Headlines driven momentum ahead of geo-political events resulted in positive price action in both equity and forex markets.
Summary: Equities trade positive for second consecutive session as optimism surrounding Sino-U.S. trade talks continue to inspire positive price action. Risk appetite in market got additional boosts as news hit market that U.S. President Donald Trump is ready to ease his stance on March 1st 2019 deadline owing to increased possibility of trade deal between two nations. Cues from U.S. Wall Street has been dictating investor sentiment for quite some time now and Sino-U.S. trade war played a major role in decline of equities over the past few months. A positive trade deal between the two nations is likely to erase majority of dovish influence on global market and put equities back in path of bulls to resume 2017’s growth rally. Political issues in European markets also seem to be reaching a climax which makes ongoing trading session a pivotal point for long term outlook. Subdued US Dollar in broad market has helped Forex market take advantage of prevalent risk appetite in global market resulting in major pairs trading positive today.
Precious Metals: Given the fact that UK’s parliament session to address Brexit proceedings and key talks between China & U.S. regarding intellectual property rights issues are expected to begin tomorrow some investors have decided to exercise caution despite prevalent risk on trading activity. This combined with weak USD in broad market has helped the price remain above critical support levels.
USD/JPY: The pair traded range bound in early Asian market hours, but increased risk appetite helped the pair stage a solid recovery rally reaching fresh 2019 highs at 110.84.Optimism surrounding Sino-U.S. trade talks continue to underpin USD bulls suggesting that positive price action is likely to continue for rest of the day. Softer Japanese Producer Price Index (PPI) further dented the already weaker sentiment surrounding JPY which added further positive influence to pair’s price action..
AUD/USD: The currency pair had a strong day yesterday charting significant upside move, this was further boosted by weak USD in broad market resulting in pair breaching 0.7100 handle. Optimism surrounding Sino-U.S. trade talks further boosted Australian dollar resulting in pair hitting intra-day high of 0.7135 but strong resistance near 0.7140 handle capped further gains resulting in pair declining from intra-day highs but trading well above 0.7100 handle.
On the Lookout: The main focus of investors is now on China & U.S. trade talks set to begin tomorrow. This meeting is expected to happen in China and the outcome will likely decide if there is going to be trade deal between two nations. Aside from trade talks, investors focus is on tomorrow’s UK parliament meeting but nothing major is now expected out of same as UK PM Theresa May has asked for more time and major decisions have been postponed to meeting on Feb 27, 2019. Tomorrow’s meeting is likely to be first time when PM May receives strong positive support for her action regarding Brexit in quite a while now. On release front, US market will see release of Crude oil inventory data, CPI update and a speech by FOMC member Harker later in the day. Positive investor sentiment in broad market and hawkish cues from Asian and European markets are likely to support positive action in U.S. Wall Street today.
Trading Perspective: Given prevalent risk appetite and positive investor sentiment in broad market, U.S. Market is likely to see all its major high risk assets trade in green.
U.S Indices: Major U.S. Index futures trading in international market such as S&P 500 and NASDAQ 100 trading in international markets were up by 0.50% ahead of U.S. market opening. Optimism surrounding Sino-U.S. trade war and headlines surrounding border wall deal continue to underpin market bulls which combined with positive cues from international market are likely to inspire positive price action during today’s market hours.
EUR/USD: Despite trading positive earlier in the day, the pair erased all its early gains and saw sharp losses as Spain’s parliament rejected the government’s 2019 draft budget earlier today, pushing the country to the brink of a national election. This caused the pair to lose hold above 1.33 handle and fall all the way to mid-1.28 handle leaving price action back into bears territory. Moving forward, the pair is likely to continue further decline as EURO lacks trigger to make another bullish breakout.
USD/CAD: A strong rebound witnessed in crude oil prices earlier in the day and broad based USD weakness dragged the pair to one week lows, however renewed USD buying interest helped reverse an early dip to sub-1.3200 level as investors focus turns to US CPI update. Given strong crude oil price which continued to underpin loonie, the pair is likely to move range bound for rest of the day.