Equity markets are continuing their steep losses as we enter the final part of the trading week with investor sentiment being pressured by various different factors. This includes the resumption of fears over global growth following weak data from China in the beginning of the year, while increased geo-political tensions between Saudi Arabia and Iran and an unexpected nuclear test from North Korea have also encouraged investors to dodge away from riskier assets like stocks. Another threat to investor sentiment is the persistent and continued weakness in the commodity markets, which only today saw the price of oil falling to a fresh 11 year lows of $32.70 for the first time since 2004. The losses in equity markets have been widespread and even extended towards selling momentum in the US markets yesterday.
FOMC Minutes - Inflation concerns provide dovish touch
The FOMC Minutes release did very little to help US markets and the lack of conviction in the statement bewildered market participants because the tone in the minutes was completely different from the unanimous decision to raise the US interest rates in December that lifted global sentiment. It was initially expected that the decision to raise the US rates last month was a decision taken in confidence; however the minutes’ statement released last night suggested that the decision to finally raise the US interest rates was a very close call. Currently the Fed policy makers expect four quarter-point rate hikes in 2016, but according to the meeting minutes if inflation growth fails to pick up in the United States then another US hike may fail to come forth anytime soon.
The USD is now open to its own spell of weakness even if this is temporary because the tone of the release last night is not what you would expect from a Central Bank that has policy makers ambitiously expecting another four interest rate increases this year. This has not yet been priced into the USD and neither have any further rate increases, meaning that something will have to give in here when it comes to market expectations. All attention will now shift towards the NFP on Friday afternoon for inspiring confidence that it could still be possible for the FOMC to raise interest rates once more before the end of the current quarter.
WTI edges closer to December 2008 low
Sentiment towards WTI Oil received another crippling blow during trading on Thursday with prices falling to yet another milestone low at $32.70 following the rising tensions between Iran and Saudi Arabia which have sabotaged any hopes that OPEC members may agree on a production cut. Concerns remain at alarming levels regarding the aggressive oversupply in the global markets while traders have begun to lose patience with the declining oil rig counts which have failed to have any impact on the consistent rise in crude stockpiles. The recent report provided by the Energy Information Administration (EIA) illustrating the sharp rise in the U.S. gasoline stocks has reinforced the concerns over the unrelenting oversupply and this has consequently eroded further investor attraction towards oil. WTI Oil is fundamentally bearish and evidence of slowing growth in China which has fueled fears of a decline in global demand may encourage bearish investors to send prices towards December’s 2008 crisis low of $32.40.
From a technical standpoint on the daily timeframe, WTI is heavily depressed as there have been consistently lower lows and lower highs in the charts. The candlesticks are trading below the daily 20 SMA and the MACD has also crossed to the downside. Prices have breached the $35 support and this may become a dynamic resistance that could invite an opportunity for a further decline towards $32.40.
Gold surges to one month high
The risk-off trading environment created from the increasing geo-political tensions between Saudi Arabia and Iran combined with an unexpected nuclear test from North Korea have boosted appetite for safe haven assets consequently driving Gold prices to a monthly high at $1102.50. Regardless of the recent gains, this zero yielding metal remains bearish and the possibility that the US interest rates may be increased on four occasions this year should limit how high prices can advance. The potential for bears to install another round of selling momentum in Gold remains live and a strong NFP release on Friday may provide the opportunity for bears to drag prices lower in the future. An appreciating Dollar could be the catalyst needed which should encourage sellers to attack this metal back down towards $1046.
From a technical standpoint on the daily timeframe, Gold currently trades above the critical $1090 level. Prices are trading above the daily 20 SMA while the MACD is in the process of trading to the upside. Bears must take prices below $1090 to regain control for a decline towards $1060.
This index is technically bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above the daily 20 SMA while the MACD has also crossed to the upside. A breakout above 99.50 may encourage buyers to send prices towards the psychological 100 resistance.
The FTSE100 is technically bearish and the breakdown below 6050 has encouraged sellers to send this index towards 5960. A bearish move below 5960 should warrant a further decline to the next relevant support based at 5850.
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