European markets are trading marginally higher but mixed in general on Monday as investors are cautiously monitoring developments in the US-China trade talks and corporate earnings in the US. Today, Goldman reported a profit beat in the first quarter while revenue fell short of expectations. U.S. Treasury Secretary Steven Mnuchin said on Sunday he hoped U.S.-China trade talks were approaching a final lap. He noted that a U.S.-China trade deal would go «way beyond» previous agreements between the two nations, and that the two sides were «close to the final round» of negotiations.
Against this backdrop, Britain’s FTSE 100 is flat at 7,437, France’s CAC 40 is up 0.10 percent to 5,508, while German DAX 30 adds 0.21% to 12,024. US stock index futures are slightly higher, as investors await further earnings reports.
The greenback remains under pressure against the European currencies, while extending bullish attempts against the Japanese yen. The USDJPY pair struggles around the 112.00 barrier amid a mild risk-on sentiment. After a two-day rally, the upside impetus seems to be weakening as investors refrain from major actions at the start of the earnings season. The renewed trade optimism seems to be not enough to fuel further rally in the pair, especially as the dollar demand looks weak in general. Against this backdrop, USDJPY will hardly be able to make a sustained break above the 112.00 handle in the near term and will continue to oscillate around this level at best. On the downside, the immediate support comes at 111.90, while a more important level is represented in the form of the 200-DMA around 111.50.
Oil prices turned lower on Monday as traders switched to profit-taking after the recent rally towards fresh five-month highs just below the $72 handle. Still, the market is still supported by geopolitics. The head of Libya’s National Oil Corp warned recently that renewed fighting could wipe out crude production in the country, which makes investors worried over the global oil supply, in addition to US sanctions against Iran and Venezuela and OPEC+ efforts. As a reminder, OPEC and its allies meet in June to decide whether to continue withholding supply. In the short term, Brent needs to hold around the $71 figure in order to avoid a deeper retreat from recent highs.
Gold prices plunged to two-week lows around $1,282, having broken below the 100-DMA. This is the third day of losses for the previous metal that traded above $1,310 last week. The sell-off is mainly due to a generally risk-on mood on US-China trade optimism. Further progress towards a deal could add to the bearish pressure on the bullion down the road. The latest upbeat US economic data and some uptick in the US Treasury yields also make the yellow metal struggling at this stage. After a break below the $1,300 psychological support, the short-term technical outlook has worsened, and now there is a scope for a loss of the $1,280 handle in the near term.
Nathan Lambert, Head of Global FX Analytical Department