FTSE +5 points at 7501
DAX +7 points at 12617
CAC flat at 5323
Euro Stoxx -2 points at 3574
Asian traders woke up to a risk-off session after an explosion in Manchester Arena killed 19 and injured more than 50 people. Yen (+0.29%) and gold (+0.18%) rose as capital flew into the safe haven assets. The knee-jerk reaction could be short-lived, if the USD appetite improves into the Federal Reserve (Fed) meeting minutes due on Wednesday.
Traders will be seeking some insight from the Fed’s Harker, Kaplan and Kashkari’s speeches due today. Neel Kashkari is known to be a dovish member and has been the only dissenter to the Fed’s March rate hike. Patrick Harker who is a member of the Fed’s hawkish camp, and Robert Kaplan who has more balanced view on the Fed’s policy, are both in favour of two additional rate hikes in 2017. The probability of a June rate hike is back to 100% according to Bloomberg estimation.
If the Fed minutes revive the hawks later this week, gold prices could pull back to $1255/$1245, area including the minor 23.6% retracement on April-May decline ($1,255), the 50-day moving average ($1,250), the major 38.2% retrace and 200-day moving average ($1,245).
Asian stocks mostly lacked enthusiasm; Nikkei (-0.27%) and Topix (-0.12%) were flat to negative. Only the Hang Seng index (+0.28%) was driven higher as Tencent added 36 points to the index. The US and European equity futures were offered, while the FTSE futures diverged positively (+10 points) on firmer oil and softer pound.
Copper and iron ore futures softened. The commodity trader Noble Group stopped trading after erasing more than 20% in Singapore amid the S&P hinted at a default risk. The aggressive sell-off in Noble could dampen the sentiment in the UK and European mining stocks at the open.
The USD/JPY traded shortly below 111.00 mark, as the early flight to safe haven temporarily pushed the yen higher against the US dollar. Dip buyers are touted pre-110.20/110.00 before Wednesday’s Fed minutes and Friday’s Japanese inflation report. Intra-day resistance is eyed at 112.15 (100-day moving average). There is a decent put option expiry at 109.55 due today.
Cable remained offered above the $1.30 level. According to the latest ICM poll, PM Theresa May’s lead retreated to 14 points from 20 points a week earlier, as the Labour Party gathered some support thanks to its spending plans on the NHS, social care and tuition fees. Latest ICM results suggest that Tories lost one percentage point support to 47%, Jeremy Corbyn’s Labour Party gained three points to 33%, Liberal Democrats and the UKIP fell by one and two points to 9% and 4% respectively. The Manchester blast could give a hand to Theresa May before the June 8 snap election, given her focus on immigration and borders. The GBP/USD swings up and down around the $1.30 level. The critical mid-term resistance at 1.3044 (major 38.2% retrace on post-Brexit sell-off) has been tested throughout the three last sessions. Failure to break above the 1.3044 resistance could trigger a downside correction. Support to the current positive trend stands at 1.2824 (minor 23.6% retracement on March-May rise) and 1.2687 (major 38.2% retrace).
The EUR/GBP crossed above the 200-day moving average (0.8605) and gathers momentum to attempt the 0.8785 (50% retracement on September – April decline) for the second time this year.
The EUR/USD extended gains to 1.1254. The euro-bulls seek a further extension to 1.1300, the Trump’s election day high. The pair could bump into the Fed-hawks’ resistance at this level
In the US, President Donald Trump is preparing a $3.6 trillion worth budget cut plan for the next 10 years. The plan is expected to see decent resistance given that the fiscal austerity would mostly weigh on modest families, young graduates and farmers. Inability to finance the major corporate tax cut plans could dent the appetite in the US stocks. The US equity futures traded marginally down in Asia.
WTI crude advanced to $51.23, as Iraq gave positive signs to back up the OPEC’s plans to cut production for additional nine months. The 100-day moving average ($51.30) is currently acting as a minor resistance. Trend and momentum indicators are positive and could encourage fresh long positions into the May 25 OPEC meeting. Resistance is eyed at $53/55.
Finally, the AUD/USD traded above 0.7500 for the first time since May 2. Positive trend could extend toward the 200-day moving average, 0.7527. The Fed minutes is the major downside risk to the Aussie recovery.
Quick glance at technicals on LCG Trader:
WTI intraday: Long positions above 50.48 (pivot) with targets at 51.70 & 52.00 in extension. Below 50.48, downside potential to 50.15 & 49.55.
AUD/USD intraday: Long positions above 0.7460 (pivot) with targets at 0.7505 & 0.7520 in extension. Below 0.7460, downside potential to 0.7445 & 0.7425.
Silver intraday: supported by a rising trend line. Long positions above 17.00 (pivot) with targets at 17.25 & 17.32 in extension. Below 17.00, downside potential to 16.92 & 16.84.