European stock markets opened mixed on Thursday amid the continuing political woes in Italy and the overall caution among global investors amid the lingering geopolitical tensions, including the recent deterioration of relations between the US and North Korea. In Italy, the 5 Star Movement and the League parties prepared a draft of their program which supposes revision of EU treaties, which may stoke concerns over the European integrity again. Nevertheless, the major indices managed to gain some ground, but on the whole, still struggle for a more clear direction. As such, FTSE 100 gains 0.2 per cent to 7,750, France’s CAC 40 adds 0.48 per cent to 5,594, while German’s DAX 30 rises by 0.33 per cent to 13,039. Meanwhile, Wall Street futures point to a negative bias at opening.
EURUSD is trading mostly flat on Thursday, with the pair is making another attempt to rebound above 1.18. Weekly US initial jobless claims came in at 222K vs 215 expected, while the Philadelphia-area manufacturing index jumped to 34.4 against the expected drop to 21.0 from 23.2, which however hasn’t added to the upside pressure on the greenback. The overall bearish picture shows that the pair may further lose ground till the end of this week. Should Fed hike expectations continue to increase, the pressure on the euro will intensify.
GBPUSD quickly jumped to 1.3570 and retraced early gains, but tries to cling the 1.35 mark, despite the strong dollar. Brexit woes add to the bearish pressure, preventing the pound from a more sustained recovery. Inspiration for the GBP bulls may come from expectations over the Bank of England rate hike should hopes for further tightening reemerge down the road. So far, the potential for a decent corrective rebound looks rather limited. In the short term, the pound needs to close at least above 1.35 for the immediate pressure to ease.
USDJPY refreshed 4-month highs around 110.80 and may now target the 111.00 threshold amid the rising Treasury yields. The immediate bullish pressure may ease in case of a correction below the support zone of 110.00. Profit taking may take place should geopolitical concerns intensify. In the medium term the pair may shift to a recovery mode as investors will likely get more cautious and nervous down the road as the trade war theme will reemerge next month.
Brent has finally challenged the $80,00 threshold and touched a fresh more than 3.5-year high of $80,10. A daily close above the psychological level – which is not warranted at all – will signal another victory for oil bulls. The buyers push the price higher on hopes that sanctions on Iran, coupled with OPEC efforts and rising global demand will help to offset the effect from rising US shale production. From the technical point of view, Brent needs to make a clear break above the mentioned barrier to target the next resistance at $80,80. Further bullish attempts, however, may attract a partial profit taking in the short term.
Following yesterday’s failed recovery attempts, gold has attracted another sell-off and refreshed end-2017 lows at $1,285. The technical picture remains deeply bearish as the greenback continues to gain strength across the board. The 10-year Treasury yield topped 3.1% amid a more upbeat outlook for the US economy. The key for the yellow metal is further dynamics in the yields as any signs of a correction towards the 3.00% figure will be taken as a reprieve for gold. However, considering the strong bullish trend in the USD, which so far doesn’t show any substantial signs of exhaustion, any bullish attempts by gold prices will likely be meeting sellers. In the short term, the precious metal will remain under pressure but may trim intraday losses later in the day.
Nathan Lambert, Head of Global FX Analytical Departament