Risk sentiment improved as support measures announced by US & European central banks. Wall Street indices likely to reverse decline from the previous session.
Summary: Global equities are finally on a rebound as back to back stimulus measures and support packages announced by major central bank and governments of economic giants finally seem to take hold. While the reality of support measures impact on the economy can’t be quantified immediately, traders seem to have begun hoping that recent measures would be enough to contain the sharp decline which took place earlier this week.
Following the positive close of Asian markets, European markets saw major indices and key stocks open on a positive note. The risk assets saw further gains over news that the European Commission is looking to loosen its debt rules for member states and issue common EU area bonds in a bid to shore up victims of ongoing economic meltdown. In the forex market, USD finally lost its dominance as risk sentiment returned and liquidity infusion by the Federal Reserve took hold of the market.
Precious Metal: Rare metals such as gold and silver finally gained positive momentum in the global market as USD weakened slightly. Given prevalent caution despite today’s improved risk appetite in the global market and weeklong profit booking and fund withdrawals from safe-haven metals, traders have taken to placing smalls bets today in order to safeguard their investment while looking for profit opportunity given the prospect for highly volatile market conditions in immediate future.
Crude Oil: Crude Oil price saw a sharp rebound in the global market today. While the demand to supply ratio is still not out of glut situation, headlines driven momentum provided fresh directional cues. Reports hinting at US President Trump’s plans to intervene between Russia and Saudi Arabia/UAE over ongoing price war, news of Texas-based oil producers planning to cut back on production and supply and US government’s plan to purchase 30 million barrels to restock emergency reserve have helped improve short term outlook considerably pushing price up by 5% on both Brent and WTI futures.
DXY: USD index which measures the strength of the greenback against six major currencies failed to breach 104 handle today as risk sentiment returned to the global market. Federal Reserve’s move to infuse the market with fresh liquidity and support measures are taken to control economic meltdown across major global economies helped improve economic outlook to some extent. This, in turn, affected USD’s demand stemming from its status as a safe-haven asset resulting in today’s decline but the index still holds above 102.
On The Lookout: In North American market hours, Wall Street is likely to experience yet another session of positive price action across its key indices and stocks this week given the broad-based improvement in risk appetite. COVID-19 outbreak escalation has resulted in California entering into lockdown while reports hint at the possibility of Germany entering a full-scale lockdown starting this weekend.
Quantitative easing measures and central banks’ support packages to backstop commercial paper and money market so far this week by major central banks have started to show visible impact in containing one of the worst global economic meltdowns in the last century. However, it will take some time before the full extent of its impact is clearly visible. On release front today, traders await the release of US existing home sales data and Canadian Retail sales data.
Trading Perspective: Forex market is seeing major currencies make some gain as USD eases. US futures trading in the international market was positive hinting at the bullish opening in Wall Street today.
EUR/USD: The pair is trading positive supported by ECB’s latest stimulus measures. However, the trigger for change in directional bias came in the form of easing USD’s strength amid renewed risk appetite in the global market. For now, the pair holds below mid-1.07 handle despite testing intra-day highs of 1.083 as EURO bulls lack fundamental support required to hold on to intra-day gains. Traders now await US data for short term profit opportunities.
GBP/USD: The pair is trading positive as GBP bulls ride the momentum of USD’s easing strength. While the broad-based return of risk appetite can be said as one reason for USD’s easing, the Fed’s support measures to underpin liquidity also act as a factor in today’s decline surrounding US Greenback. For now, the pair is trading above 1.18 handle and is likely to continue moving rangebound around the 1.1800 handle but remain trapped below mid-1.18 level as the trading session comes to close for the week.
USD/CAD: The pair is trading with clear dovish directional bias as commodity-linked currency Canadian Loonie got a strong burst of fundamental strength and support over today’s crude oil price rebound. Meanwhile, broad-based USD easing also added to downside momentum pushing the price below the mid-1.43 handle. Traders now await the US and Canadian macro data for short term profit opportunities, but the price is likely to stay below 1.44 handle as trading session closes for the week.
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