A sense of unease lingers across the financial markets ahead of the heavily anticipated FOMC statement, while the ongoing Brexit fears have rekindled a wave of jitters which consequently has punished global stocks. Most major markets dug deeper into the red territory amid risk aversion and this could be the dominant theme if the incessant declines in oil prices and elevated concerns over slowing global growth continue to weigh on investor sentiment.
Although Asian equities displayed resilience during trading on Wednesday, prices could be poised to decline if the risk-off sentiment bolsters the Yen, ultimately dragging Japanese stocks lower. European markets were shaky during trading on Tuesday from depressed banking stocks and should follow this negative trajectory as investors continue their flight to safe haven safety. With Wall Street bulls absent, sellers have been provided an opportunity to attack the S&P 500 if the bearish contagion from Europe offers a solid foundation.
FOMC in Focus
Investors may direct their focus towards the FOMC statement on Wednesday which most already expect will conclude without a US interest rate rise. This should be no surprise following the dismal NFP results for May and the current unstable economic environment that has forced the central bank to re-evaluate its stance. Realistically even if May’s NFP exceeded expectations, the E.U referendum vote on the 23rd June would have obstructed any effort by the central bank to raise US rates in June. Although data from the US has followed a positive path, it seems likely that the next rate rise will be in September, rather than July, and this revelation should keep in the Dollar depressed in the short term.
The Federal Reserve will also be releasing projections for inflation and economic growth which should provide market participants with additional clarity on how the US economy is faring amid the global instability. If economic growth predictions are hiked with speculation of further US rate rises, then the Dollar bulls could be provided the inspiration to send the Dollar Index back above 95.00. It must be remembered that for an extended period, US rate hike expectations have been the driving force behind the Dollar’s resurgence and any hints of further actions taken by the Fed could encourage buyers to attack.
Brexit volatility intensifies
The Brexit concerns have intensified to unfathomable levels as major financial figures jump into the arena voicing their worries over the impacts of a Brexit to the global economy. Hillary Clinton is the new addition to the chorus that has warned against a Brexit vote, noting that it could trigger a Brexit fueled recession. With the polls sharply changing every week, it remains uncertain which camp is actually leading and such simply heightens investor anxiety further. Sterling bears have received ample encouragement from the haunted investor attraction towards the pound and such should provide a foundation for sellers to install another heavy round of selling.
From a technical standpoint, the GBPUSD is bearish and prices have smashed into 1.4100. Prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. A decisive breakdown and daily close below 1.4100 should open a path towards 1.4000.
Commodity spotlight – Gold
Gold bulls were unchained during trading this week as the ongoing Brexit woes and elevated concerns over the unstable global landscape have bolstered its safe-haven allure. This metal experienced an incredible rebound spanning from May’s dismal NFP report and with risk aversion rife amid the ongoing uncertainties, Gold could be destined to trade towards $1300. From a technical standpoint, this metal is bullish as prices are trading above the daily 20 SMA while the MACD has also crossed to the upside. A solid daily close above $1285 could open a path towards $1300. In this situation, Dollar weakness may be the catalyst that encourages bullish investors to install another heavy round of buying.
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