Global equity markets is seeing two tone price action ahead of American market hours as headlines and investor sentiment based price action dominated price rally. Forex market continues to see range bound action owing to lack of directional bias ahead of FOMC Update.
Summary: Global markets today saw contrasting price action in Asian and European market hours. Despite US equity market closing on positive note and a clear lack of any major news that could trigger a bearish price action, majority of Asian equity markets saw dovish price action today. Given investors caution owing to lack of progress in geo-political issues and dovish expectations in the upcoming US Fed interest rate decision trading volume has been relatively low since trading session began for the week. Aside from Hong Kong & Singapore stock markets all other major Asian markets painted in red. However, forex pairs saw range bound price action with positive bias as US Dollar traded dovish in global market. European market saw equities open on positive note and continued yesterday’s positive price action as expectations for delay in Brexit deadline during upcoming EU leader’s summit and news of merger between two of Germany’s biggest banks continued to underpin positive investor sentiment resulting in contrasting price action between Asian and European markets.
Precious Metals: Precious metals traded positive for third consecutive session today. Expectations for accommodative stance by US Fed’s during upcoming interest rate statement update have resulted in US Dollar turning dovish in global market. This resulted in increased participation from emerging market providing steady demand for safe haven assets and stable fund supply for precious metals helping gold & silver see positive price action across the day.
USD/JPY: The pair saw range bound price action across Asian and majority of European market hours post sharp decline in late Pacific-Asian market hours. Demand for Japanese yen spiked during Asian market hours as equity market saw sharp decline. Further weaker US dollar owing to expectations for Fed forward guidance hinting at interest rate cuts also added to demand for JPY but healthy risk appetite in European markets prevented further declines resulting in range bound price action.
AUD/USD: The AUDUSD pair has been trading range bound near 0.7100 handle post sharp declines in Pacific-Asian market hours. The pair saw sharp slide owing to dovish central bank update and disappointing macro data from Australian economic calendar. However, weaker USD in the broad market helped limit sharp downside move resulting in range bound price action.
On The Lookout: Given the fact that US economic calendar lacks major macro data updates for the day, price action in US Wall Street and major forex instruments are likely to be influenced by broad based investor sentiment. Wall Street is unlikely to see any major moves today as all eyes are now focused on US Federal Reserve’s interest rate decision and forward guidance data for directional cues before placing major bets. The third vote in UK parliament on PM May’s Brexit deal has been cancelled as speaker denied the government request stating that deal needs modification owing to current deal being rejected by lawmakers in previous vote. This situation has now left EU in control of UK’s request for Brexit deadline extension and according to the headlines the outcome at this moment could go in either direction. This scenario is expected to limit price action in forex market for rest of the week and while there may be some sharp swings, it is unlikely to EURO or GBP to see a breakout rally ahead of Friday’s EU vote.
Trading Perspective: Given healthy risk appetite in market US Wall Street is likely to see positive price action today but major move are unlikely as caution ahead of tomorrow’s Fed update is likely to limit gains resulting in relatively range bound price action.
EUR/USD: The pair saw sharp upside move during today’s Asian and European market hours and hit new 2-week high at 1.1361 in early European market hours. But disappointing ZEW resulted in the pair declining from intra-day highs. Investors now await US macro data updates for short term directional cues ahead of US FOMC update.
GBP/USD: The pair saw two-way price action in European market hours and macro data update had little impact on price action as Brexit headlines continue to dominate price action. News that PM May is going to send formal written request to EU Tusk for extension of deadline ahead of Friday’s EU vote and reports based on comments from EU source which state conclusive decision on Brexit deadline extension / contingent offer may not be made during upcoming Friday’s meeting resulting in confusion among traders. Investors now await further headlines for clarity before placing new bets.
USD/CAD: The pair saw downward price action as the CAD gained momentum following crude oil price hitting new 2019 highs. Weak USD in broad market ahead of US FOMC update also added strength to CAD bulls. Investors now await US macro data for short term directional cues and profit opportunities.