The sell-off continues in the European stock markets on Friday, albeit the downside pressure is not as aggressive as earlier in the week. This may be partly due to a declining trading activity ahead of Christmas holidays. In general, investors remain concerned over the global growth prospects and thus refrain from buying stocks. By the way, ECB is said to be increasingly worried by China’s economic slowdown. However, in the longer term, this could be positive for the regional shares as this signal suggests the European monetary authorities could push back their rate guidance later. So far, German DAX 30 loses 0.41% to 10,567, Italy’s FTSE MIB sheds 1.16 per cent to 18,361, Britain’s FTSE 100 declines by 0.35 per cent to 6,688, while France’s CAC 40 loses 0.69 per cent to 4,659. US stock index futures meanwhile point to a modest rebound after an aggressive two-day sell-off.
The downside pressure on the greenback has eased a bit today but the US currency remains on the defensive in general. EURUSD turned abruptly lower on the day after being rejected from the highs marginally above the resistance at 114.85 in the form of the 100-DMA. It looks like the local rally is getting out of steam as the bulls are not ready to challenge the 1.15 barrier yet, despite the dollar weakness. The recent ECB comments on China and the possible push back in rate guidance added to the corrective pressure on the single currency. The key driver behind the retreat is probably end-week profit taking at attractive levels. A daily close above 1.14 is needed for the euro not to lose the enthusiasm.
Meanwhile, USDJPY continues to lose ground after shallow and failed recovery attempts earlier in the day that were capped by the 111.45 area. The pair tries to stay above the 111.00 level that was derailed yesterday, when the dollar touched an early-September low at 110.80. Considering that investors remain pessimistic over the global economy, and there are no any bullish drivers ahead in the short term, USDJPY is still vulnerable to further losses amid the risk aversion coupled with lower USD appeal. The pair needs to climb back above the 112.00 resistance to avoid another sell-off in the short term.
Crude oil prices continue to refresh September 2017 lows, with Brent is already trading within striking distance from the key $53 level. A break below this threshold will open the way to $50. Once the price gets down to this area, panic selling may drive it even lower. It looks like the speculative flows are unstoppable as even the reports about more significant cuts in OPEC+ production failed to stop the sell-off, nothing to say about driving Brent higher. As long as the barrel remains firmly below the $55 barrier, the downside risks are obviously bearish. Today’s Baker Hughes report will hardly affect the prices even if it points to a decline in the number of oil rigs in the US.
Gold prices have been in a corrective mode on Friday, but the local pressure is limited and the metal still trading close to yesterday’s highs around 1266. The yellow metal clings to the $1260 level in order to avoid a deeper profit-taking ahead of the weekend, which could be quite logical, considering the upcoming Christmas holidays and attractive levels. However, as the greenback continues to suffer steep losses, the precious metal doesn’t waste time. A break above $1266 will open the way to the next important hurdle at $1273.50. On the downside, the bullion needs to stay above $1250 not to lose its steam.
Nathan Lambert, Head of Global FX Analytical Department