Investors have stormed into the first trading day of December adopting a risk-on approach after the United States and China agreed for a 90-day trade truce in their ongoing trade conflict.
This welcome development is already reducing appetite for the Dollar while emerging currencies and riskier assets are benefiting from the improving market mood. With easing trade tensions likely to remain a dominant market theme as the year slowly comes to an end, the Dollar is at threat of extending losses. Market expectations over the Federal Reserve potentially taking a pause of interest rates could complicate the Dollar’s efforts to stage a rebound. Looking into the technical picture, prices are seen declining towards 96.50 and lower if 97.00 proves to be a stubborn resistance level.
Sterling wobbles above 1.2700
Traders should fasten their seat belts and prepare for a rough and rocky ride on the British Pound ahead of Parliament vote on Brexit this month.
A strong sense of pessimism over any deal Theresa May brings forward being rejected in Parliament will continue to erode attraction towards the British Pound. Although the Pound remains extremely sensitive to Brexit headlines, the technical picture goes in line with the bearish fundamentals. Technical traders will be keeping a very close eye on how the GBPUSD behaves above the 1.2700 support level. A breakdown below this important point will most likely pave a clean path towards 1.2630 and 1.2600 in the near term. With prices trading below the daily 20 SMA and the MACD pointing to further downside, bears remain in firm control.
AUDUSD leaps towards 0.7400
The Australian Dollar has commenced December on an incredibly bullish note with prices gapping higher roughly 70 pips to trade towards 0.7400.
Dollar weakness coupled with the renewed risk sentiment remain the primary factors behind the sharp jump in the AUDUSD. If bulls are able to exploit the current upside to send prices beyond 0.7440, then it is fair to see that the trajectory of the currency pair officially bullish. As long as prices keep above 0.7330, the AUDUSD is bullish.
USDJPY edges lower on renewed risk sentiment
An approving appetite for risk amid the US-China trade truce will be nothing but bad news for the safe-haven Japanese Yen.
The Japanese Yen is poised to weaken in the near term as investors sweep safe-haven assets to the side to hunt for riskier investments. Although this development should push the USDJPY higher, the currency pair remains weighed by a softer US Dollar. With Dollar weakness and Yen weakness likely to result in the USDJPY trading within a wide range, traders could look elsewhere for opportunities. Those who may be interested in a pending breakout/breakdown will be looking at how prices react below the 114.20 resistance and 112.40 support.
Oil jumps as US-China trade tensions ease
Oil bulls received a welcome boost today as the United States and China put a pause on trade tensions.
This positive development has revived risk sentiment and soothed fears over ongoing trade disputes hitting global growth. With encouraging comments from President Vladimir Putin on Russia’s cooperation with Saudi Arabia regarding production cuts fuelling the upside, WTI Oil and Brent Crude are likely to extend gains in the short term. However, the fundamental drivers behind oil’s sharp depreciation remain present. Concerns over oversupply in the markets will present headwinds down the road while any signs of renewed trade tensions could rekindle demand fears. WTI Crude has the potential to rebound towards $56.00 if a daily close above $52.00 is achieved.
Commodity spotlight – Gold
The market friendly outcome to the US-China trade discussions has clearly resulted in Gold prices jumping to levels not seen in over three weeks. Investors may feel there is a disconnect here as Gold tends to lose attraction in a “risk-on” environment. The driver behind Gold’s incredible appreciation is Dollar weakness. For as long as the Dollar continues to weaken, Gold is seen trading higher. In regards to the technical picture, the breakout above $1230 could inspire a move higher towards $1240 and beyond.