Pre-Market: Global Sell-Off Accelerates with Asia and Europe Deep in the Red

Stock volatility is back in earnest today, as the risk-off shift that was already apparent in forex markets throughout the equity-bounce reached the last stand for bulls, US large caps. Given the very strong divergences that we have been monitoring, the dip is not a huge surprise, and now the big question is if we will see a re-test of the correction lows or not.

DAX Index, 4-Hour Chart Analysis

The signs still point to the former, as the recently lagging Asian and European markets didn’t show signs of resilience amid the sell which would have pointed to an orderly rotation in the ongoing rally. Also, the same goes for US small caps which continue to lead the way lower, confirming the negative market internals on Wall Street.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The Nasdaq provides the best news for bulls yet again, as is still the strongest major global index by a long shot. What’s more, the tech benchmark remained stable amid the sell-off and that leadership provides a glimmer of hope amid the dominantly negative signs.

Traders are likely in for another very active day, and not just because of the volatile price action, but also thanks to the busy economic calendar. US personal spending will come out in pre-market trading together with the usual weekly unemployment claims figure, while the ISM Manufacturing PMI is scheduled just after the opening bell, together with Jerome Powell’s next testimony.

As the market took the new Fed Chair’s hawkish words at face value on Tuesday, which triggered the current leg lower in stocks, we suspect a more dovish stance from Mr. Powell that could be the perfect occasion for a short-covering bounce.

Dollar Still Firm as Commodities Fall

EUR/USD, 4-Hour Chart Analysis

The Greenback continues to show robustness, with even the Yen losing ground compared to it, so far today, despite the stock rout that usually favors the safe-haven currency. The Euro is trading on fresh 6-week lows against the USD with the pair hitting 1.2170 during the European session.

Commodity currencies continue to bleed, although trading activity is relatively low, with a lot of players likely waiting for the Fed Chair’s testimony. Gold is also drifting lower, together with crude oil and industrial metals, and things will likely heat up substantially again after the opening bell on Wall Street.

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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.