Following the bullish Asian trading, the European stock markets are rising on Thursday as investors have finally shrugged off the tech sector sell-off. However, the equities finish the first quarter with losses for the first time in two years. The gains in Europe are partially driven by German auto makers, as well as general better risk-taking. Buyers were somehow inspired by report that France’s Renault is in talks
to merge with Japan’s Nissan Motor Co. The additional support – mostly for German market – came from the economic front as the unemployment rate in Europe’s largest economy reached a record low of 5.3% in March. As such, Britain’s FTSE 100 moved up 0.28 per cent to 7,064, Germany’s DAX 30 added 0.87% to 12,044 and French CAC 40 dipped 0.63% to 5,162. The risk for Wall Street indices is the continuation of the Amazon story as in his latest tweet Trump attacked the retailer again.
The EURUSD pair is struggling to keep above the 1.23 level following failed attempts to reach the resistance of 1.25. The recently re-emerged dollar demand keeps euro bulls in control. The latest eurozone statistics hasn’t inspired the single currency - the preliminary German HICP came at 1.6% YoY against the expected rise to 1.7%. However, the pair liked the ECB’s Knot statement as the central bank member highlighted a greater risk of them acting too slow rather than too quick in normalizing policy. US personal spending and income met expectations in February as well as core PCE which came at 1.6% YoY. So, the release hasn’t sparkled any substantial reaction in USD pairs. Should the EUR dip below the 1.23 level, the immediate support lies at 1.2260 and 1.2240.
GBPUSD failed to come back above the 1.41 threshold and gave up to dollar bulls once again. The greenback has stabilized following the yesterday’s rally and now attempting to make another bull run on the back of decent spending data. The pound is bleeding three days in a row already, and the short-term risks still point to the downside. As the British currency doesn’t have any domestic bullish drivers for now, the overall USD tone continues to set the course. In the absence of fresh protectionist signals from Trump, the dollar could enjoy another rally, which mat send GBPUSD to the 1.39 where a decent support lies.
USDJPY added over 170 pips yesterday and reached mid-March highs at 107.00. The pair is trading in a modest correction mode on Thursday. The bearish potential looks limited at this stage as the yen is still overbought, and the risk-on background curbs yen’s appeal as a safe haven asset. On the other hand, the upside scope is also not so obvious, and failure to regain the 107.00 level will increase the chance of returning to the negative dynamics. The immediate significant support is the 106.00 area where the 14- and 20-DMAs lie.
Brent crude price struggles to regain the upside momentum, trading around $68.40 after another rejection from $69. The market remains in a corrective mode after a rally above $70 earlier this week.
EIA data showed US stockpiles added 1.6 million barrels last week, which topped forecasts calling for a smaller increase. Another bearish sign is further growth in US shale production which reached fresh record volumes last week. The theme of Middle East geopolitical tensions has abated for the time being, which curbs chances of Brent’s recovery in the short term. Should the bulls fail to stop the sellers around $68.00, crude prices may accelerate the retreat and dip to $67.30.
Gold prices remain under pressure for a third day in a row. The yellow metal was bleeding strongly yesterday, and despite the bearish move has slowed down since, the downside risks still persist as the greenback looks set for further gains. The risk-on mode in the global markets also curbs the recovery prospects for gold. As technical picture shows, the current retreat may bring the precious metal back to lows below the $1.310 mark in the coming days. So far, prices manage to keep above the $1.320 level which is the immediate support. Should the dollar bulls give up, the short-term downside risks will partially abate.
Nathan Lambert, Head of Global FX Analytical Departament