The Macron-inspired risk-on rally has bolstered investor risk sentiment, with the hunt for risk elevating world stocks to record highs during Tuesday’s trading session. Asian equities marched to a near two-year high on Tuesday amid the risk-on trading mood and the bullish momentum supporting European stocks. With the perceived market-friendly Macron first-round French presidential victory somewhat dissolving risks associated with Frexit, the evident relief may support Asian, European and American markets moving forward.
Wall Street could receive another welcome boost this afternoon as some investors remain cautiously optimistic over Trump’s planned big tax reform and tax reduction announcement on Wednesday. While global markets may be praised for their patience over Trump’s proposed fiscal policies, a sharp correction could be on the table if the alleged phenomenal tax cuts and infrastructure spending falls well below expectations.
Euro hovering below 1.0900
The Macron relief has inspired Euro bulls to antagonize the 1.0900 resistance during Tuesday’s trading session. With the results of the first round of the French presidential elections reducing some Frexit-associated risks, the euro found itself back in fashion. Although the EUR/USD remains bullish on the daily charts, there is still a risk of prices coming under renewed selling pressure, as anxiety heightens ahead of the second round of the French presidential elections on 7 May.
Investors may direct their attention towards the pending ECB meeting on Thursday which is expected to conclude with policy measures left unchanged. Markets may observe the recent French presidential election results triggering a change in Mario Draghi’s rhetoric, with some signs of hawks potentially supporting the euro further. From a technical standpoint, EUR/USD bulls may secure their dominance as prices are able to close above 1.0900 with the next level of interest around 1.1000. In an alternative scenario, a break below 1.0800 could entice sellers to send the pair back to 1.0750.
Dollar bulls seek inspiration
The greenback lost its attitude during early trading on Tuesday and could find itself under renewed selling pressure if Trump’s big tax reform and tax reduction announcement on Wednesday fails to provide investors with any additional clarity. The sheer lack of detail that markets have been offered over the proposed fiscal plans have challenged the Trump rally, as the growing threat of fiscal spending failing to meet the market expectations exposes the dollar to further losses.
From a technical standpoint, weakness below 99.00 on the dollar Index could open a path towards 98.80 and 98.50 respectively. In an alternative scenario, a decisive breakout above 99.50 could open the path back towards the 100.00 psychological level.
Commodity spotlight – WTI Oil
Oil markets may be destined for further punishment as the persistent oversupply woes inhibit investor attraction towards the commodity. Although OPEC has maintained their optimism over the supply cuts stabilizing the saturated oil markets, the big elephant in the room, known as US Shale, continues to obstruct the cartel's valiant efforts to trim the global glut. With sentiment towards oil bearish amid the oversupply concerns, a further downside may be expected with bears eyeing $48. From a technical standpoint, previous support around $50 could transform into a dynamic resistance that encourages a decline towards $49 and $48 respectively.
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