European markets are trading higher Tuesday, fuelled by tech stocks rising globally after Apple shares hit a new all-time high yesterday. Investors continue to stubbornly ignore trade tariff tensions, despite Mexico has confirmed retaliatory tariffs against US. Markets try to focus on positive developments, also ignoring an aggressive bearish correction in crude oil prices. The only loser today is Britain’s FTSE 100. The index fell 0.5 per cent to 7,705 as the pound rallied after stronger-than-expected UK’s services-sector PMI. Meanwhile, France’s CAC 40 gains 0.70 per cent to 5,511, while German DAX 30 rises by 1.19 per cent to 12,922. US stocks futures point to a positive open for Wall Street, with new record in tech shares is looming.
The US dollar fails to attract demand, with USD index is trading around the daily lows below 94.00. The currency markets overall lack directional impulse this week and need fresh catalysts to decode on further direction. EURUSD still can’t recover above the 1.17 threshold, with euro zone PMIs were rather neutral and didn’t affect the pair. The single currency is making bullish attempts lately, but lack impetus to stage a meaningful rebound even as the dollar is mostly on the defensive now. The euro area Q1 GDP is due on Thursday, and should the numbers confirm that the regional economy has slowed down at the start of the year, the bearish pressure on EURUSD will intensify. The immediate resistance for the pair remains in the 1.1750 area, where the 20-DMA lies.
The pound jumped strongly today after strong UK PMI service data. The index came in at 54.0 in May, which is the highest since February. Following the release, GBPUSD rallied to May 24 highs marginally below the 1.34 mark. However, the price failed to challenge the psychological resistance and retreated partially as the dust has settled. Despite today’s report signals that the slowdown in Q1 may be temporary, this only release will hardly open the way to a more hawkish rhetoric y the BoE any time soon. Besides, Brexit risks are still there as a number за issues including the Northern Irish boarder remain unresolved. As such, the pound is still vulnerable to losses, despite the recent bullish attempts. In the short term, the pair needs to keep above the 1.33 mark in order to avoid a sell-off.
USDJPY is showing a negative bias on Tuesday after two days of a decent growth. The pair peaked at 109.99 earlier in the day, but failed to test the psychological resistance at 110.00 which remains the key on the upside. The risk-on environment is still there, and the global investor sentiment doesn’t support the Japanese yen demand. However, the pair struggles to continue its ascent due to the general dollar weakness. In the bigger picture, the price still could resume the upside move, should the buck demand reemerge. The potential source of possible future USDJPY weakness is the renewal of trade-war concerns.
Crude oil prices correct lower aggressively today, with Brent losing over 2% on the day. The price touched a one-month low at $73,80 and now is attempting to regain the $74 mark. The short-term technical picture has worsened significantly after a break below the key $75 level. The reason for a more pronounced profit taking was the report that US producers have asked OPEC to increase crude oil production by 1 million bpd as US retail gasoline prices rose to their highest in more than three years. It is so far unclear, what the cartel’s reaction will look like, but the signal itself is quite negative for the market. A daily close below the $74 figure will open the way to a deeper correction. Especially should the API and EIA data point to another rise in crude inventories and production.
Gold is trading in the lower part of its recent range, with the $1,300 level still looks illusive for short-term bulls. The yellow metal makes some recovery attempts but stays only marginally higher on the day and may yet resume the decent in the nearest future. The greenback is relatively weak lately, but it’s not enough to open the way to a sustained rebound in prices. The outlook remains bearish as long as the precious metal is trading below the key moving averages in the daily charts.
Nathan Lambert, Head of Global FX Analytical Department