Global market trades positive on healthy risk appetite, but range bound action likely to continue ahead of President Trump’s speech and U.S. macro data updates.
Summary: European markets today displayed splendid bullish price action in Equities and Forex instruments which is indication on healthy risk appetite in broad market. While all major risk assets in equity markets are trading positive, Forex markets saw a different outcome as major global currencies continued to struggle with range bound action despite prevalent risk appetite in broad market. Weak euro area macro data has inspired concerns of economic slowdown and this is weighing down EURO in broad market. However healthy risk appetite and better than expected EURO area PMI helped limit losses in Forex market. Meanwhile European equities have managed to remain unfazed by macro data outcome today. Few markets that were open in Asian session also saw positive price action supported by positive cues from US Wall Street and steady risk appetite in broad market. Meanwhile US dollar continues to remain strong in broad market supported by boost in 10-Yr U.S. Treasury bond yields despite dovish Fed stance limiting upside move.
Precious Metals: Both gold and silver traded positive in European market today. Gold having hit one week low yesterday, found bids in European session as concerns of economic slowdown in EURO area underpinned safe haven demand. However, holiday celebrations in major Asian markets have resulted in less volatility and volume in precious metals market.
AUD/USD: Australian dollar today saw two way price action in broad market. The pair fell below 0.72 handle on disappointing retail sales data and strength of US Dollar in broad market. However positive comments from RBA helped AUD erase early losses and move above mid 0.72 handle posit which it has maintained consolidative action near intra-day highs in European market hours
USD/JPY: Strong US Dollar in broad market underpinned by positive price action in 10-yr U.S. Treasury bond yields helped pair breach110 handle in early trading hours. However holiday thin activity in Asian session soon led to pair falling back below 110 handle as bulls lacked necessary volume and strength to sustain rally above said price level. However healthy risk appetite in broad market helped prevent sharp loss.
On The Lookout: Moving forward with today’s U.S. market hours, risk appetite is high suggesting equity markets will see positive price action. Meanwhile macro data and headline dependent Forex market will continue to see range bound action as US Dollar remains strong in broad market. Investors await U.S. ISM Non-manufacturing PMI, Services & Markit Composite PMI for short term trading opportunities. But focus also lies on President Donald Trump’s speech in State of the Union scheduled to occur later today where he is expected to address the nation and convince U.S. citizens to gain support for his border wall funding. Investors also await updates relating to PM May’s plans on Brexit proceedings as she is set to meet with E.U. representatives coming Thursday given the fact that E.U. isn’t ready to budge on its stance over Irish backstop agreement.
Trading Perspective: Market is expected to see high level of activity in U.S. session owing to macro data updates and news filled market hours.
EUR/USD: Disappointing Euro area retail sales data caused the pair to decline below critical support level of 1.1420/18 handle, but better than expected PMI helped limit loss and move back above 1.1420 mark in European market hours. However given US Dollar’s strength in broad market, the pair is moving well near 1.1400 handle and positive U.S. macro data outcome could act as trigger pushing the pair back into 1.13 handle during American market hours.
GBP/USD: British Pound is also losing ground in broad market similar to EURO. Disappointing UK services PMI caused an already weak GBP to decline below 1.3000 handle. Brexit chaos and weak macro data continue to pressure the pair on downside path along with strong US dollar in broad market. For now bearish price action is likely to continue as the pair has fallen below psychological support level of 1.3000 handle below which bears have tight grip on market.
USD/CAD: The pair is seeing range bound action trapped within 1.3100 to 1.3150 handle. Strong US Dollar backed by hike in 10-yr U.S. T.Yields underpin USD bulls but dovish influence from Fed’s latest update limited gains while positive price action in crude oil market owing to U.S. Sanctions on Venezuelan crude oil underpins CAD bulls. Today’s U.S. macro data outcome is unlikely to serve as breakout trigger which suggests range bound action is to continue for rest of today’s trading session.