Global uncertainty fuels safe-haven demand

A sense of unease gripped the financial markets during trading on Monday following the toxic combination of dismal China data and mounting Brexit concerns that weighed heavily on global sentiment. Investors have been left anxious following the wave of repeatedly disappointing data across the board and this can be reflected in the stocks markets that continue to display signs of exhaustion. Although Asian equities received a false line from the growing expectations that Japan may delay a sales tax hike set for April 2017, Asian stocks could be poised to decline further as the fears from China’s deceleration renew risk aversion, consequently strengthening the Yen. Wall Street was submissive to the bears last week and may continue to slide lower as the diminishing expectations over the Fed raising US rates provides a foundation for sellers to attack. Confidence towards the global economy remains low, and with faltering GDP data from the Eurozone adding to the ongoing concerns over slowing global growth, risk aversion could encourage market participants to scatter away from riskier assets to safe-havens.

Eurozone growth slower than expected

Sentiment towards the Eurozone economy was dealt a heavy blow during trading last week following a report that showed Eurozone Q1 growth rising slower than expected at 0.5% compared to the initial 0.6%. Growth in the European economy is one of the key challenges that the European Central Bank has had difficulty in cultivating while declining commodity prices continue to sabotage the nation’s 2% inflation target. It seems that despite the previous rounds of aggressive monetary policies implemented by the ECB, the European economy has shown no major signs of a solid bounce. There may be a very strong possibility that further actions could be taken by the ECB in a fighting bid to revive inflation while also jumpstarting domestic growth.

Brexit concerns suffocate markets

The elevated concerns over the inestimable impacts of a Brexit to the UK economy have rippled across the financial markets with anxiety punishing risk appetite. Financial heavyweights continue to share their views with major players highlighting the dangers of a Brexit to the UK, which has haunted investor attraction towards the Sterling. With uncertainty enveloping the pound and domestic data on a slippery decline, bearish investors have been provided a foundation to attack the currency at any given opportunity. Market participants may direct their focus towards the GDP report on Tuesday and if this underwhelms, then the Sterling may be left vulnerable to further losses.

Speaking of the Sterling, the GBPUSD is bearish on the daily timeframe as prices attained a solid weekly close below 1.44. The candlesticks are trading below the daily 20 SMA while the MACD has also crossed to the downside. Previous support at 1.44 could become a dynamic resistance which could open a path towards 1.41.

Gold smashes into $1285

Gold prices surged with vitality during trading last week as the welcomed combination of risk aversion, concerns over slowing global growth and rising expectations that Donald Trump may become the next US President simply provided a foundation for bulls to attack. This precious metal remains fundamentally bullish and continues to display resilience despite the rising Dollar which should have kept prices depressed. With expectations rapidly fading over the Federal Reserve raising US rates in Q2, bulls may have been gifted an opportunity to send Gold prices towards $1300 and potentially higher. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has also crossed to the upside. A decisive breakout above $1285 could open a path towards $1300 and potentially higher.

Commodity spotlight – WTI Crude

WTI Crude bulls received inspiration from the rising expectations that supply may be decreasing amid the unexpected decrease in stockpiles and backdrop of supply disruptions. While bulls may be commended on their ability to take crude oil prices towards $46.50, this commodity remains bearish and prices could be set to decline when the dust settles. The main bearish drivers of an excessive oversupply and fading expectations over OPEC agreeing on an oil deal are still present. Taking this into consideration any rise in prices could be a relief rally that could offer an opportunity for prices to trade back towards $40.

From a technical standpoint, WTI crude is bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above the daily 20 SMA while the MACD also trades to the upside. Although a technical breakout above $46.50 may open a path towards $48.00, investors should remain diligent as these false boosts in oil prices from the optimism over a production cut are temporary.

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