Trade tensions create a scenario of risk-averse trading activity, holiday trading activity to further decrease investor participation affecting fund flow and price volatility, suggesting the possibility of subdued activity in Wall Street later today.
Summary: Global equities are declining for second consecutive trading sessions as uncertainties surrounding the Sino-U.S. trade deal continues to keep global investors in a state of indecisiveness.
Following President Trump’s move to pass the congress bill backing anti-government protestors in Hong Kong as official law, China has warned of retaliation in the form of firm countermeasures. This has caused investors to question the possibility of Phase 1 of the trade deal between China and the USA to be delayed. Further, lack of clarity from China on mode and severity of retaliation has caused investors to stay hesitant from placing new bets as the next move from China will decide the directional bias in the global financial market.
Following dovish activity in Asian markets today, the European market also saw major indices and equities follow up on the previous session’s decline and widen the gap between record highs scaled earlier this year. In the Forex market, dovish bias remains prevalent, but major forex pairs remain locked well inside familiar price levels in a range-bound fashion as cautious investor sentiment has created a scenario of neutral directional cues and low price volatility.
Precious Metals: Despite prevalent cautious investor tone, the indecisive investor sentiment over lack of clarity on Chinese retaliation has led to investors holding back from placing any new bets even on safe-haven assets. This has resulted in gold currently moving towards the worst monthly decline in the last three years while silver also traders with slight bearish bias having managed to hold steady slightly above monthly lows.
Crude Oil: Crude oil price is seeing consolidative price action in the international market, but the bias remains in favor of bears. Weekly US stockpile inventory data seeing a spike that induced concerns of increased supply in 2020 and tensions surrounding the Sino-U.S. trade deal also adds pressure on the crude oil price. Still, the decline is capped as traders await cues from OPEC session with its allies in early December, which will see participants agree on product and supply cut agreement.
AUD/USD: The pair saw slight recovery activity in Pacific-Asian market hours helping price of AUD climb above multi-week lows hit earlier this week. However, escalating tensions surrounding Sino-U.S. trade deal capped AUD’s gains, which when combined with a lack of price volatility amid the thin holiday market, resulted in pair failing to breach the 0.6800 handle yet again.
On The Lookout: As the week comes to close, all eyes are on Sino-U.S. trade deal proceedings given escalation of uncertainties to new heights following China’s threat to retaliate against the US, which lacked clarity. While the market remains directionless on account of investors’ hesitation to place new bets over lack of transparency, reduction of fund flow from the US on account of thanksgiving celebration also affected overall trade volume and price volatility.
While the US market will open for trade today, it is set to close early on account of black Friday celebrations. In the UK, investor sentiment improved as UK PM Johnson promised to hold back on rising income tax and vat post-Brexit and also made a vow to ensure prompt separation from EU on the current due date of January 31st, 2020 if his party was to win the election.
However, gains were kept in check as Johnson’s party was blamed on misleading voters over plans for spending on healthcare. Aside from these two events, trades are on the lookout for thanksgiving sales information for clues to place short term bets on post-holiday trades.
On the economic calendar front, Traders await the release of Canada’s Q3 GDP, RMPI, and Budget Balance data while the US calendar lacks data release on account of black Friday.
Trading Perspective: Forex market to remain trapped in a familiar territory over lack of directional cues and short term bias. As the trading session comes to close for the week amid lack of investor participation from the US market on thanksgiving and black Friday celebrations, major forex pairs are unlikely to see any fresh change in price direction.
US futures trading in the international market saw dovish price action ahead of Wall Street opening as US legislation resulted in escalating tensions between China and the USA. Cues from the international market, along with the expected lack of volatility and early closing in Wall Street today, suggests the US market will see subdued price action today.
EURUSD: The pair scaled fresh 6-week lows as trade tensions escalated in the global market. Amid cautious, risk-averse investor sentiment, the broad-based risk currency sell-off boosted USD, which also added pressure to EURO bulls resulting in pair trading with a clear bearish bias. However, upbeat EZ inflation data helped cap decline post which pair has entered consolidation and is likely to remain steady near intra-day lows as the trading session comes to close for the week later today.
GBP/USD: The pair is trading zigzag near 1.29 handle as both currencies display strong fundamental support but lack the strength necessary to create a breakout. GBP bulls are supported by favorable scenarios in the UK market following PM Johnson’s promise to meet out Brexit on the current deadline and the holdback on the tax hike. But as he faced pressure skipping a debate, GBP also faced pressure from US Greenback’s growing strength in the global market. However, lack of trade volume, fund inflow, and price volatility from the US market over thanksgiving celebrations are set to keep price action range-bound for the rest of the day.
USD/CAD: The pair edged back towards 1.33 handle as broad-based selling activity in the forex market, and risk-averse investor sentiment in the global market helped USD bulls gain strong fundamental support. Further, declining crude oil prices in the global market also weighed down commodity-linked currency Canadian Loonie providing USD with a clear positive directional bias. Traders now await the release of Canadian GDP data for short term profit opportunities.
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