Fears of the possibility of a tighter monetary policy have sent US dollar to its lowest levels against its major peers in nine months, wiping out entire gains since the election and December rate hike last year.

Hawkish comments from ECB and BoE governors last week surprised many market participants, who spare no hesitations to long the GBP and EUR against the greenback on assumptions that the tapering of Eurozone’s bond purchasing program will start earlier than expected.

Heavy selloff in treasuries and bonds over the last four trading sessions was probably a wake-up call to equity traders. Major leading indices including Hang Seng, Dow and S&P 500 seemed reluctant to climb higher, whereas Nasdaq has entered into technical correction three weeks back. Regional markets including Singapore, Malaysia and India are facing corrections too.

GBP/USD advanced to above 1.30 level for the first time since UK Prime Minister Mrs Theresa May called for a snap election in mid-May. Clearing above 1.304 level will open room for more upside towards next resistance level of 1.315. EUR/USD surged to its highest level in over 12 months. Fibonacci extension indicates the next resistance level can be found at around 1.174 area.

Favourable official China Manufacturing PMI data failed to provide much support to Asian stocks on last Friday. Major Asian indices including Nikkei (-0.92%), Hang Seng (-0.66%), Singapore (-0.62%) ended lower following a broad spelldown in US equities overnight. Shanghai Composite managed to close marginally higher, but volume remains low, indicating a lack of interest

Market focus shifted to China Caixin manufacturing PMI – a measure of manufacturing activities among the private enterprises to set the tone for Asia’s trading today. Market sees it to drop below 50 watermark for a second consecutive month, with consensus reading at 49.5.

Technical analysis

Crude oil:

  • 10-day Simple Moving Average sloped upwards
  • MACD formed golden cross
  • SuperTrend (10,2) has flipped from bearish(red) to bullish (green)
  • Immediate resistance level at $47.0, next major resistance level will be $48.7.

Gold:

  • Testing key support level at $1,240 area (trendline)
  • 10-Day Simple moving average slopped downwards
  • SuperTrend (10,2) remains in bearish set-up
  • Parabolic (0.02, 0.2) has flipped upwards


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