While optimism surrounding Sino-U.S. trade underpinned market bulls, profit booking activity ahead of key events resulted in bearish price action in broad market.
Summary: Global market today opened on positive note in Pacific-Asian market hours but saw major indices and equities take sharp bearish dive in late-Asian and early European market hours while Forex market saw relatively neutral and range bound price action. Optimism surrounding Sino-U.S. trade talks helped major indices remain near multi month highs which were evident from performance of MSCI AC World equity index which remains well near 10-week highs. However, profit booking post yesterday’s positive price action resulted in major equities across Asian market taking dovish turn. This influenced major indices to see downward action near end of Asian market hours. Dovish cues from ECB on their TLTRO plans and Brexit uncertainties continue to pressure European markets. This combined with dovish cues from Asian equity market resulted in sharp decline across major European equity markets, while Forex market traded range bound owing to USD’s slight positive rebound during European market hours.
Precious Metals: Precious metals are trading positive in broad market today owing to weak US Dollar. However, there was strong resistance on its upside move owing to Dollar’s rebound late in the day. But caution owing to Sino-U.S. trade talk progress and declaration of national emergency in U.S.A has resulted in high level safe haven demand. This helped see increased activity from all major global market including emerging economies resulting in gold price moving near 10-month highs during early European market hours.
USD/JPY: The pair saw sharp two-way price action today. Dollar’s rebound early in the day on Sino-U.S. trade talk related optimism helped Dollar bulls stage upside move while dovish influence from Fed stance on rate hikes and declaration of national emergency pressured Dollar into seeing downside move. Increased safe haven demand during European market hours combined with high bearish pressure on dollar resulted in pair losing all gains made early in the day and move back to mid $110 handle.
AUD/USD: Following dovish start for the week, the pair continues to trade bearish near weekly lows today. While optimism surrounding Sino-U.S. trade talks continues to underpin Australian Dollar bulls in broad market, RBA meeting minutes revealed today re-affirmed their neutral stance as the update was well in line with latest speech from Governor Lowe. This caused the dovish influence on AUD to remain steady resulting in range bound price action across Asian and European market hours.
On The Lookout: The main focus of the day is on Sino-U.S. trade talks which are set to resume later in Washington, U.S.A. While no details on last week’s talks were released to public, tweets and comments from members involved in negotiation hinted at progress in trade talks. Also investors are focused on Brexit proceedings as headlines hints that PM May is considering amending withdrawal agreement to prevent no-deal scenario. Mixed macro data outcome combined with dovish cues from ECB resulted in major European equities seeing downside price action, however weak dollar resulted in range bound action in Forex markets as Dollar’s momentum in broad market controls price action of major global currencies despite fundamentals pointing at different direction. Aside from Sino-U.S. trade talks investors are also interested in how American market reacts to President Donald Trump’s declaration of national emergency as trading session resumes for the week today in U.S.A. There are no major macro data releases in US market leaving price action of equities and Forex currencies at mercy of headlines inspired momentum.
Trading Perspective: As market gets ready for news driven activity, investors hold back from placing major bets awaiting directional cues.
EUR/USD: The pair is seeing highly volatile price action as mixed sentiment surround US dollar has resulted in bulls and bears waging war over control of price action. Fundamentally weak Euro suffered further as worries that Trump administration could impose tariff on European auto market owing to lack of progress in trade talks. Broad based USD price dynamics is expected to dictate price action for rest of the night.
GBP/USD: The pair hit 10-day high and moved above mid-1.29 handle on news that PM May is looking to re-open withdrawal agreement and there is little chance for no-deal Brexit scenario. PM May and EU’s Junker are expected to meet tomorrow to discuss details on same tomorrow. This has resulted in British Pound gaining positive price action and is likely to trade positive for rest of the day while price action is controlled by Brexit headlines.
USD/CAD: The pair held on to its mildly positive tone through the early European session, albeit struggling to attract any strong follow-through buying as positive price action of crude oil in broad market continued to underpin CAD bulls. As political climate from US continues to hurt Greenback bulls, headlines driven momentum is likely to decide directional cues and influence price action.
Divided investor sentiment continues to limit positive price action in broad market on most major assets. But hopes on positive outcome in future talks following comments from representatives of China & U.S. has inspired a temporary phase of positive activity in broad market.
On The Lookout: As trading session approaches week’s closing, all major events and high impact macro data updates have already hit the market. Two most anticipated events of the week ended in stalemate and investors now look forward to proceedings of events scheduled to occur later in the month. But given current status of both events, the outcomes look in unfavorable direction and could lead global market into another great phase of decline if resolution is not found by March deadline. For the day ahead, U.S. Calendar is set to see second tier macro data updates which are expected to provide short term profit opportunities as trading session closes for the week. However they are unlikely to have any major impact as proceedings of geo-political events dictate price momentum for now.
On The Lookout: The main focus of investors is now towards Sino-U.S. trade talks scheduled to occur later today. Given the fact that key issue – intellectual property rights handling is to be addressed in the meeting, a positive outcome is likely to result in trade deal between two nations as both economies have suffered significantly owing to ongoing trade wars. On release front, today’s U.S. calendar is silent for the day. Price action is likely to be influenced by news driven momentum in Wall Street today.
Market turned dovish despite positive opening as investors turned cautious ahead of key political and economic events scheduled across the week which in erasing a significant part of gains made last Friday.
On The Lookout: Immediate focus of investors is on speech by ECB President Mario Draghi & BOE Governor Mark Carney later in the day for short term directional cues ahead of much awaited PM May’s Brexit Plan B vote in UK parliament session tomorrow. The event is set to be followed by high level trade talks between China & U.S. in Washington later this week. News driven action is expected to keep market highly active across the week but price action is expected to continue subdued action in near future ahead of Tomorrow’s UK parliament meeting. US FOMC meeting later in the week is also eyed as outcome will help set course of medium term price action in major forex assets. Futures data in international market trades in red which suggests that US Wall Street is likely to see range bound action with bearish bias.
