Indices reverse after attempted break higher
EU50 pulls back to 21 EMA near 3654
GBPUSD remains in 1.2770-1.3020 range
Just under 24 hours ago everything looked rosey for equity markets with European benchmarks hitting multi-year highs and US futures pointing to yet another record open on Wall Street. However, sentiment has changed quite markedly in the past day and now it looks like yesterday’s session may have been a turnaround Tuesday.
The EU50 rallied to its highest level since 2015 yesterday, hitting a high of 3728. However, price reversed with a shooting star printed on D1 and today the market has continued lower to trade back near the 21 EMA at 3654. Source: xStation
The reversal came around lunchtime when Home Depot results were announced, and the less than satisfying trading update took its toll almost immediately on Dow Jones futures which fell by around 80 points in short order. The stock is one of the largest components on the price weighted index, accounting for around 6% of the broader benchmark, and while it would be more than a little bit of a stretch to attribute the declines seen since on this one earnings update, it did coincide neatly with the daily highs for several major indices. As one of the leading consumer discretionary stocks in the US the cutting of the 2019 forecast and miss in revenue were both concerning and could be seen to reveal some wider weakness in what has been a resilient US retail backdrop for much of the year.
In reality the selling was actually likely driven by a change in sentiment as investors woke up to the myriad of potential risks which still threaten the market. The canary down the mine in this instance seems to have been the passage of a bill through the Senate which is aimed at backing protestors in Hong Kong. While this was a victory for human rights, it will likely infuriate Beijing and once more stoke tensions between the world’s two largest economies at a time when US-Sino trade developments are the main driving force for the markets. It feels like a phase one agreement on a trade deal has been already discounted several times over by investors and sentiment may be starting to sour.
UK election debate provides little insight
The first debate between the next potential prime ministers provided very little that we didn’t already know, with Boris Johnson and Jeremy Corbyn both not straying from their core messages. Polls conducted shortly after the event showed no decisive outcome in terms of a winner, but in a similar vein to the Tory leadership debates, Boris Johnson will probably have come out of it feeling slightly the happier. This is due in part to the sizable lead the Tories currently enjoy amongst opinion polls and in part due to Boris’s propensity for dropping a clanger and the less eventful these are the better for him as far as his party are concerned. The pound moved off its lowest level of the day during the debate but there was no lasting move and in early trade this morning the currency has dipped below the $1.29 handle to trade at its lowest level of the week - although this is actually more due to strength in the buck than weakness in sterling.
GBPUSD has once more failed to break above the potential resistance level around 1.3020. The market remains stuck in a 250 pip range from 1.2770-1.3020 that has contained price for the past month. Source: xStation
This content has been created by X-Trade Brokers Dom Maklerski S.A. This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.