Pre-Market: Stocks Retreat, Yuan Tumbles as Dollar Pain Trade Still On

The major US indices opened with losses today, as the creeping rally of the recent days lost further lost momentum, and as international headwinds remained strong. While the losses are not drastic, and the leading benchmarks, the Nasdaq and the Russell 2000 are still just a tad below their all-time highs, the small risk off shift could quickly turn into a larger scale correction, as a significant part of the market is still severely lagging behind.

S&P 500 Futures, 4-Hour Chart Analysis

Trading volumes are higher than in recent days, but that said, business-as-usual is the best phrase to describe price action across global financial markets, as the trends that have been dominating the previous months show no signs of weakening. The Dollar, which went from the most hated asset in early 2018 to the most bullish major currency, hit a new 12-month high as measured by the Dollar index today, as we expected.

USD/Yuan, 4-Hour Chart Analysis

The reserve currency’s strength is hurting its peers differently though, and the recently weak Chinese Yuan took another major hit today in early trading. Elsewhere in the forex segment, the GBP is back below $1.30 against the Greenback, while the Euro is close to testing its June lows near 1.15. The USD/CNH pair hit 6.80 for the first time in a year, and its weakness spread to the commodity segment yet again, with especially copper feeling the pain.

Copper Futures, 4-Hour Chart Analysis

The industrial metal plunged below key long-term support today Precious metals are also getting pounded, with gold hitting $1210, while oil is a positive outlier as the oversold bounce continued in WTI crude.

Europe Still Far Behind amid Mixed Economic Numbers

EUR/USD, 4-Hour Chart Analysis

Back to stocks, besides the full-blown bear market in China and the still struggling emerging markets, Europe is also relatively weak. While the British stocks are outperforming thanks to the pronounced weakness of the Pound, the rest of the continent is struggling to catch up with the US market.

DAX Index, 4-Hour Chart Analysis

The DAX turned lower after its recent rally today, and as the weakness in the Euro and the global risk-on shift were unable to lift the German benchmark, a risk-of turn could push back it even towards the April lows below the 12,000 mark.

Today’s economic numbers reinforced the divergence between the US and rest of the world, as British Retail Sales missed by a mile, pushing European assets lower, while the US Philly Fed index came in well above expected, and weekly jobless claims hit an almost 60-year low in the US.

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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.

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