Market Sentiment Turns Cautious

19 March, 2019

A number of ongoing global narratives kept a lid on the markets with USD trading subdued ahead of major events this week. These include the two-day FOMC meeting starting today and ending tomorrow, and the Brexit narrative.

The GBP remained volatile as the Brexit deadline inches closer with no real progress made. Economic data on Monday was relatively sparse. Oil prices spiked on news that OPEC reported higher conformity to production cuts. This sent NYMEX Crude oil futures to rise 1% on the day to $59.09.

EURUSD Invalidates the Double Top Pattern

The common currency invalidated the double top pattern that was formed by last Friday’s close with the currency pair rising 0.10% on the day. The breakout to the upside came against a weaker greenback. Data from the eurozone was quiet with only the release of the monthly report from the German Bundesbank. The report painted a bleak picture as officials acknowledged a weaker pace of growth in the first quarter of the year.

Will The Euro Advance Gains?

The upside breakout from 1.1329 resistance could eventually push the common currency to test the multi-month falling trend line which is likely to act as dynamic resistance around the 1.1400 level. The overall price action in the EURUSD remains quite choppy. The recent gains have shown a sharp recovery as price rose at the same pace of declines as before.

Yen Advances as Investors Turn Cautious

The Japanese yen was trading modestly stronger against the USD on Monday rising 0.03%. USDJPY continued to retreat following a rally to a 3-month high of 112.12 earlier this month. Trade balance figures released on Monday showed that exports fell for the third consecutive month in February due to easing global demand for goods. Official data showed that exports fell 1.2% on the year, extending the 8,4% annualized decline in January.

Will USDJPY Turn Bearish?

The USDJPY currency pair was trading subdued on Monday with price action closing within a small range but bearish. This marks a second consecutive day of declines in the currency pair. A bearish follow through today could signal a move to the downside. Given that prices failed near the resistance level of 111.40, the USDJPY could extend the declines lower to the 109.84 level at the very least in the near term.

Gold Advances on Falling Risk Appetite

Gold prices were trading mixed on Monday but price quickly recovered towards the close of business. The gains come as the global risk sentiment remains mixed. Themes such as the Fed’s forward guidance and the outcome of the Brexit talks have kept risk appetite in check. This led to gold making modest gains, tracking higher yields in the U.S. bond markets.

Can XAUUSD Maintain the Momentum?

At the time of writing, XAUUSD is breaking past the 1306 level while forming a minor ascending triangle pattern. This comes as the precious metal advanced 0.13% on the day on Monday. The upside breakout, if successful, could send gold prices higher as they test the upper resistance level of 1320 – 1321 level. This would potentially mark a retest of the level which previously served as support.

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