European stock markets are on the defensive after a mixed start on Wednesday amid a cautious tone among investors ahead of the EU-US trade talks. The situation ahead of Trump-Juncker meeting remains rather strained, as EU’s Malmstrom said that they are planning tariffs of $20bln on US goods in response to Washington’s threats. The auto heavy German DAX 30 is the most exposed amid the crucial event as the dispute between the two economies is centered around the auto sector. As such, Britain’s FTSE 100 sheds 0.79 per cent to 7,648, France’s CAC 40 loses 0.12 per cent to 5,427, while German DAX 30 declines by 0.61 per cent to 12,611. US stock index futures indicate a positive start.
Forex market remains calm and stable. The USDJPY continues to sink down gradually, declining for a fifth day in a row already. The pair has been threatening the 111.00 figure again, and the downside risks prevail in the short term, considering the price has been changing hands below the 14- and 20-DMAs since late last week. In the coming days, however, the dollar could regain strength and recoup losses against the yen should the UD durable goods orders and Q2 GDP come in better than expected. A daily close above the 111.00 level will be a confirmation of a limited downside pressure on the greenback.
The EURUSD pair refrains from sharp fluctuations ahead of tomorrow’s ECB meeting. Traders don’t expect any fireworks from the meeting this time, though Draghi could express concerns over the region’s economy against the backdrop of trade tensions around the world. However, the central bank governor's retoric on the issue will also depend on the outcome of today’s EU-US meeting in Washington. In general, the pair still lacks momentum to challenge the 1.17 barrier which points to the bearish risks for the euro from the technical point of view. The longer the price remains below this level, the higher the possibility of a downside movement these days.
GBPUSD is changing hands marginally above the opening levels, but still struggles to challenge the 20-DMA around 1.3173, where the daily high lies. On Tuesday, the UK PM May said she will take control of Brexit negotiations and relegate the government's Brexit department. The reports have somehow eased the uncertainty around the future talks and lifted the pound a bit. However, traders realize that some key issues remain unresolved and it’s too early to clam a victory as non-deal Brexit is possible as well. Against this backdrop, the pair’s upside potential remains constraint, just as the bearish pressure on the buck which stays afloat despite a lack of the immediate positive drivers.
Brent crude continues to trade with a bullish bias on Wednesday, but the current dynamics is more like a consolidation rather than a recovery extension. The price is confined to a tight trading range not far from the $74 figure. The $74.50 area has been limiting the buying pressure since the start of the week, though technicals have obviously improved since the latest sell-off. Traders are now focused on the declining activity in the US shale fields and the upcoming tight sanctions on Iranian oil exports. On the other hand, the market continues to worry about the global demand outlook as trade wars could derail the demand from China, the world’s largest energy consumer. As long as these factors are balanced, Brent will remain in a tight range in the short term. Any fresh driver could send the price in either direction, but downside risks may reemerge after the recent corrective rebound.
Spot gold has jumped sharply today, with the price has extended its recovery to the $1,233 figure recently. The buyers emerged at the metal’s attempts to get beck below the $1,223. Despite the surge, the overall picture remains bearish, and investors could resume the sell-off at any point as gold remains attractive for selling on rallies. The immediate upside target comes at $1,235. Only above this level, the downside pressure could ease further.
Nathan Lambert, Head of Global FX Analytical Department