US stocks fall after Cohen’s resignation and Gold rebounds and settles below 1330
Global market stocks, bonds and the US Dollar steadied following the departure of pro-trade and top US economic advisor Gary Cohn. President Trump is expected to sign the steel and aluminum tariffs today. Market angst eased with the talk of tariff carve-outs (exceptions) for neighbors and additional countries. The Bank of Canada kept its overnight rate at 1.25%, maintaining a tightening balance but notably more concerned about trade frictions.
Currency markets have taken all the headlines in stride with the Dollar Index (USD/DXY) finishing flat-ish at 89.59 (89.60 yesterday). The USD/JPY, market barometer of risk appetite managed to close little-changed (106.08) after slumping to 105.50 (overnight low) on the Cohn resignation. The Australian Dollar kept its gains in spite of a fall in base metals led by iron ore.
Amidst all the trade talk, the US trade deficit for February increased to -USD56.6 billion from a deficit of -USD53.9 billion. A deficit of -USD55.5 billion was expected.
There is maybe too much focus on Capitol Hill (Washington DC). Global underlying growth and policies remain stable. Central banks will keep the path of interest rates higher.
Trade war tensions remain in focus. While Wall Street rebounded off their lows, sentiment in the equity markets remains clouded. Markets now have their sights on the ECB meeting where policymakers are expected to keep interest rates and asset purchases unchanged. Mario Draghi’s press conference will be closely scrutinized for any QE clues.
Bond markets and global yields steadied. The US Ten year yield ended flat at 2.88% after falling to 2.84%. The yield on the Japanese Ten Year JGB as unchanged at 0.04%. Australia’s Ten-year yield eased to 2.79% from 2.82%.
All quiet on the Forex front as traders keep their positions close to their chest, ie as square as possible. Currencies traded sideways, ending virtually flat amidst all the flashing headlines. For now, it’s very much JTTRS (Just Trade the Range Shag), keeps your mind open and your finger on the pulse.
Economic data and events today start with Australia’s Trade Balance (GMT 12.30 am, March 8/Local Time 11.30 am, March 8) which is expected to be in surplus (+AUD 0.21 billion) against the previous deficit (-AUD 1.36 billion). This could be potentially huge for the Aussie today depending on the result. China’s Trade Surplus, due an hour and a half later is expected narrow considerably due to a marked fall in Imports.
The Dollar Index (USD/DXY) finished flat at 89.59 (89.60 yesterday). Following news of the Cohn resignation, the Dollar Index slid to an overnight low of 89.407 before rebounding to 89.77, finally settling at 89.59. Immediate support comes in at 89.40/50 which should hold heading into the ECB meeting later today. Likely range 89.40-89.90.
EUR/USD – ended flat at 1.2412 (1.2410 yesterday). EUR/USD initially jumped to 1.2445 on the Cohn news before slumping to 1.2384 (overnight low), rebounding finally to close at 1.2412. The Euro has kept a firm tone following the Italian election results and into today’s ECB policy meet. The ECB is expected to keep its minimum bid rate at 0.00 and QE policy until September. Markets will focus on what Draghi will say in his press conference looking for clues on QE. Given all the trade tensions, his speech would be of particular focus. Immediate resistance remains at 1.2440/50. Immediate support lies at 1.2380 (overnight lows). Meantime trade the range shag which is likely 1.2380-1.2430.
AUD/USD – finished on a firm note at .7822 (0.7820 yesterday). Yesterday’s Lowe speech was mildly supportive of the Aussie which managed to hold its ground in the current environment. Australian Q4 GDP yesterday just missed expectations (0.4% from 0.5%) which will keep the Aussie’s topside limited. Today the trade data for both Australia and China will have an impact. AUD/USD has immediate resistance at 0.7830 (overnight high) and 0.7850. Immediate support can be found at 0.7780/90 and then 0.7760. Likely range today 0.7760-0.7840.
USD/JPY – steadied after the initial fall to 105.50, closing in NY at 106.10. The rise in the US Ten year yield back to 2.88% and the improvement of risk sentiment supported USD/JPY. Ahead of the BOJ meeting tomorrow, it’s difficult to see this puppy too much outside of 105.50-106.50 for now. Immediate resistance can be found at 106.30 and then 106.50. Immediate support lies at 105.80 and then 105.60. Given the current interest rate differentials and the fact that Japan Inc continues to monitor these current levels in the USD/JPY prefer to buy dips.
GBP/USD – Brexit remains a risk and the UK simply cannot dictate to the EU what they are claiming. PM May and her cohorts should remember and learn from a song from one of its main sons and major export, the Rolling Stones who sang “You can’t always get what you want”.. which is a song penned in the early 70’s. The rest of the line goes “but if you try sometimes, you get what you need”. Nuff said. Immediate resistance lies at 1.3910/20 while immediate support can be found 1.3870/80 and then 1.3850. Look to sell rallies with today’s likely range 1.3830-1.3930.
USD/ZAR – The rand strengthened by 8 cents to the dollar on Tuesday morning, after Stats SA announced that SA GDP in 2017 grew at a higher rate than predicted.
The South African economy grew by 1.3% in 2017 compared to 2016, exceeding National Treasury’s expectation of 1% growth announced during the National Budget Speech in February
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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