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VIX hints at higher vol as stocks gain
The FTSE 100 (+0.69%) opened upbeat on the back of limited pound appreciation and firmer commodity prices.

BHP Billiton (+2.42%) rallied in London as company revealed plans to divest its US shale unit and reduce debt to avoid clash with activist investors.

Energy stocks (+0.55%) were better bid in London as investors paid little attention to Monday’s non-event OPEC meeting.

WTI crude gave back gains as the OPEC meeting gave no further indication on the cartel's future plans on supply cuts, yet the downside correction remained limited. Kuwait’s oil minister said that the decision to extend or to end the supply cut deal will be discussed in November meeting. The crude is up by 0.70% at today's session.The light disappointment could still cap the upside attempts and encourage a deeper downside correction toward the 50-day moving average ($46.65). Resistance is seen at $48.00 (100-day moving average).

The pound is the biggest loser against the greenback in London. Offers are touted at 1.2925 (100-day moving average). The key short term support is eyed at 1.2847 (major 61.8% retracement on June – August rise) and may suggest a stronger downside momentum if broken. In the dirt of major events, the pair will likely be driven by the global news and the US dollar appetite.

Euro swings between hawkish ECB bets & profit taking

The short-term euro moves could be tricky in the coming sessions. On one hand, traders are topping up their long EURUSD positions before the European Central Bank (ECB) President Mario Draghi’s speech in Jackson Hole meeting due on Friday. On the other hand, profit taking prevents the upside swings from developing into stable trend toward the 1.20 mark.

To us, Draghi has little incentive to talk down the Eurozone economy before the critical September meeting, though he is expected to voice his worries about the low inflation due to the euro appreciation. He may well want to test the market depth and reaction potential before revealing the final verdict on the future of the Quantitative Easing (QE) program in September 7 policy meeting.

The net long speculative positions eased from a decade high levels last week, yet the sentiment remains comfortably bullish. Decent call option expiries trail from 1.1805 to 1.1995 today. Large expiry could be exercised at 1.1850.

German and Eurozone ZEW survey results could hint at a slight deterioration in expectations in August. Price pullbacks are expected to remain limited, as euro traders remain buyer on intra-day lows.

The rally in the euro could continue weighing on the European stocks, preventing them from consolidating gains in the short-run.

VIX index hints at anxiety in US stock markets

The US President Donald Trump’s commitment to send some 4000 troops to Afghanistan to fight terrorism and ensure peace has been controversial with his campaign promises and added to worries about a gradually more isolated President from his own party. The fiscal reforms are looming. The probability of a Federal Reserve (Fed) rate hike in December eased to 32.3%. The US 10-year treasury yields fell further to 2.18%.

The US stocks lacked appetite in New York. The S&P500 (+0.12%) extended losses to the 100-day moving average ($2’418) and the Dow Jones (+0.13%) shortly slipped below the 50-day moving average ($21’630). NASDAQ (-0.05%) closed Monday’s session marginally lower. Energy (-0.52%) and financials (-0.38%) weighed in the Wall Street, mining stocks (+0.80%) and healthcare (+0.62%) were better bid.

The US equity futures benefit from the improved global risk appetite, yet the upside moves may be fragile.

The VIX index is showing signs of anxiety since the second week of August. This could be an early indication of a deeper downside correction in the US stocks as Trump hopes leave their place to rising disappointment.

USDCAD could pursue 1.25 goal

The Canadian dollar extended gains versus the greenback despite soft economic data and lower oil prices. The 0.5% monthly contraction in wholesale trade sales was in line with expectations and therefore had a little impact on the CAD-positive mood. June retail sales data is due today. The consensus is 0.2% month-on-month growth versus 0.6% printed a month earlier. The 1.25 level is the next natural target for short USDCAD positions. Offers are touted pre-50-day moving average (1.2707).