Financial market research and analysis

The US dollar made a strong start to the week. The greenback gained against all of its major G10 counterparts in Asia; the DXY index nears 100 for the first time in March with growing conviction that the Fed will increase the federal funds rate in December for the first time since 2014. The hawkish Fed and the dovish ECB will remain on the macro-headlines to the end of the year.

The euro extended losses to its lowest levels in 7 months before rebounding on better-than expected German PMI figures in the European open. Even the encouraging PMI read from Germany and the cheaper euro couldn’t revive the appetite in the DAX. All sectors trade south in Frankfurt, expect financials.

The German-led optimism in the euro could be short-lived as threats from terrorists spread over the big major European cities. Brussels is on lockdown on terrorism concerns.

The euro is close to oversold market conditions, with the RSI pointing at 32% today. A renewed upside correction is expected to remain capped at 1.0700/1.0750, only surpassing 1.0790 (Fib 38.2% on Oct 30– Nov 18 decline), the EURUSD will technically step in bullish consolidation zone and could push for further gains to 1.0860 / 1.0960 (21dma / minor Fib 23.6% on Dec’14-Mar-Apr sell-off).

The broad picture remains comfortably negative however; top sellers have their eyes wide-open to strengthen their shorts at the best rates. The mid-term direction remains bearish with unchanged target at 1.0500/1.0450 zone.


The pound under pressure as commodity prices dive

Nickel dropped 4% while copper lost another 2% to $2/lb on China concerns. The WTI and the Brent are down by 3% and 2% in London. The renewed weakness in the energy and commodity markets explains the early losses in the FTSE (-0.80%). The FTSE has been the most negatively impacted within the European equity complex. Glencore, Anglo American and Antofagasta lead losses. The selling pressures could intensify should the copper cheapens below $2/lb.

The risk is off.