European stocks attempt to stage a recovery on Tuesday after yesterday’s selloff amid global trade concerns. The worries have abated somewhat, but investors stay alert as tensions between the US and China persist. Markets will likely trade cautiously in the coming days as later this week Trump is expected to present a list of Chinese companies that will be banned from investing in US tech firms, which will hurt the tech sector most of all. Meanwhile, Britain’s FTSE 100 adds 0.50 per cent to 7,547, France’s CAC 40 gains 0.31 per cent to 5,300, while German DAX 30 rises by 0.05 per cent to 12,276. US stock index futures trade marginally lower in early pre-market trade.
The dollar turned higher against most rivals today after a limited correction earlier. The US Treasury yields have recovered from one-week lows, which coupled with the easing trade concerns have helped the buck. The EURUSD pair dipped marginally after three days of gains as the dollar demand has returned and the euro has attracted sellers on rally attempts. A broader picture shows the single currency remains attractive for profit taking on gains as the dovish ECB stance and the political risks in Europe continue to derail the euro's attractiveness. The pair remains within the downtrend as long as the ECB and Fed monetary policy divergence remains wide. In the short term, the pair’ bearishness could be limited should the price manage to keep above the 1.16 level.
The pound has been also trading with a bearish bias on Tuesday, with the 1.32 figure stands as the intraday support. The upside potential is limited by the 20-DMA around 1.33. The current stance looks neutral after the BoE newcomer Haskel’s dovish comments and the statement from the European Commission spokesman Schinas who noted that Brexit talks have the potential for improvement. GBPUSD daily picture looks neutral as well, but the risks point to the downside as long as the price remains below the mentioned moving average which comes as resistance since April 19. The BoE’s financial stability report will be the next local driver for the pound, while the broader sentiment still hinges on the overall USD dynamics.
USDJPY remains under pressure, despite trade concerns have abated recently. The pair is changing hands below the 110.00 barrier on Tuesday, with the buck lacks the existing momentum to get back above the psychological level as investors in the global financial markets remain cautious. Considering a high risk of resuming the safe haven demand, the pair may yet dip lower from the current levels in the coming days. The immediate significant support comes at 109.00.
Brent crude attempts to regain the bullish momentum after an aggressive profit taking on Monday. The price has recovered back above the $75 level, but is yet to confirm the latest breakthrough as the market remains uncertain after the recent OPEC+ summit. Traders wonder how much barrels will come to the global market after the change in the arrangements of the group. Should any speculations about the potential conditions for supply deficit emerge in the coming days, Brent will likely stage a rise from the current levels. In the short term, the market will react to fresh API and EIA data due today and tomorrow, respectively.
Spot gold dipped to fresh 2018 lows below the $1,255 level after a break of the $1,260 threshold. The yellow metal looks extremely oversold, but still fails to attract buyers, which confirms the downtrend remains very deep and firm for the time being. The asset could stage some recovery should the greenback fails to proceed with the current correction which lacks the bullish impetus. However, we’ll hardly see a sustained rise in the gold prices as long as the dollar’s bullish trend remains intact. The next bearish target now comes at $1,252, while the immediate resistance lies around the $1,260 area.
Nathan Lambert, Head of Global FX Analytical Department