Global stocks have steadied on Wednesday after the Chinese markets staged a rebound following yesterday’s sell-off across the board. The positive close of Asian shares propped up stocks in Europe as investors have relatively calmed down after the US-China trade spat escalation. However, worries over a full-scale trade war between the two countries remain as the conflict is far from resolving. Meanwhile, Britain’s FTSE 100 recovers by 1.01 per cent to 7,680, France’s CAC 40 gains 0.28 per cent to 5,405, while German DAX 30 adds 0.30 per cent to 12,715. US stock index futures bounce back before the opening bell, with Dow futures up over 100 points.
The EURUSD pair continues trading with a bearish bias as the negative tone around the single currency persists, while the greenback holds steady against most rivals. The price dropped to daily lows just above the 1.1530 area as ECB’s Novonty said that he sees euro depreciating against the dollar. Meanwhile, another central bank official, Villeroy, has confirmed that tares are to stay unchanged until at least summer 2019. On the whole, there is nothing at the moment that could push the single currency north, and a hawkish Fed’s stance continues to press the euro lower. The additional pressure on the pair came amid the reports that EU plans to impose 2.8 billion euro worth of duties on US imports this Friday. From the technical point of view, the pair, which paired intraday losses recently, will likely remain below the 1.16 figure as long as the dollar demand persists, and the potential for recovery looks limited as well.
GBPUSD has got a mild boost and recouped the intraday losses during the European hours after a timid consolidation below the opening level. The pair refreshed 2018 lows earlier in the day below 1.3150 and has bounced back since due to a weaker dollar demand before the opening bell on Wall Street. The price look set to challenge the 1.32 level but remains on the defensive not far from this year’s lows as Brexit uncertainty continues to derail sterling’s attractiveness. The bullish potential in the pair is also limited ahead of tomorrow’s Bank of England meeting as market participants worry that the central bank won’t present any hawkish hints because there were no spectacular economic data since the May inflation report that could encourage the monetary authorities to change the tone.
USDJPY has been swinging between gains and losses within a limited intraday range as trade fears ebbed and eased the upside pressure on the safe-haven Japanese currency. The pair is consolidating around the 110.00 level which lies between the 20- and 200-DMAs representing the intraday support and resistance respectively. The neutral stance will likely persist in the short term before the greenback decides on the clear direction. A daily close above the 110.25 area will improve the pair’s near-term technical outlook.
Crude oil prices tend north today, but the impetus looks too timid as traders refrain from more aggressive buying ahead of the upcoming OPEC summit. Brent still struggles to get back above the $75 threshold which remains the key target for bulls. Meanwhile, the OPEC countries continue to give contradictory signals. Saudi crown prince confirmed that the cartel is to discuss bringing more supply to the market. Oman oil minister said OPEC+ agreement should be preserved and the quotas should not change, while Iran’s POEC governor highlighted that the participating countries should stick to existing deal for the rest of 2018. The unstable rhetoric continues to unnerve traders who will likely remain on the sidelines until the start of next week, when the market will be digesting the decision of oil exporters.
Gold prices remain close to 2018 lows, but keep above the 1270 level which served as support during the yesterday’s plunge. The metal has been trading with a bearish bias despite the oversold conditions. Moreover, is doesn’t feel any support from waves of risk aversion. This is due to is high dependence on the dollar dynamics. The greenback demand has eased somehow today, but the currency remains steady, which prevents the precious metal from a recovery. Spot gold needs to get back above the $1,280 area for the immediate downside pressure to ease at least partially.
Nathan Lambert, Head of Global FX Analytical Department