The brutal selloff that engulfed global stocks this week took a pause on Friday as risk sentiment slightly improved across financial markets.
Most Asian shares recovered during early trade despite Wall Street suffering heavy losses overnight. In Europe, stocks continue to march higher on positive global cues which could support Wall Street later in the afternoon. Although positive trade data from China and reports of U.S. President Donald Trump meeting Chinese President Xi Jinping at the G20 summit next month has rekindled risk appetite, stock markets are not out of the woods yet.
Concerns revolving around escalating trade tensions, prospects of rising interest rates and global growth concerns remain a drag on global equity markets. With caution likely to heighten ahead of the earning’s seasons, the current stock market rebound could prove to be a mere dead-cat bounce.
Dollar Index wobbles above 95.00
It is thought-provoking how the Dollar has weakened to a monthly low against its major peers despite trade disputes and global growth fears promoting risk aversion.
President Trump’s repeated criticism of the Federal Reserve coupled with soft U.S. inflation data remain key drivers behind the Dollar’s depreciation. Although the Greenback still maintains its status as a safe-haven currency in times of uncertainty, further losses could be experienced in the short term. The potential downside is based on a technical breakdown below the 95.00 support level on the daily timeframe. A solid weekly close under this level has the potential to instill bears with enough confidence to attack 94.60 and 94.35, respectively.
Commodity spotlight – Gold
Gold bulls were unstoppable on Thursday as global risk aversion sent investors sprinting to safe-haven assets. A depreciating Dollar boosted appetite for the yellow metal with prices powering to a 10-week high above $1,225.
Although gold prices are noticeably weaker this morning, bulls remain in the driving seat above the $1,213 level. While the technical outlook points to further upside, fundamentals are still in the bear’s favour. With the Dollar supported by safe-haven flows and prospects of higher U.S. interest, the medium- to longer-term outlook remains negative for Gold.
Focusing purely on the technical picture, Gold prices turned bullish on the daily charts following a breakout above the $1,213 resistance level. Investors may utilize $1,213 as a fresh support to push prices towards $1228.20 and $1233.50. If prices unable to keep above the $1,213, Gold has scope to depreciate back towards the $1,200 psychological level.
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