Global Markets Trade In Red Following IMF Growth Forecast

IMFBoth Equities and Forex markets trade in red following IMF growth forecast update which inspired fresh wave of caution as update hinted at global economic slowdown resulting in increased demand for safe haven assets but USD failed to make solid gains owing to bearish pressure from U.S. market.

Summary: Global market is painted in red today as investor sentiment has turned dovish on global growth worries following weak Chinese GDP data which hinted at slow economic growth and International monetary fund growth forecast update which released yesterday. This is second revision of IMF global growth forecast in recent times as escalating trade war and political issues continue to worsen economic outlook for 2019. This combined with ongoing Brexit proceedings which see increasing uncertainties with each passing day added to safe haven demand in broad market resulting in both Forex and equity markets seeing steady downtrend price action. While US Dollar gained positive price action in broad market owing to safe haven demand, upside move was limited near 2-week highs as Greenback still suffers from influence of dovish fed rate hike stance and partial government shutdown which has extended into fifth week following Democrats rejection of latest proposal from President Trump resulting in subdued price action in major forex assets.

Precious Metals: Both gold and silver are trading in green today as broad market sentiment is inclined towards safe haven asset investment. While price action has been relatively steady across the day, sharp gains were prevented as safe haven demand also boosted US Greenback to 2-week highs in broad market. Both precious metals are expected to continue positive price action across the day on safe haven demand as USD bulls lack strength to go higher.

USD/JPY: The pair saw steady downtrend action across today’s market hours as increased safe haven demand supports Japanese Yen. While US Dollar gained positive price action yesterday on risk asset sell off, Dollar bulls lacked strength to maintain positive price action owing to dovish pressure from US market. Further, demand for JPY is steady as better part of global investors now believe that Sino-U.S trade deal is unlikely to go through which supports long term outlook for JPY.

AUD/USD: Australian dollar hit 2-week lows as broad based risk averse trading activity saw US dollar gain strength following IMF’s growth forecast which hints at slowdown in global economic activity. Concerns of global growth and cues from Chinese market greatly affect price action in Australian dollar. Further US dollar has strong hold on its position owing to risk averse trading activity in broad market despite bulls lacking strength to make bearish breakout which is expected to keep the pair trading near session lows for rest of today’s trading session.

On The Lookout: Major economic calendar release for the day from UK & EU  markets saw mixed outcome but failed to have any visible impact on price action of key assets and indices. As risk averse investor sentiment remains high in market, macro calendar release failed to have any impact given that most risk assets are already trading in red. That said US existing home sales data scheduled to release during North American market hours is expected to provide short term profit opportunities later today. US equity markets is expected to trade in red on cues from Asian and European markets while major forex pairs are expected to continue subdued price action as dollar bulls lack support to make breakout but has enough strength to remain near 2-week highs. Main focus now lies of ECB meeting set to occur later this week for comments on rate hike plans and how ECB members are going to react given high level of political tensions and slowdown in economic activity and growth forecasts which is expected to provide directional cues from near time price action.

Trading Perspective: As safe haven sentiment remains high, most major assets in equity market will trade in red while forex market will see subdued price action given Dollar’s strength during today’s market hours.

US shutdownEUR/USD: The pair is experiencing two way price action during today’s market hours as both sides wage war for control of momentum. Despite prevalent bearish investor sentiment in broad market, US dollar failed to create a breakout as dollar bulls lack strength for decisive price action. Mixed macro data seems to have had little impact on EURO in broad market resulting in the pair recovering from early loss but still trading range bound near critical support level. The pair could resume further declines overnight if it fails to recover above 1.1363 handle and sustain positive price rally by end of today’s trading session.

GBP/USD: Brexit remains the main driving force behind this pair resulting in price action which is highly in contrast to other major risk assets in global markets. While uncertainties surrounding Brexit proceedings are highs, news that PM May has submitted a “Plan B” for Brexit proceedings despite numerous similarities to “Plan A” and UK employment data hitting 7-month highs helped GBP reclaim foothold over 1.29 handle. While broad based US Dollar’s recovery price action could influence some level of downtrend action later in the day, Brexit will continue to remain main driving force capping any chance for downside move at mid-1.28 price level.

USD/CAD: Broad based risk asset sell-off boosted US Greenback and declining crude oil price in broad market following IMF global growth forecast helped the pair hit 2-week high. Slowdown economic activity would mean less demand for crude oil which caused oil price to decline but recent data which hinted at reduced production from OPEC members and temporary shutdown of 21 rigs looking for crude oil in US helped limit sharp declines. The pair has moved down from intra-day highs but maintains strong foothold above 1.33 handle on broad based demand for US dollar. Investors await Manufacturing sales and Wholesale sales data from Canadian markets for short term profit opportunities and better than expected reading will help Loonie pull the action back to 1.32 handle.