European stock markets are trading mixed on Tuesday amid a lack of drivers and headlines to push the major indexes in either direction. Investors continue to expect the US-China trade talks and FOMC meeting minutes due on Wednesday as the central bank’s rhetoric will set the tone to global financial markets in general. As such, Britain’s FTSE 100 sheds 0.20 per cent to 7,589, France’s CAC 40 gains 0.76 per cent to 5,420, while German DAX 30 rises by 0.72 per cent to 12,420. US stock index futures are mostly flat, demonstrating their indifference to the recent Trump’s attach on the Fed policy of raising rates.
Meanwhile, the greenback was hit rather hard by the US President’s comments and remains under pressure against major counterparts. The buck once again confirmed its sensitivity to verbal interventions from the officials as traders rushed to sell the currency quite aggressively. However, as soon as the dust settles, the USD could start to regain ground as there are no any fundamental drivers to send the buck much lower for now. Moreover, the dollar demand could reemerge ahead of the FOMC meeting minutes due tomorrow as traders bet on a rather optimistic rhetoric by the Fed that could confirm its commitment to further tightening despite the recent Trump’s criticism.
EURUSD has regained the 1.15 figure, but still fails to overcome the next intermediate resistance in the form of the 20-DMA at 1.1540. On the other hand, a daily close above 1.15 will confirm further improvement of the short-term technical picture. But further euro dynamics will much depend on the sentiment around the greenback. So should the dollar demand reemerge, the pair will easily resume the downside move and target the 1.1435 area, where the local support lies. As for the 1.13 barrier, this level looks to stiff to be broken easily.
GBBPUSD is extending a cautious recovery for a fourth day in a row. The pair reached almost two-week highs around 1.2850 and fails to stage a more aggressive rebound despite dollar weakness. Such a behavior confirms that traders remain concerned by a high probability of a no-deal Brexit. In the short term, market participants will focus on the talks as chief EU Negotiator Michel Barnier and UK Brexit Minister Dominic Raab convene later today. And the UK side hopes to achieve a deal with the European counterpart. So in case of disappointment, the GBPUSD pair will likely get back below the 1.28 figure and could test the 1.2750 area should the selling pressure on the greenback ease.
Brent crude continues its ascent, though the impetus is rather limited on Tuesday. After yesterday’s rise above the $72 level, the price targets the $73 barrier, but it looks like the buyers lack the incentive to push the asset significantly higher as the market needs fresh drivers at this stage. Besides, traders are getting more cautious ahead of API data later today and the official crude oil inventories report by EIA due on Wednesday. From the technical point of view, Brent needs to get back above the $73.10 area, where the 20-DMA lies. The longer the price remains below this region, the higher the risk of a bearish correction becomes.
Gold price extending the corrective recovery for a third day in a row. The yellow metal has jumped from lows in the $1,160 area and reached a one-week high of $1,196. But today, the buyers are rather cautious and less decisive which may signal the selling pressure on the buck is easing gradually. If so, gold could resume the decline before the price overcomes the $1,200 area, which is the key target for bulls now.
Nathan Lambert, Head of Global FX Analytical Departament