European markets are trading mostly lower on Monday as stocks struggle to keep the positive momentum on reports of geopolitical tension amid an escalating battle between government and rebel forces in Libya. As for US-China trade relations, the U.S. National Economic Council director Larry Kudlow said on Sunday that the two countries are closer to the deal than they ever have been before. Besides, he has softened some of the government’s rhetoric around potential border closures with Mexico over immigration.
Against this backdrop, Britain’s FTSE 100 adds just 0.09 percent to 7,453, France’s CAC 40 is up 0.01 percent to 5,476, while German DAX 30 is down 0.26% to 11,978. US stock index futures are mostly lower as well, with market participants worried about what is likely to be a tough earnings season.
The greenback is on the defensive against the majors on Monday. EURUSD broke above the 1.1250 intermediate resistance for the first time since late-March and registered a high of 1.1264. The selling bias around the US dollar supports the up move in the pair, as well as the Sentix Index that advanced to -0.3 for the current month. Also, the common currency is partly supported by the likeliness of extra stimulus in the Chinese economy.
In a wider picture, the euro remains under pressure amid poor fundamentals in the euro area, while the greenback stays rather resilient despite the Fed took a pause in hiking this year. Technically, a daily close above 1.1250 will brighten the short-term outlook for the pair, while in general, the common currency is still vulnerable to downside risks, especially as the risk sentiment deteriorates gradually.
USDJPY is under a decent downside pressure today, with the pair has eased from recent highs marginally below the 112.00 threshold. The price dipped below the 200-DMA around 111.50 and remains bearish in the daily charts as investors switched from buying shares into a more cautious mode, which fueled the safe-haven yen demand, while the general pressure on the dollar added to the negative stance on the pair. In the short term, the dollar needs to stay above the 111.00 figure in order to avoid a more aggressive selling pressure.
Crude oil prices jumped to fresh 2019 highs amid rising geopolitical tensions that sparked concerns over oil supply from Libya. Further signs of easing tensions between the US and China are playing into bulls’ hands as well. Oil was also lifted by Friday’s stronger-than-expected rise on March nonfarm payrolls. Against this backdrop, market participants ignored the Baker Hughes data that showed the number of U.S. oil rigs rose by 15 this week to 831 after six consecutive weeks of declines. After a break above $70, Brent jumped to $70.84 and remains elevated on the day, though further rally looks unlikely at this stage as the futures are looking overbought already.
Nathan Lambert, Head of Global FX Analytical Department