Stock markets swiftly surrendered their gains during trading on Thursday amid the sharp decline in oil prices which heavily diminished investor confidence towards the global economy. Asian stocks stumbled to one week lows amid the risk off trading environment, and may be set to decline further as increased appetite for the safe haven Japanese Yen drags Japanese stocks lower, consequently leaving Asian equities open to further losses. The losses in Asia formed a bearish contagion that punished European markets which were already pressured by falling energy stocks and investor caution ahead of the Easter holiday break. American markets followed the same negative path with the Dollar appreciating and growing optimism of further US interest rate rises in 2016 sending most stocks back into the red territory.
It seems that the heightened concerns over the health of the global economy have created an extremely sensitive trading environment which continues to be controlled by the erratic movements in the oil markets. With fears towards the ongoing global turmoil still lingering and risk aversion rife, stock markets may be left vulnerable and set for more punishment as anxious investors flee from riskier assets.
The FTSE100 experienced a sharp decline during trading on Thursday as risk aversion intensified amid the decline in oil prices which encouraged investors to offload riskier assets for safe-haven investments. This index is turning bearish on the daily timeframe and may be set to decline further as concerns over the health of the global economy sour investor risk appetite. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. The breakdown below 6100 should open a path towards 6050 and then 6006 respectively.
EUR bulls linger
The sharp burst of volatility in the currency markets has resulted in the EURUSD swinging erratically in favor of the bulls with prices slicing though the stubborn levels off resistance as Dollar weakness initially took center stage. This pair is technically bullish on the daily timeframe and the false lifeline Dollar bulls have been provided from the heightened expectations of a potential US interest rate rise in April may eventually dry out, in-turn giving way for the EURUSD to trade back above the 1.120 area. It seems that the Euro has been buoyed by the diminishing expectations over the ECB’s ability to revive Eurozone growth amid the financial turmoil and such may be the catalyst which pushes the EURUSD back towards 1.1350. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has crossed to the upside. This pair remains firmly bullish as long as prices can keep above the 1.1050 support.
Sterling under pressure
The Sterling has declined across the currency markets this week as growing anxieties over the impact of a Brexit and the attacks in Brussels offered a platform for bearish investors to attack the GBPUSD. This pair remains under intense pressure and the failing inflation figures from the UK which renewed concerns over a potential economic slowdown simply offered another reason for the Bank of England to keep UK interest rates unchanged. With political rifts and tepid economic data adding to the horrible cocktail, Sterling bears have received enough encouragement to potentially send prices to levels not seen since 2009.
From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has crossed to the downside. The previous support at 1.42 may turn into a dynamic resistance which should encourage sellers to send prices towards 1.40.
Gold breaches $1225
Gold prices have collapsed over $40 this trading week as an appreciating Dollar and growing expectations of the Federal Reserve raising US interest rates in April weighed heavily on the precious metal. Regardless of these short term losses, this previous metal remains fundamentally bullish and ongoing global uncertainties should boost its allure once risk aversion takes center stage. The over exaggerated expectations of the possibility of the Fed raising US rates have attributed to the sharp declines in Gold prices, but the lingering concerns over slowing global growth may eventually provide a platform for Gold bulls to send price towards $1250. A weak Dollar may encourage buyers to push prices towards $1250, but a breakdown below $1200 signals bullish weakness and invalidates this daily bullish view.
Commodity spotlight – WTI Oil
WTI bears have received ample encouragement this week following the fresh reports from the EIA displaying a 9.36 million barrel buildup in inventories which intensified the ongoing concerns over the excessive oversupply in the markets. This bearish reaction towards crude oil was aggressive and sent prices back below $39 despite the growing optimism towards the likelihood of a positive meeting in April. Although WTI has enjoyed some speculative boosts in oil prices from the growing expectations of a solution to the oversupply, the fundamentals of an unrelenting oversupply may continue to haunt investor attraction and provide further headwinds to positive movements in prices.
From a technical standpoint, a breakdown back below $40 should encourage a steeper decline towards $38 and $35 respectively.
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