Trump’s decision towards imposing tariffs on allies continues to influence price action of major assets in the market. Traders await macro data for short term trading cues while geo-political events provide directional influence.
Summary: US Wall Street last night opened subdued amid disappointing macro data from China and US which pressured US T.Yields. However, news of delay in US President Trump’s plans for imposing tariffs on European auto imports helped offset early loss helping Wall Street indices close in Green. US tariff on China’s Huawei added fuel to fire in ongoing Sino-U.S. trade war which caused Asian indices to decline slightly but all major markets – China, Singapore and Hong Kong closed on positive note. European indices are also trading in green given positive influence in market over US decision to delay tariff plans. While tensions surrounding U.S. decision to blacklist Huawei caused market to sway earlier in the day, all major indices and equities continue to trade in green indicating healthy risk appetite in the market today. In forex markets, USD denominated major global currencies are seeing some level of positive price action but gains remain limited.
Precious Metals: As risk appetite returned to market, precious metals saw dovish price action. However, US decision to blacklist China’s Huawei fuelled tensions surrounding Sino-U.S. trade war which fuelled some level of safe haven demand capping downward price action. Both silver and gold are expected to see range bound price action with slight bearish bias for rest of the day.
Crude Oil: Crude oil price trades with positive bias today and is up more than 1% in the global market. OPEC enforced supply cuts, increased tensions between US and Iran over US decision to call back all non-emergency diplomatic staff to US, attacks on multiple Saudi Arabian crude oil shipments and pipelines add concerns of supply disruption in the market influencing positive price action.
USD/JPY: The pair remains trapped within weekly price range. But USD has gained slight upward momentum in current session as US decision to delay auto tariff boosted risk appetite while US decision to blacklist Huawei capped prospects for gains resulting in pair seeing range bound price action with positive bias.
On The Lookout: Geo-political issues remain in focus. US continue to wage trade war against its major allies but the main focus remains on China. While US has decided to continue trade talks with China, it is trying various intimidation tactics to try and make china submit to its demand and possibly sign a trade deal. However, China remains stubborn in its stance and won’t submit to US demands unless they seem to benefit China in some way or doesn’t affect their business and economy too much. Traders continue to exercise caution as US’s tactics could likely cause China to respond with retaliatory tariffs. In the meantime, investors focus on macro data updates for short term profit opportunities and directional cues. Some of most notable updates ahead include US Philadelphia Fed manufacturing index and Bank of Canada Governor Stephen Poloz’s speech.
Trading Perspective: Prevalent risk on mood in the market is likely to reflect in Wall Street’s price action today. Forex market will continue to see range bound action as cautious investor tone limits possibility for sharp move on either side.
US Market: US index futures trading in the international market were positive ahead of Wall Street opening. Positive influence from update hinting at delay in auto tariff improved risk appetite in the market. But caution owing to escalating Sino-U.S. trade tensions may limit gains. Earnings influenced rally could inspire some level of strength for market bulls in early trading session.
EUR/USD: While Italian debt woes continue to pressure Euro, the pair managed to gain positive bias on news of Trump’s decision to delay auto tariffs. However, Sino-U.S. trade tensions escalate on US decision to blacklist Huawei. The pair remains at mercy of USD bulls and Trump’s decision resulting in the pair struggling to hold fort at 1.12 handle while waiting for US macro data for short term trading cues.
USD/CAD: Canadian Dollar has managed to regain upper hand as crude oil price regained positive momentum in the market. Escalating tensions in the Middle East suggest that crude oil price may remain high in near future. This is positive factor for commodity linked currency Loonie. Traders now await US macro data for short term trading cues. Meanwhile, prevalent risk appetite in the market suggests continued rally in favor of CAD.