U.S. Dollar Trading (USD) the extreme negativity seen on Monday subsided in the Asian session Tuesday as the Nikkei rallied sharply off 15000 to close near 15400. The positive sentiment spilled over into the European and US sessions with profit takers and bargain hunters pushing most of the sold off assets higher. The US Dollar and Gold and Yen were the main casualties with the safe havens all paring back Brexit gains.
The Euro (EUR) EUR/USD buying saw 1.1100 tested in European trade but the big figure held with EUR/GBP selling capping Euro gains. The outlook is still negative but the downside needs more bleak news to break solid 1.1000 support. The Sterling (GBP) managed a decent bounce but the downtrend is capping with 1.3420 the high so far. A break above 1.3500 would open the door for a larger correction higher but uncertainty remains high and nothing specifically positive has come out in the last 24 hours to change the overall negative sentiment. Most analysts suggest we will move towards 1.30-1.25 as brexit negotiations continue.
The Japanese Yen (JPY) with Nikkei the instigator of the relief rally it comes as no surprise the USD/JPY is higher and all the Yen crosses have enjoyed solid gains overnight. GBP/JPY moved from Y134 to Y137 but is still faces considerable resistance above. PM Abe and BOJ meet today at the start of the Asian session to dicuss the volatility. The Australian Dollar (AUD) the reversal yesterday on the back of improving risk appetite has seen the risk currency move back to 0.7400 and the support in the last few days has surprised many traders. The AAA rating and diversification appeal for investors moving out of Europe may ending up outweighing the negative shocks the Brexit may bring in coming months.
Stocks Indices(DAX) enjoyed solid gains up 2% to close near 9500 and with bargain hunters suggesting the Brexit move was overdone. The outlook is still negative and the burden of proof is squarely on the bulls to hold the gains. US Stocks (DOW) Was strong with the rest of the global markets and held the gains into the close which is a good omen for Asian trade Wednesday. S&P 500 is back above the key 2000 level.
Pairs to watch
EUR/AUD Diversification away from Europe to help AUD lower?
GBP/USD 1.3470 Key Topside Resistance short term
Economic Data Ahead
US Weekly Crude Oil Inventories forecast at -2.3m vs. -0.9m previously.
By Anthony Darvall (TonyD)