Sino-U.S. trade talks

Positive mood lifts Asian Indices

Asian stocks kick the week off with gains on Monday amid growing optimism about a trade deal between the US and China. Chinese stocks are the ones benefiting the most, with the Hang Seng up by 0.85 percent at 28,959 and the Shanghai Composite added 1.12 percent to 3,027. In Tokyo, the Nikkei225 gained 1.02 percent to 21,822 while Australian stocks are on a four-day winning streak, with the ASX 200 up by 0.4 percent thanks to gains across most sectors. The index hit a five-month high after lifting by more than 5 percent in February. The Chinese government is considering cutting the tariffs on many goods that are imported from the US, and the US government is said to be contemplating lowering or removing tariffs on Chinese imports.

European equities also started in positive mood with CAC outperforming in early European session rising 0.55 percent at 3,294. FTSE in London is adding 0.20 percent at 7,121 while DAX is just 0.05 percent higher at 11,606. Gold is moving lower for one more day as the risk on mood turns investors attention to global equities. The precious metal currently is trading at $1287 after breaking last Friday the support at 1296 provided by the 50-day moving average.

On the Lookout:  This week the focus will be heavily on China, the US nonfarm payroll number and a few key rate decisions from the Reserve Bank of Australia (RBA), ECB and Bank of Canada (BOC). The Chinese premier Li Keqiang is expected to open the National People’s Congress by announcing a lower GDP growth forecast for this year (believed to be a target range of 6% to 6.5%), and that will set the tone for what to expect over the next two weeks. On Tuesday, investors eyes will be on the final February services and composite PMIs due in Japan, China, Europe, and the US. Also expected is Italy’s final Q4 GDP print and January retail sales for the Euro Area in the morning, followed by the February ISM non-manufacturing, December new home sales, and January monthly budget statement in the US. Away from that, we’re due to get the February meeting minutes from the UK FPC meeting while BoE Governor Carney is due to speak in the afternoon. The Fed’s Rosengren will also speak, while China’s NPC will officially open, running until March 15.


Trading Perspective:  In forex markets, the persistent positive mood in riskier assets keeps the Japanese Yen safe-haven under pressure around 112 area. The AUDUSD price action suggests that the near-term bearish pressure might still be far from over, the pair is finding support at the previous day low at 0.7065, while the bulls need to regain the 0.71 level in order to attract some bids. The Kiwi is trading at the daily lows at 0.68 after a strong start for the week at 0.6827. The Canadian dollar is trading lower against the greenback at 1.3300, amid pressure in oil prices.

GBPUSD opened with a gap higher to touch a high of 1.3258 as positive Brexit news came out about with more lawmakers calling for an extension to Article 50. Cable, after correcting the last two trading days of the previous week is seeking to regain the short term positive momentum breaking above the 100-hour moving average at 1.3258. Open interest in GBP futures markets dropped by almost 3K contracts on Friday vs. Thursday’s final 202,184 contracts, according to advanced data from CME Group. In the same direction, volume contracted for the third session in a row, this time by near 11.2K contracts.

GBPUSD Hourly (H1) Chart

EURUSD started the week with a negative sign breaking below the 100-hour moving average on low volumes as greenback attracts the buyers even after Trump says the strong dollar is hurting US competitiveness. Support for the common currency can be found at the 1.13 round figure. On the upside, the pair is facing a strong resistance at the 100-hour moving average around 1.1386 a level that rejected the pair twice the previous week.

In Euro futures markets, investors added around 3.5K contracts to their open interest positions on Friday from Thursday’s final 526,677 contracts. On the other hand, volume extended the choppy performance and shrunk by more than 49K contracts.

EURUSD Hourly (H1) Chart