While weaker USD helped forex market see price action with positive bias, escalating Indo-Pakistan tensions capped gains resulting in range bound action in forex market and dovish price action in major global equities.
Summary: Global equity markets are trading in red today as escalating tensions between India & Pakistan swept away large portion of risk appetite in broad market. Earlier today, in Asian market hours Pakistan had reported that it had shot down an Indian fighter jet and took the pilot as a prisoner. Market was already seeing increase in investor caution as US President Donald Trump & North Korean Leader Kim Jong Un are set to meet for talks today. Further, dovish cues from US Wall Street dampened risk appetite resulting in all major Asian and European equity markets seeing dovish price action. However, forex markets saw range bound price action with bullish bias as US Greenback’s weakness helped major global currencies see some positive price action. Investor focus turned towards brexit progress as UK today’s parliament session outcome will decide key factors on brexit progress. Investor caution ahead of headlines pertaining to Brexit and Kim-Trump meeting along with risk averse investor sentiment resulted in relatively low trading activity and this helped limit declines despite prevalent dovish sentiment in the market.
Precious Metals: Gold and Silver are experiencing range bound price action today. Profit booking activity post overnight gains on weak US Greenback in broad market resulted in the pair erasing all gains and moving near weekly lows. But escalating Indo-Pakistan tensions renewed demand for safe have assets resulting in rebound from intra-day lows post which precious metals have maintained range bound action.
USD/JPY: Japanese Yen gained last night on US dollar declined in broad market following dovish comments from US Fed Chair Jerome Powell during his testimony in front of the congress. Further, risk averse investor sentiment on Indo-Pakistan tensions underpinned demand for Japanese Yen owing to its safe haven status resulting in price rally in favor or Japanese Yen.
AUD/USD: The pair traded in red despite weak US Dollar in broad market in risk averse trading activity and dovish cues from Chinese markets put pressure on Chinese proxy Australian Dollar. Further disappointing macro data outcome in Australian macro calendar also added bearish influence resulting in the pair traded in red while investors await Powell’s speech and US macro data for short term profit opportunities.
On The Lookout: The Key focus of investors is on UK Parliament session scheduled to occur today and Trump-Kim face to face meeting in Vietnam summit where there is chance for President Trump to meet Chinese Premier Xi Jinping for trade talks as deadlines approaches. US President Donald Trump & North Korean Leader Kim Jong Un are expected to discuss denuclearization plans of North Korea are expected to create a road map/timeline for progress, while UK parliament is likely to vote on either no-deal scenario / article 50 extension or decide on second Brexit Referendum. As investors await headlines on key geo-political events, they shift their focus to US macro data updates and speech by Fed Chair Jerome Powell for short term profit opportunities. Meanwhile, focus will also remain on proceedings of headlines relating to Indo-Pakistan relations as tensions remains high post Pakistan taking out Indian fighter Jet and holding the pilot as prisoner.
Trading Perspective: Investors will exercise caution as US President Donald Trump is attending Vietnam Summit and US GDP data is scheduled to release today ahead of which investors are unlikely to place major bets.
EUR/USD: The pair continues to trade range bound ahead of Fed Chair Powell’s speech, Investors caution owing to meeting between US & N.Korean leaders Trump & Kim also weigh down market bulls. Traders now await speech by Fed Chair Jerome Powell for short term trading opportunities. AS USD regained some strength in late European market hours the pair has declined well below 1.1400 handle and is likely to continue range bound action for rest of the day.
GBP/USD: As hopes of soft brexit and delayed brexit deadline continue to underpin GBP bulls ahead of UK Parliament meeting outcome, the pair hit fresh 7 months high moving above 1.33 handle. The pair is expected to see positive price action as headlines hint that parliament session will likely see a vote in favor of extending article 50 deadline and if the outcome is in line with expectations the pair is likely to continue further upside action and scale above mid-1.33 handle during American market hours.
USD/CAD: Following last night’s decline, the pair saw further declines today owing to positive crude oil price action and weak USD influenced by dovish Powell’s comments during his speech last night. Traders bow await Powell’s speech during re-appearance in congress today and US crude oil inventory data. Better than expected CAD macro data updates will lead to further downside move during American market hours today.