Forex Analysis And Chartbook: Dollar Ticks Higher as Trade Worries Intensify

Tuesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,677 0.60%
DAX 30 11,309 -0.40%
WTI Crude Oil 51.39 -0.41%
GOLD 1,212 -0.79%
Bitcoin 3,717 -0.27%
EUR/USD 1.1296 -0.28%

Risk assets had a mixed day following yesterday’s rally attempt, as Asian and European markets struggled to extend yesterday’s move, with pronounced weakness in China, while US stocks managed to recover off their early lows, trading in the green for the second day in a row.

The Dollar’s push higher was the most important trend of the day, which was fueled by the slightly hawkish tone of an FOMC member ahead of the week’s key events, the Fed’s meeting minutes and the G20 summit.

EUR/USD, 4-Hour Chart Analysis

The Greenback also gained ground due to the rumors regarding a 25% auto tariff that could be introduced as soon as next week by the Trump administration, which dampened hopes of a constructive G20 summit with regards to trade tariffs.

The broad Dollar index edged closer to its recent 16-month high and the EUR/USD pair broke below the 1.13 level for the first time in two weeks, while the GBP/USD pair confirmed the Pound’s recent relative weakness, plunging below the 1.28 level and getting close to its lows form August and October.

Dow 30 Futures, 4-Hour Chart Analysis

The major US indices opened lower following a hectic and bearish overnight session, but with the help of the relatively strong Dow, the benchmarks quickly recovered and traded in the green in the afternoon session.

The worse than expected CB consumer confidence and Case-Shiller Housing Price Index pushed Treasury yields off their session highs, helping equities in the rally, and despite a few volatile spikes lower, stocks remained stable throughout the day. That said, the declining short-term trends are still intact on Wall Street, and we need further evidence before declaring the start of the “Santa Claus” rally.

China Shows Weakness as Gold Tumbles

Shanghai Composite Index CFD, 4-Hour Chart Analysis

While globally we have seen a slight risk-on shift this week, China has been relatively week due to trade fears ahead of the G20 summit, and today, mainland shares continued to struggle, even before the fresh tariff rumors.

The Shanghai Composite, which entered a bear market back in June is drifting back towards its September low, after failing at its broad declining trendline, and even as a year-end short-covering rally is still possible, the long-term outlook remains very negative.

The persistent weakness in China and the other main emerging markets continues to reaffirm our view that we are seeing a global bearish shift, and with the key European indices also struggling, the beginning of 2019 will be crucial for risk assets around the world.

Gold Futures, 4-Hour Chart Analysis

Commodities had a volatile session amid the Dollar’s rally, and most of the segment traded with a bearish bias, with only the battered crude oil contracts attempting an intraday rally of their one-year lows. Gold and copper both declined as the Greenback pushed higher, with the industrial metal being hurt by the weakness in China again.

For gold, the combination of the hawkish Fed, the rally in US stocks, and the bullish USD led to a dip below the key short-term support level near $1215. The precious metal failed to show resilience the face of the still bearish long-term technicals, and despite the positive fundamental backdrop we still haven’t seen a clear technical buy signal in gold.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

 

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.