After a decline in Asian markets, European stocks opened lower and turned mixed shortly after. Equities fluctuate as some countries have reported a resurgence in coronavirus cases, fueling concerns over a potential second wave of the pandemic. China and South Korea have experienced an uptick in cases after restrictions were eased. Germany has also seen the rate of the virus rising. On the data front, China’s producer price index for April declined 3.1% year-on-year, as compared to a 2.6% fall expected.
Against this backdrop, UK’s FTSE 100 gains 0.93 percent to 5,995, Italy’s FTSE MIB edges higher by 1.08 percent to 17,568. France’s CAC 40 declines by 0.14 percent to 4,484, while German DAX 30 gains 0.32 percent to 10,860. U.S. stock index futures have pared earlier decline and turned positive ahead of the opening bell.
As risk sentiment had improved somewhat, the dollar fell nearly across the board after some consolidation earlier in the day. EURUSD turned marginally higher on the day, challenging the 1.0830 area. The next intermediate resistance arrives at 1.0850. However, the upside momentum in the common currency will likely remain limited at this stage as traders still prefer a cautious approach, with the near-term technical outlook for the pair remaining neutral. The inability to break above the 1.0950 zone, where the 55-daily SMA lies, may encourage bears to return to the market.
USDJPY turned slightly lower after three days of gains. Still, the pair is holding above the 20-DMA, with downside risks being limited as long as the prices stay above the 107.00 handle. if risk sentiment deteriorates any time soon, the greenback may attract some profit-taking at fairly attractive levels. On the upside, the pair still needs to regain the 200-DMA above 108.00 to stage a more sustainable ascent in the days to come.
Elsewhere, Brent crude has settled above the $30 handle but the upside momentum is too weak to bet on a more robust rebound. The market failed to capitalize on the reports that state-led Saudi Aramco would slash oil production by an additional 1 million barrels per day beginning in June. The negative sentiment prevails in the market as traders continue to express concerns over the outlook for oil demand and a second wave of coronavirus cases. Should Brent fail to hold above the mentioned psychological level, the selling pressure may reemerge and send the prices under $29.
Nathan Lambert, Head of Global FX Analytical Department