Summary: Prevalent risk appetite in broad market helped equities trade positive but the cause for increased risk appetite happens to also support US Dollar in broad market resulting in mixed outcome in Forex markets. All major indices and stocks traded positive in major Asian and European markets. While investors are still cautious of Sino-U.S. trade talk outcome as deal is unlikely to be finalized until Presidents of both countries meet face to face later this month, optimism surrounding trade talks on expectations for positive outcome during upcoming trade talks scheduled to occur later this week underpins market bulls. Further news that U.S. lawmakers have managed to come up with a deal regarding funding for border wall between U.S. & Mexico has further improved positive sentiment in market as U.S. government is unlikely to go through with another shutdown which added positive influence to U.S. Dollar in global market which is already trading positive supported by upbeat U.S. T.Yields.
Precious Metals: Gold and Silver continue to trade positive as investors are cautious owing to uncertainties surrounding Brexit proceedings ahead of upcoming UK Parliament meeting and concerns of slowdown in Euro area economic activity which has caused spread widening between German and other major long term government bond. This has created steady demand for safe haven assets keeping precious metals steady above critical price levels.
USD/JPY: The price action of pair continues to remain influenced by strong US Greenback in broad market. Improved risk appetite on positive cues from U.S. Wall Street and headlines driven momentum further decreased demand for Japanese yen which is viewed as safe haven asset and this has helped the pair hit new 2019 high earlier today. The pair is now consolidating its hold over today’s highs having fallen slightly lower from intra-day highs on profit booking activity.
AUD/USD: Australian Dollar today staged steady upside price action following yesterday’ sharp decline when price hit one week lows. AUD bulls were supported by optimism surrounding upcoming Sino-U.S trade talks. Further healthy risk appetite in broad market also helped underpin demand for AUD in broad market. The pair faces strong resistance to upside at 0.7100 and support to downside at 0.7050 handle and is trading at 0.709 handle.
On The Lookout: Immediate focus of investors is now on upcoming Sino-U.S. trade deal and UK parliament session. UK parliament is set to meet later this week to discuss Brexit proceedings but given E.U’s refusal to budge to UK’s demands the situation is in stalemate and the outcome of meeting is likely to give investors an idea on whether there will be extension of deadline with soft Brexit or no deal Brexit scenario which will dictate overall price action for most major assets for rest of the month. On the release front, U.S, markets will see release of JOLTS job openings and a speech by Fed chair Jerome Powell which is expected to affect USD price action in broad market and set short term course for rest of the week.
Trading Perspective: Given increased risk appetite in broad market and positive headlines driven momentum are expected to keep Wall Street trading in green today.
EUR/USD: The pair hit fresh 2019 lows in the 1.1260/55 in early trading session but managed to recover on improved risk appetite in broad market. Optimism surrounding Sino-U.S. talks underpin EURO bulls in immediate market but the pair needs to breach resistance near 1.1310/1.1315 for EURO to regain upper hand while price action below said level will lead to USD regaining control of momentum shortly.
USD/CAD: The pair saw steady downside price action today, but there wasn’t much decline in price value as price action still remains well above 1.32 handle. While modest USD pull-back could be viewed as one of the reasons for downside action, the major reason was Crude oil price’s sharp upside move on news that Keystone pipeline bringing Crude oil from Steele City, Nebraska, to Patoka, Illinois was closed following the discovery of a leak in the St. Louis, Missouri. The pair is likely to move range bound for rest of the day but strong USD in broad market is likely to resume control of price action once crude oil price rally calms down.
