US equities extended their third day of gains led by the energy sector last night, while precious metals continued to consolidate amid the risk-on sentiment.

The market focus shifted to President Trump’s tax-reform plan, which helped to rejuvenated appetite for the US dollar and riskier assets. Investors are taking advantage of the recent pullback to ‘buy on the dip’. The yield of 10-year US treasury notes surged to 2.2%, a sign that investors are rotating out of government papers and other safe havens.
 
The dollar index surged 0.6% to the 92.5 area with its immediate support and resistance levels at 91.7 and 92.6 respectively. Traders can observe the SuperTrend (10,2) and the 10-Day Simple Moving Average to capture any potential trend-reversing signals. Technically, a meaningful break-out above 92.5 will suggest more upside. 

Crude oil prices surged over 2% as the International Energy Agency (IEA) raised its outlook for global oil demand growth this year. This helped to underpin concerns about surging crude stockpiles due to the ongoing effects of Hurricane Harvey, which shut off nearly a quarter of the nation’s refinery capacity. The rebound in the oil price over the last few days reflects expectations of resumed demand from Major Gulf Coast refineries after they restart operating.

The Bank of England (BoE) meeting will be a key focus today. The central bank is widely expected to hold interest rate unchanged and make no changes to its asset-purchasing program. The soft growth outlook and uncertainties surrounding 
Brexit talks are likely to counterbalance higher inflation readings, which hit 2.9% in August. Surging inflation was mainly a result of the weak pound, which has pushed up the cost of imports since the EU referendum in June 2016.

GBP remains strong ahead of the BoE meeting. GBP/EUR is traded at the 1.112 area, a level not seen since early August. Technically, both the SuperTrend and 10-Day Simple Moving Average line are both sloping upward, suggesting a strong uptrend. Traders can expect surging volatility near the time of the BoE’s interest rate decision, at 19:00 Singapore time today. 

Technical Analysis:

GBP/EUR

  • 10-Day Simple Moving Average sloped upwards
  • SuperTrend (10,3) remains in bullish set-up, suggesting uptrend remains intact
  • Fibonacci Retracement suggests the next resistance level at 1.1236 areas
  • Momentum indicator RSI has reached overbought zone of 70%

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