Stock markets are likely to remain explosively volatile and wildly unpredictable amid the ongoing trade drama between the US and China.
The fact that global equities roared back to life on Monday only to surrender gains yesterday, continues to highlight how extremely skittish the market is currently. While easing fears of a trade war initially supported risk sentiment, reports that the Trump administration may crackdown on Chinese investments into US companies rekindled jitters. With the US-China trade developments being a key theme driving markets, investors should expect the unexpected.
Asian stock markets were under pressure during early trading, following a steep tech-driven selloff on Wall Street overnight. The negative domino effect from Asia could weigh on European shares this morning. If investors adopt a guarded approach today and caution prevails, Wall Street is at risk of extended losses this afternoon.
Dollar flat ahead of final Q4 GDP estimate
The Dollar struggled for direction against a basket of major currencies on Wednesday morning, as global trade tensions continued to weigh on sentiment.
This has certainly been a painful trading month for the Greenback, as the awful combination of US political uncertainty and trade war fears punished the currency. The “dot plot” disappointment from March’s FOMC meeting which poured cold water on four rate hikes this year, simply compounded the Dollar’s woes. Bulls are pleading for a lifeline and this could come in the form of the final US Q4 GDP estimates released this afternoon. Markets are expecting to see a revised GDP estimate of 2.7% for the final quarter of 2017. A figure that meets or exceeds market expectations has the ability to support the Dollar.
Taking a look at the technical picture, the Dollar Index is under pressure on the daily charts. Prices are trading below the 20 SMA, while the lagging MACD has crossed to the downside. A breakdown and daily close below 89.00 could invite a decline lower towards 88.60 and 88.30.
Commodity spotlight – Gold
Gold was exposed to heavy losses on Tuesday amid a stabilizing US Dollar.
Easing concerns about US-China trade tensions complimented the downside with prices dipping towards $1340. While an appreciating Dollar could result in further pain for Gold in the short term, the yellow metal remains supported by increasing geopolitical tensions, stock market volatility and lingering trade war concerns.
Focusing on the technical picture, the yellow metal remains somewhat supported above the $1340 level. Previous resistance around $1340 could transform into a dynamic support that encourages an incline back towards $1355 and $1360, respectively. Alternatively, a failure for bulls to defend $1340 could result in a decline back to $1330 and $1326, respectively.
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