European stocks steadied Wednesday as Italian assets have rebounded partially from yesterday’s sell-off. Nevertheless, investor sentiment remains rather muted amid the ongoing political woes in euro area. Renewed US-China tensions also restrain the optimism as White House announced a plan on import tariffs which caused criticism from Beijing. As such, Britain’s FTSE 100 adds 0.3 per cent to 7,655, France’s CAC 40 declines by 1.26 per cent to 5,424, while German DAX 30 rises by 0.7 per cent to 12,755. US stock futures show that Wall Street would open marginally higher after yesterday’s decline.
EURUSD received support around 1.15 on Tuesday and staged a corrective rebound today. The pair is testing the 100-hour MA close to the 1.1650 area which is the key one in the short term as daily close above this level will open the way to further recovery. The bearish pressure on the Italian assets has eased and gave some relief to the single currency. However, the pair remains firmly within the downtrend and will stay vulnerable to further losses amid political instability in Europe (not only Italy, but also Spain). Short-term bullishness in the EURUSD is also supported by German CPI numbers which came in higher than expected in May, according to the preliminary release. In the bigger picture, the 1.15 support is the key to the downside.
GBPUSD also recoups losses from yesterday, with the 1.32 level has served as support that prevented a deeper decline. The pound is now challenging the 1.33 figure due to the easing pressure on the riskier assets. However, the upside potential in the pair is limited as the USD index remains close to November highs and may resume the rally in coming days, if the US-China trade rhetoric doesn’t escalate. If the pound is rejected from 1.33, the price could come back to levels around the November lows.
USDJPY is making bullish attempts since the start of the trading day in Asia as the panic around the political woes in the euro area has somehow abated. The pair briefly touched 5-week lows yesterday and gained support marginally above 108.00. Today’s correction is so far limited by the 109.00 figure. But the pressure will likely resume as the UD data came in on a weaker side. According to the second estimate, the country’s economy rose 2.2% in the first quarter vs. +2.3% expected and down from the initial reading of +2.3%. Meanwhile, ADP employment came in +178K in May vs. +190K expected, which casts a shadow over the Friday’s key NFP release. The pair needs to keep above the short-term moving averages around 108.65 in order to avoid a more aggressive decline.
Brent crude received a boost from the dollar’s mild retreat after the disappointing US data. The price regained the $76 mark after an early dip below $75. But in the bigger picture the balance of risks still point to the downside as the market has shifted its focus from supply shortages concerns to the potential OPEC output increase. Moreover, crude oil could resume the decline, should the upcoming US data point to further rise in crude inventories and shale production. The API release is due later today, while the official EIA report is published on Thursday.
Gold has jumped north aggressively amid dismal economic figures from the US. The yellow metal, which managed to keep above $1,295 earlier in the day, is now testing the $1,300 mark again. As dollar dynamics in the major pairs shows, the pressure from latest data is limited, so the bullish impetus for gold from this front may be a short-term one and won’t be enough for eroding the resistance at the 200-DMA in the $1,307 area. The precious metal continues to trade within the downtrend and could slip to the $1,295 figure with the next target at $1,292 as soon as the greenback demand reemerges.
Nathan Lambert, Head of Global FX Analytical Departament