Bulls gains fundamental support amid declining crude oil price and concerns of global economic slowdown on subdued USD in broad market and hawkish Euro area macro data.
Summary: Asian market hours saw major indices on mixed momentum with Chinese, Australian and Japanese markets closing in red while Singapore and Indian markets saw bullish price action. Chinese and Australian equity markets were significantly weighed down by concerns of slowdown in global economic growth, escalating Sino-U.S. trade war negotiations. On the other hand, sharp slide in crude oil price action and broad based sell-off surrounding US Greenback helped Singapore and Indian markets trade positive. European markets also opened positive taking cues from positive macro data and overnight gains in Wall Street and Asian markets with bulls further supported by expectations that U.S. Federal Reserve will take a dovish stance towards monetary policy in its ongoing two-day policy meet. Precious metals also gained during today’s trading session supported by safe haven demand amid subdued USD on declining oil price and weak macro data from major markets which reaffirm investor’s opinion of slowdown in global economy.
EUR/USD: The pair traded in upper half of 1.13 handle during Asian market hours following overnight pull back from one week tops above 1.14 handle. However EURO bulls got support from reports that hinted at Rome and Brussels reaching an informal agreement in a bid to end budget row that has stoked investor doubts about the health of Italy’s finances. EURO bulls were further boosted by broad based dovish tone surrounding US Greenback and positive German PPI data which helped the pair reclaim 1.14 handle and hit new one week highs during early European market hours.
GBP/USD: The pair is trading positive for third consecutive session supported by broad based USD’s weakness ahead of US FOMC statement. While the pair tested price levels as high as 1.27 handle bulls were unable to sustain the rally owing to overwhelming bearish pressure influenced Brexit uncertainties. But bulls managed to find support and sustain positive price action near mid 1.26 handle as UK inflation data was in line with expectations. Moving forward the pair’s medium to long term outlook could change significantly depending on FOMC statement scheduled to release later today.
EM Asian Currencies – Indonesian Rupiah and Indian Rupee continue to lead gains among Asian emerging markets supported by sharp drop in crude oil price and broad based USD sell-off. Given that most emerging markets in Asia are huge oil importing countries and international trade are handled in US Greenback currencies from emerging markets stand to gain as lower oil price and USD value will help ease inflationary pressure and reduce nation’s current account deficit. Indian Rupee, Indonesian Rupiah and Thai Baht are up by 0.55%, 0.33% & 0.15% against US greenback during European market hours while Korean won exchange rate is at neutral level.
On the Lookout: Major European indices and FX pairs are trading bullish in European market hours supported by better than expected macro data and subdued US dollar in broad market. Moving forward investors await US crude oil inventories, existing home sales data which will provide opportunities for short term gains during US market hours. But key event of the day is US Federal Open Market Committee’s interest rate decision and statement for hints on fed’s 2019 rate hike plan. The outcome of ongoing FOMC meet will greatly affect the outlook of major global equities and forex pairs. Crude Oil price is expected to take a dovish turn today as EIA crude oil inventory data scheduled to release later today is forecast to show increase in crude stockpiles.
Trading Perspective: European equities and major forex pairs are expected to continue positive price action across London market hours as FOMC interest rate decision is scheduled to release at 1400HRS in New York time.
EUR/USD : While bulls seem to be active and in favor of the common currency, upside move is limited owing to cautious investor sentiment ahead of US FOMC statement. Investors are divided over the outcome of ongoing FOMC meet as recent macro data releases hinted at slowdown in US economy. Dovish comments from FOMC meet will help EURO bulls sustain move above 1.14 handle while positive comments will boost USD and drag the pair back into mid 1.13 price range.
GBP/USD: The pair which is currently trading in green could see its positive price action extend for a short while if Fed members deliver dovish forward guidance, however there is zero chance for British pound to sustain any kind of positive rally over long term due to uncertainties surrounding Brexit and fear of the UK parliament rejecting the deal leaving the UK with no-deal Brexit providing considerable support to Pound bears in long term.
USD/CAD: Although the US Dollar continues to see broad-market weakness, the CAD is falling sharp against US Greenback owing to Crude Oil price action in broad market. The commodity linked currency is greatly influenced by price action of crude oil and since oil price is essentially in a free fall owing to glut scenario despite OPEC’s attempts to reduce output amid growing concerns of slowdown in global economic growth, USD/CAD is expected to continue dovish price action across today’s market hours despite broad based USD sell-off.