Financial market research and analysis

Traders woke up to a risk-off session after an explosion in Manchester Arena killed 22 and injured 59 people. Yen (+0.21%) and gold (+0.18%) rose in Asia, as capital flew into the safe haven assets.

Asian stocks mostly lacked enthusiasm; Nikkei (-0.33%) and Topix (-0.16%) were flat, Hang Seng (-0.12%) reversed earlier gains as Tencent, the main positive driver on the index, turned negative in the afternoon.

The anxiety due to Manchester blast moderated into the European open and had little to no impact on the stock markets trading.

The FTSE 100 lacked direction at the London open. Energy stocks were better bid on earlier gains in the oil markets, yet gave back gains as the barrel of WTI (-0.80%) started leaking. Mining stocks started at the bottom of the range amid an aggressive sell-off hit Noble shares in Singapore and dampened the sentiment across the sector.

BHP Billiton (-1.1%), Anglo American (-1.01%), Rio Tinto (-1.06%), Antofagasta (-0.79%0 and Glencore (-0.66%) were among the leading losers in London.

Softer pound has been mechanically supportive of the FTSE above the 7500p.


Noble tanked on default risks

The commodity trader Noble Group stopped trading after erasing more than 20% in Singapore amid the S&P cut the companies rating by three notches to CCC+, citing that the ‘company’s capital structure is not sustainable’.

The rating agency warned of default risks, as the group could fall short of liquidity to cover its debt by the middle of next year.


Cable capped by thick 1.3044-resistance

Cable remained offered by the $1.30 level. According to the latest ICM poll, PM Theresa May’s lead retreated to 14 points from 20 points a week earlier, as the Labour Party gathered some support thanks to its spending plans on the NHS, social care and tuition fees. Latest ICM results suggest that Tories lost one percentage point support to 47%, Jeremy Corbyn’s Labour Party gained three points to 33%, Liberal Democrats and the UKIP fell by one and two points to 9% and 4% respectively. The Manchester blast could give a hand to Theresa May before the June 8 snap election, given her focus on immigration and borders.

The GBPUSD swings up and down around the $1.30 level. The critical mid-term resistance at 1.3044 (major 38.2% retrace on post-Brexit sell-off) has been tested throughout the three last sessions. Failure to break above the 1.3044 resistance could trigger a downside correction. Support to the current positive trend stands at 1.2824 (minor 23.6% retracement on March – May rise) and 1.2687 (major 38.2% retrace).


Euro gains field against US dollar, pound

Euro remains bid on positive economic data.

German GDP grew by 0.6% in the first quarter of 2017 as expected, although the driver of the Q1 figure was somewhat different than expected. The domestic demand slowed from 0.8% to 0.2% (versus 0.5% expected) and exports’ growth came down from 1.8% to 1.3% (versus 1.5% expected). In compensation, the government spending and capital expenditure pulled the GDP number higher, somewhat helped by a sharp fall in imports’ growth from 3.1% to 0.4% (versus 1.0% expected).

The preliminary PMI data hinted at a solid growth in German and French services in May, though the manufacturing activity could have marginally dipped in both countries.

The EURUSD extended gains to 1.1268. The euro-bulls seek a further extension to 1.1300, the Trump’s election day high. The pair could bump into the Fed-hawks’ resistance at this level.

The EURGBP crossed above the 200-day moving average (0.8605) and gathers momentum to attempt the 0.8785 (50% retracement on September – April decline) for the second time this year.


Fed speakers could shake the USD before Fed minutes

Traders will be seeking some insight from the Fed’s Harker, Kaplan and Kashkari’s speeches before the release of the Federal Reserve (Fed) meeting minutes on Wednesday.

Neel Kashkari is known to be a dovish member and has been the only dissenter to the Fed’s March rate hike. Patrick Harker who is a member of the Fed’s hawkish camp, and Robert Kaplan who has more balanced view on the Fed’s policy, are both in favour of two additional rate hikes in 2017. The probability of a June rate hike is back to 100% according to Bloomberg estimation.

If the Fed minutes revive the hawks later this week, gold prices could pull back to $1’255/$1’245, area including the minor 23.6% retracement on April – May decline ($1’255), the 50-day moving average ($1’250), the major 38.2% retrace and 200-day moving average ($1’245).

The USDJPY traded shortly below 111.00 mark, as the early flight to safe haven temporarily pushed the yen higher against the US dollar. Dip buyers are touted pre-110.20/110.00 before Wednesday’s Fed minutes and Friday’s Japanese inflation report. Intra-day resistance is eyed at 112.15 (100-day moving average). There is a decent put option expiry at 109.55 due today.


Dip-buyers alert as WTI reverses gains in Europe

WTI crude reversed gains, after reaching $51.23 on Iraq’s positive response to the OPEC’s production cut plans for additional nine months. The 100-day moving average ($51.30) is currently acting as a daily resistance. Trend and momentum indicators are positive and could encourage fresh long positions into the May 25 OPEC meeting. Dip-buyers could jump on the back of the bull pre-$50. Resistance is eyed at $53/55.