Global Growth Concerns Linger, Weighing on Risk Appetite

The Trump administration reportedly cancelled extended trade talks with China which were scheduled for January 31. Asian indices closed mixed with Japan’s Nikkei down 0.14% at 20,593, the Shanghai Composite Index gave up 0.16%, and Australian stocks remained in negative territory this afternoon, as losses from resource stocks and financials were enough to push the market lower for a second day. The ASX 200 fell by 15.1 points or 0.26% to 5843.7. Aussie indices are still up 3.5% in January, making it the best month since April 2018.

European markets started the session with losses as the German ZEW indicator reported yesterday fell to its lowest point since January 2015. The DAX losing 0.41% to 11,090, CAC40 is down 0.42% at 4,847, and FTSE100 shares are pressured 0.99% at 6,901 on a strong performance in sterling following an upbeat set of employment numbers mingled and despite the optimism that parliament will prevent a no deal Brexit. Bloomberg reports, citing unnamed sources that the U.S. Federal Reserve has launched an investigation into how Deutsche Bank handled billions of dollars in suspicious transactions from Danske Bank.

On the Lookout: The Bank of Japan held its monthly meeting on Wednesday, deciding to keep its short and long-term policy rates steady near zero. The BoJ vote was 8 to 1, leaving its pledge to buy JGBs unchanged so that its holdings increase at an annual pace of around 80 trillion yen. The decision on maintaining its interest rate targets was made by a 7-2 vote with board members Goushi Kataoka and Yutaka Harada dissenting.

The central bank also made no changes to new forward guidance, adopted in July that pledges to keep interest rates extremely low for an extended period.

The BoJ Governor Haruhiko Kuroda was further noted saying that overseas downside risks are heightening, mainly due to US-China trade friction and European problems, and the central bank is ready to take additional measures if needed.

There are monetary-policy decisions for the Bank of Korea and the European Central Bank, on Thursday.

Trading Perspective: The dominating theme in forex markets is global growth concerns, weighing on risk appetite. EURUSD for one more time broke below the 50-hour moving average and trading slightly lower at 1.1357. Traders will focus on the ECB meeting tomorrow waiting for clues about the ongoing economic slowdown in the old continent. The broad consolidative scenario looks unchanged as long as the pair is trading around 1.1350 to 1.1390 area. Immediate resistance from the pair is 1.1382 yesterdays high, and then more supply can be found at the 100-hour moving average around 1.1456. On the downside, first support will be provided at 1.1336 yesterday low, and if the pair breaks below, a move down to monthly lows at 1.1269 looks possible.

EUR futures markets, investors added around 4.3K contracts to their open interest positions on Tuesday from Friday’s final 523,371 contracts. In the same direction, volume rose sharply by almost 36K contracts, reverting the previous drop.

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USDJPY keeps the short term positive momentum trading 0.24% higher at 109.58. The pair will face resistance at 110.00 psychological mark, and then at 200-day moving average at 111.18. On the downside protection will be at 109.26 level and then at 109 round figure. JPY futures markets from CME Group noted open interest dropped for yet another session on Tuesday, this time by more than 6.2K contracts vs. Friday’s final 219,075 contracts. Volume, instead, extended the choppy performance, rising by around 16K contracts.

GBPUSD is trading close to monthly high at 1.2978 and an attempt to 1.30 can’t be ruled out as the pair gets a lift from strong jobs report and stronger wage growth that reported yesterday. Support can be found at the 100-hour moving average at 1.2913 while more solid support can be found at yesterday low at 1.2856. Open interest in GBP futures markets shrunk for the fourth consecutive session on Tuesday, this time by more than 3.4K contracts according to advanced data from CME Group. On the other hand, volume increased by nearly 51K contracts for the first time after three drops in a row.

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