European stock markets show mainly bullish dynamics Thursday, with German DAX 30 is lagging behind on the back of euro rebound. As the political woes in Italy have abated for the time being, investors calmed down a bit. Meanwhile, shares of automakers dipped amid reports the US will slap steel and aluminum tariffs after a one-month reprieve. Merkel has already responded by saying that the tariffs would be incompatible with WTO rules. Therefore, risks from this front will persist in the short term and will likely prevent stocks from a more pronounced rebound. As such, Britain’s FTSE 100 adds 0.46 per cent to 7,724, France’s CAC 40 rises by 0.21 per cent to 5,439, while German DAX 30 sheds 0.47 per cent to 12,728. US stock futures show some signs of struggle on Wall Street as trade-war fears reemerge.
EURUSD continues its corrective recovery after yesterday’s relief rally. The pair is challenging the 1.17 threshold but lacks momentum to stage a sustainable comeback. Interestingly, the single currency has ignored the euro area CPI data, despite the results came in better than expected. Core consumer prices increased by 1.1% YoY in May vs. 1.0% YoY expected. Such a behavior may be a sign that traders are largely focused on the political situation in the region which poses a risk for eurozone financial stability and for the ECB tightening prospects as well. The pair is yet to confirm its recovery – it needs to close above 1.17 to ease the immediate downside pressure. Tomorrow, the US NFP employment data will set the tone for dollar pairs including EURUSD. Strong numbers will push the euro lower again.
The GBPUSD pair is crawling north either, with the pair rose to almost one-week high around 1.3350. The overall dollar retreat helps the sterling bulls to advance north, rebounding from 2018 lows reached earlier this week. UK consumer confidence data gave some support to the pound, but on the whole, there are no any internal factors that could push the cable higher. Therefore, further trajectory in the pair will depend on the general market sentiment on the greenback. The buck will have a test by Friday’s labor market data – should the figures disappoint, GBPUSD will extend its ascent and may even challenge the important resistance in the 1.3430 area, where the 20-DMA lies.
USDJPY I trading flat after earlier retreat. The pair struggles to gain bullish traction despite the safe haven assets demand has substantially abated. This may signal that the dollar is not ready for resuming the rally yet as traders are cautious ahead of tomorrow’s US employment data, where the wages will be in focus. From the technical point of view, the pair needs to recover above the 109.00 level in order to gain traction again. The upside potential still looks limited in the short term, and the bearish risks still persist. The immediate support comes at 108.50 and then at 108.30.
Brent crude is mostly consolidating after yesterday’s rally on positive comments by OPEC. A cartel representative highlighted that the existing agreement will stay in place at least until the end of the year, and production volumes will be increase, if necessary. The price faced a tough resistance marginally below the $78 mark and since struggles to gain momentum for further ascent. In the hourly chart, Brent is stuck between the 20- and 200-SMAs. A break in either direction will set further tone in the short term, but the balance of risks point to the downside. The price needs to keep above $77 in order to avoid more pronounced corrective signals.
Spot gold is climbing higher for the third day in a row. The metal faced a local resistance close to the 200-DMA around $1.307 recently and retreated, but remains in the green territory due to a weaker greenback. The technical picture has improved this week, however gold is yet to confirm its recovery as bearish risks still persist. The precious metal needs to make a clear break above the mentioned moving average in order to target $1,310 and then $1,1314. The risk of another sell-off is still there as the buck may attract buyers, should the US economic data come on a stronger side.
Nathan Lambert, Head of Global FX Analytical Departament