Pre-Market Analysis And Chartbook: Commodities Gain, Dollar Declines Following Powell’s Dovish Shift
Thursday Market Snapshot
|Asset||Current Value||Daily Change|
|WTI Crude Oil||52.14||3.65%|
We are having another tumultuous day in financial markets, with risk assets trading without a clear direction after yesterday surge in US stocks. Fed Chair Jerome Powell is mostly to be blamed for the hectic day, although the looming G20 summit is also causing wild swings in currencies and equities alike.
Mr. Powell changed one sentence in his stance on the Fed’s monetary policies yesterday, saying that interest rates are already near their “neutral” levels, unleashing one of the strongest short squeezes of the year in US stocks. The other major asset classes were not that enthusiastic about the speech, with especially US Treasuries showing a muted reaction.
Dollar Index, 4-Hour Chart Analysis
The Dollar, on the other hand, lost ground against all of its major peers following the surprising shift in Powell’s stance, which came on the heels of yet another attack by President Trump. The Dollar Index retreated from the vicinity of the 97 level yet again, and although the uptrend in the reserve currency remains intact, the rest of the year could bring another correction, especially should the US and China gets closer to a new trade deal during the weekend.
Nasdaq 100 Futures, 4-Hour Chart Analysis
While global equities are virtually unchanged since Powell’s speech, with even a slight bearish bias in Europe and Asia, the major US indices all gained more than 2% on the day, and today, the benchmarks are holding on to most of that.
The Nasdaq 100 was leading the way higher yesterday after being relatively weak for weeks, but despite the strong rally, the tech index is still stuck in a declining trend, trading right at the upper boundary of the recent short-term consolidation. In December, odds still favor a bullish move in equities, and the Nasdaq 100 might reach up to the 7200-7250 zone, even as we expect the global bearish shift to be persistent.
Pound Remains Weak as Oil Jumps and Gold Defends Support
EUR/GBP, 4-Hour Chart Analysis
Outside the Dollar, the Pound’s relative weakness is the most important trend in forex markets, and despite the slight risk-on shift this week, the British currency is still eyeing a breakdown amid the continued Brexit uncertainty.
The EUR/GBP pair tested the resistance zone near the 0.8920 level today, and even though the common European currency hasn’t been the strongest in recent weeks, it’s close to breaking out above the broader consolidation pattern which would signal a move above 0.90.
Gold Futures, 4-Hour Chart Analysis
Commodities are broadly higher today thanks to the weakness in the Dollar, with especially the bounce in crude oil and the rebound in gold making headlines. The battered oil market saw buying following positive Russian comments regarding a possible supply cut, and after dipping to a $49 per barrel handle for the first time in over a year, the crucial commodity rallied around 5%.
Gold managed to hold on to the $1215 level in the meantime, with the new, marginal, multi-month lows in US Treasury yields helping the precious metal together with the dip in the Dollar. Gold is still stuck below its October high, but as it is starting to show signs of stability, the positive fundamentals could finally lead to a major move in the metal.
Major Stock Indices
S&P 500 Futures, 4-Hour Chart Analysis
Dow 30 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
Shanghai Composite Index CFD, 4-Hour Chart Analysis
EEM (Emerging Markets ETF), 4-Hour Chart Analysis
EUR/USD, 4-Hour Chart Analysis
USD/JPY, 4-Hour Chart Analysis
GBP/USD, 4-Hour Chart Analysis
AUD/USD, 4-Hour Chart Analysis
WTI Crude Oil, 4-Hour Chart Analysis
Copper Futures, 4-Hour Chart Analysis
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