Caution Surrounding European Market Influenced Mixed Market

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

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Caution Surrounding European Market Influenced Mixed Market Performance

January 16, 2019

Brexit bBrexit vote turn out, no confidence vote on PM May and dovish comments from ECB governor  Draghi has caused investors to turn cautious resulting in mixed market performance despite broad based risk appetite in global markets.

Summary: Financial markets are continuing to experiencing mixed outcome in forex and equity market space as geo-political and event driven momentum are causing mayhem in global markets. While situation in Asian markets are relatively stable and US markets continue to experience standstill status in political woes resulting in steady cautious investor tone, events in European market are causing high turbulence. French and Italian government are causing economic woes over budget related issues following recent political debacles in respective countries which combined with trade war impacted Germany has caused ECB Governor Mark Carney to issue warning of economic slowdown. Aside from said events, Brexit proceedings also seem to be against EU’s favor as no deal scenario would likely result in equally powerful loss in both UK & EU despite business worth billions of dollars is migrating to EU. Said Dovish factors are causing mixed performance in Equity market and steady dovish action among major forex pair this week.

Precious Metals: While profit booking and sustained risk appetite in broad market limits prospects for strong gains, turbulence in European and US markets over political and economic woes continue to underpin safe haven demand which combined with weak USD boosts performance for silver and gold which are denominated in dollar as weaker USD in times of crisis helps boost participation of investors from emerging markets owing to lower exchange rates and precious metals beings viewed as inflation/recession proof instruments. Both gold and silver have managed to trade steady with nearly 0.10% boost in value in spot market during today’s trading session so far.

EM FX Assets: Currency pairs from emerging markets suffered losses today as USD gained a short bout of bullish influence owing to ongoing Brexit proceedings. Caution from European market has influenced some level of sell-off activity in risky assets which boosted USD and this caused currencies from Asian emerging markets to suffer slight losses. While few currencies like Thai baht, Indian Rupee & Korean Won trade relatively neutral, currencies that normally gain high when USD snaps such as Indonesian Rupiah, Philippines Peso saw dovish price action today.

AUD/USD: While Australian Dollar paints a solid picture when looking at long term perspective in daily chart with price well near monthly highs, latest data from Australia which hints at decline in consumer sentiment and slight pick up in USD has resulted in decline from monthly highs during European market hours as visible from intra-day hourly charts. The pick up in USD today is owing to sell-off of risky assets in European markets and cautious investor tone surrounding brexit progress and ECB governor Draghi’s warnings of economic slowdown.

Jeremy CobrynOn The Lookout: Moving forward this week, now that much awaited brexit vote in parliament is over, investors are expected to focus on macro data filled week for short term profit opportunities. However there is UK parliament’s vote of no-confidence on PM May scheduled to occur later today called for by opposing party leader Jeremy Cobryn who is irked with intentional sabotage tactics handled by PM May on Brexit proceedings. However PM May is expected to win the vote as law makers wish for speedy conclusion of events and Jeremy Cobryn lacks enough votes to oust PM May. In immediate future, investors focus is on US import/export price index data, crude oil inventory data and Chinese Q4 GDP data for short term profit opportunity.

Trading perspective: Cautious investor action is expected to continue owing to political woes from EU and US remaining the main focus of investors.

EUR/USD: Brexit proceedings and warning of economic slowdown by ECB’s Draghi is dragging EURO near to monthly lows. The pair which has been in slow decline since last night has fallen below 1.14 handle and is trading steady near mid 1.13 price region which suggests high level of bearish grip on current price action. The pair could move range bound as long as it stays above mid 1.13 handle but a move below said level will push for further declines while a move above 1.14 handle will help bulls resume recent Bull Run.

GBP/USD:  The British Pound erased early losses yesterday post Brexit vote in UK House of Commons and while the vote was rejected GBP bulls managed to sustain positive momentum as investor expect solid and fast progress in Brexit proceedings henceforth. However given historic defeat in parliament with a vote turnout against government seeing a margin of 230 vote difference, PM May is seeing no confidence vote against her and if PM May loses the vote, GBP will resume its decline.

USD/CAD: Recovering USD on risk asset sell-off amid cautious investor and slight pick up in US Treasury bond yields help dollar recover momentum while declining crude oil price further weakened loonie boosting support for USD bulls. However if US EIA crude oil inventory stockpile data scheduled to release later today shows a draw in stock pile crude oil price will recover indirectly boosting demand for Loonie which should limit upside move in greenback.

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