Summary: Asian equity market today saw major benchmark indices and equities trade with mixed momentum as bulls tried to hold on to recent gains amid profit booking activities and lack of fresh directional trading cues. European market opened positive for the day with both major benchmark indices and equities trading positive on cues influenced by positive influence from gains in share price of perfume maker Burberry and Pharmaceutical giant Bayer. However, uncertainties surrounding Brexit and bleak investor sentiment from Germany over economic growth woes continue to cap gains. Also comments from Chinese Foreign Minister Geng Shuang stating that US President Donald Trump is misleading people when it comes to trade deal also dampened the mood. Geng stated that Chinese economic activity was not bad considering global economic uncertainty and slowing global growth which made it clear that unless there is proper understanding between both parties, regardless of tariff threats and measures from US President Trump there isn’t going to be a trade deal. The risk aversion influenced from Chinese update caused forex market to suffer bearish activity despite weak USD in the global market.
Precious Metals: Precious metals are trading positive in the global market amid mixed cues. Cues from Chinese comments which suggested that trade war is likely to extend for prolonged time frame and cheap USD amid rising fed rate cut bets boosted demand for safe haven assets in the global market.
Crude Oil: Crude oil price continues to trade positive in the global market amid muted cues. Comments from China had little to no effect on crude oil bulls. The usual factors such as OPEC’s extended supply cut and escalating tensions in Middle East continue to underpin positive price action in global market.
AUD/USD: The pair is trading with slight bearish bias in the global market today. The Australian Dollar which hit 1½ week highs saw consolidative price action earlier in the day, but has since declined owing to influence from dovish RBA meeting minutes release. But weak USD has capped declines below 0.70 handle.
On The Lookout: Dovish cues from Chinese headlines will continue to limit risk appetite in the global market for a while. However, the main driving force behind the price action of major risk assets the week ahead will be cues from inflation data of major global economies scheduled to release later today. Geo-political updates continue to remain driving force behind long term momentum but given the stalemate scenario in Sino-U.S. trade war, the only other major influence from Brexit proceeding and UK PM succession. UK prime minister succession will likely take place during the latter half this month. As of writing this article Boris Johnson continues to lead the race for succession but Brexit scenario will likely remain same even if he takes up the role as lawmakers are moving to prevent a no-deal scenario while Boris wants to exit with or without a deal at current deadline. On release front today, major economic calendar releases to watch out for today include speech from Fed Chair Jerome Powell and BOE governor Mark Carney. There is also release of US retail sales data and Canadian foreign securities purchase update.
Trading Perspective: While cues from China continue to limit risk appetite, US stock and index futures trading in the international market were trading with positive bias ahead of Wall Street opening on Wall Street cues and lingering risk appetite in the global market. Citi bank led gains supported Wall Street bulls yesterday and major banks such as JP Morgan, Goldman Sachs & Wells Fargo are seeing release of earnings report today and are likely to see positive outcome which will further support and lead gains in Wall Street in North American trading session today.
EUR/USD: The pair is trading with dovish bias in the global market today on risk aversion influenced by Chinese headlines. The common currency declined below 1.1250 handle and went as low as 1.1209. Mixed investor sentiment and weak USD keep declines in check but based on macro data outcome later in the day further downside move is in the card with chance for pair to test as low as 1.1181 during American market hours.
GBP/USD: The pair continued to decline in the global market today amid risk aversion in the global market and pressure from Brexit uncertainties which continue to pressure the pair into further downward decline. The pair hit new yearly lows on worries of hard Brexit outcome given the difference between succession candidates Hunt and Johnson on their Brexit approach. Traders now await US macro data for short term profit opportunity but directional bias favours further declines.
USD/CAD: The pair is trading with dovish bias today as well given CAD’s strength from positive price action of crude oil in the global market. However, prospect for gains are limited on account of Chinese headlines. Traders now await Powell’s speech, US & Canadian macro data updates for short term profit opportunities and directional bias for trading.
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