a downward revision to their expectations for further rate hikes this year. Good news for New Zealand’s economy as Fitch Ratings has affirmed sovereign credit rating at AA with a stable outlook, and S&P raised the economic outlook to positive.

A report published on Thursday by World Gold Council (WGC) says that the global central banks stepped up their gold purchases to the highest since 1967, which in turn pushed up the metal prices by 4% last year.

In Europe traders will watch the Eurozone Prelim Flash GDP reading for the fourth quarter of 2018 that will be published at 10:00 GMT.

Later today, in the US, weekly jobless claims are released along with the employment cost index and the Chicago purchasing managers index. The Canadian monthly GDP release for November will be in the news at 13:30 GMT. Traders will keep an eye also on US-China trade talks which continues in Washington.

In the earnings calendar, Amazon.com Inc., General Electric Co., Altria Group Inc., and United Parcel Service Inc. reporting during the US session.

Trading Perspective: USD weakness across the board is the talk of the day after the FED president’s comments. AUDUSD is at the best levels since early December adding 0.39% at 0.7277, NZDUSD is trading 0.24 percent higher at 0.69075 and USDCAD is trading lower at 1.31405.

EURUSD Daily Chart

EURUSD yesterday broke the 100-day moving average that we have discussed in our latest daily report and bulls took control sending the pair above 1.15. If the common currency manages to hold the round 1.15 figure, an attempt to 200-day moving average looks possible at 1.1576. On the flipside, 1.1406, yesterday’s low is the first support while more buying interest will emerge at a monthly low: 1.1269 level.  

In EUR futures markets, open interest rose by more than 1K contracts on Wednesday from Tuesday’s final 527,521 contracts, partially reverting the previous drop. In the same direction, volume rose for the second session in a row, now by nearly 70K contracts.

Sterling is fighting to break above the 100-hour moving average at 1.3134 to enhance the short term bullish mood. GBPUSD gains 0.12% to 1.3130 amid greenback weakness, dovish FOMC comments as no headlines come out of the Brexit frontier.

GBP futures markets noted investors scaled back their open interest positions by almost 4K contracts on Wednesday, recording the second drop in a row. Volume, too, shrunk significantly by around 88.3K contracts, prolonging the erratic performance.

GBPUSD Hourly (H1) Chart

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