The tragic events which took place in Paris on Friday have contributed to the global equity markets remaining under pressure at the start of the week, with investors shifting away from risky assets and looking towards the safe-haven safety of the JPY, Gold and the USD as trading for the week commenced.
Despite the nervy start, equity markets are attempting to rebound and European futures are currently alternating between gains and losses. With that being said, equity markets in general are continuing to trade with cautiousness and looking bruised. Asian equities have plunged to six-week lows while European markets posted their largest weekly decline since August last week. It is currently expected that American equities will open lower, while the Euro has weakened on concerns that geopolitical tensions might damage consumer confidence around Europe.
The reoccurring concerns over the slowdown in China complimented with the most recent decline in mining stocks have punished the FTSE100. This index is technically bearish on the daily timeframe and may be set to decline lower if traders decide to part from risky assets. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. Previous support at 6200 may act as dynamic resistance which might then encourage sellers to send the FTSE100 to the 6000.
Japan dips into technical recession
Sentiment towards the Japanese economy received yet another blow after confirmation overnight that Japan has descended into another recession. This is the second technical recession since Prime Minister Shinzo acquired power almost three years ago. Although it was expected that the GDP data would confirm that Japan had entered another recession, predictions for quarterly GDP growth stood at -0.2% while the real result was a contraction of 0.8%. This has just reinforced concerns over the shape of the Japanese economy and the ongoing bearish sentiment over Japan.
With economic weakness around the region likely to impact Japan trade and with the inflation target for the Bank of Japan (BoJ) still looking out of reach, confirmation of another recession has enforced further pressure on the BoJ to act again.
Commodity Spotlight – Gold
The renewed risk-off environment combined with Friday’s unimpressive US retail sales report has offered Gold bulls a slight welcome boost. Partial Dollar weakness presents buyers with the opportunity to take advantage of the 1080.00 support in Gold for a potential appreciation to 1100.00. Regardless, the yellow metal is still technically bearish and dominated by the US interest rate expectations in which the current Fed futures predict a 70% likelihood of a US interest rate hike in December.
Technically prices are riding the outer skins of the Bollinger bands and the MACD has crossed to the downside. The previous support at 1100.00 may act as a dynamic resistance which should encourage sellers to send prices back towards the 1050.00 level.
The EURUSD is technically bearish on the daily timeframe. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. A breakdown below the 1.0700 may open a path to the next relevant support at 1.0500.
The USDCHF is technically bullish on the daily timeframe. Prices have found some resistance around the 1.0075 level. A breakout above this resistance may open a path to the 1.0250.
The USDJPY is technically bullish on the daily timeframe and prices are trading above the daily 20 SMA. A breakout above the 123.50 resistance may open a path to the 125.00 level.
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