Pre-Market: Stocks Extend Gains on Upbeat Trump as Dollar Pops

The international turmoil which was triggered by Donald Trump’s tariff announcements continues to be in the center of attention, as the POTUS once again managed to surprise markets with the same strategy that he always uses, namely starting with a very strong “first offer” and then negotiating from that strong position.

As trade war fears eased following Steve Mnuchin’s weekend comments, Trump tweeted that talks are going great with the US’s important trade partners, further fueling the bounce in stocks before the opening bell.

S&P 500 Futures, 4-Hour Chart Analysis

As the oversold short-term momentum readings were also supportive of a bounce, a textbook short-covering rally ensued, but now the major US indices are already at make-or-break levels, and momentum is almost back to neutral thanks to strong bounce.

The S&P 500 is right at the declining short-term trendline after rallying back above the March low, and we expect choppy trading in the current price range as the 2675 level is also ahead as resistance for the key benchmark.

DAX index, 4-Hour Chart Analysis

Looking at the weakest markets, Europe is still under severe pressure, with the DAX, the FTSE 100, and the EuroStoxx50 hovering near the February lows, with the recent strength of the Euro and especially the Pound not helping equities.

Nikkei 225 Futures, 4-Hour Chart Analysis

That said, Asian markets continued the relief rally with especially the Nikkei bouncing hard, back to the declining trendline and above the February low, as the lost further ground compared to the USD today amid the improving sentiment.

Heavy Trading in Forex Markets

EUR/USD, 4-Hour Chart Analysis

The Dollar has been the most active major, as the greenback bounced back hard after the recent selloff, following some weak data coming out from the Eurozone. Spanish inflation and the Eurozone money supply both missed expectations, pushing the common currency lower, although the Euro bounced back following the worse than expected US consumer confidence release.

Commodity currencies are also losing ground today following a brief period of strength, and that could point to another downswing in the equity correction as well, as the Aussie and the Canadian Dollar continue to lead the market.

Commodities themselves are mixed today, as industrial metals and crude oil are virtually unchanged while gold fell back below the $1350 level on the USD strength and the improving sentiment.

We expect another very active US session in stocks and currencies, with a possible re-surge in volatility, so day traders should control position sizes and expect wild swings in both directions.

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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.