News & Analysis

Stock recovery cracking? USD surges – US GDP hits 2.5%; GBPJPY – GBPUSD slammed; Oil smacked after inventories report

Feb 28, 2018 | Market Updates

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Ôû© 11:30 AUD Private Capital Expenditure
Ôû© 20:30 GBP Manufacturing PMI
Ôû© 02:00 USD Fed Chair Powell Testifies – ISM Manufacturing PMI

US markets – another weaker night traders after futures showed a possible recovery. The US prelim GDP came in at 2.5% confirming a hot US economy. Rate rises look set now. Powell advised three this year, his testimony on Friday is going to be a lot more interesting now the GDP has meet expectations or it might just confirm what is now known. The Dow lost 240 points in the last hour of trade in yesterday’s session. The Dow and S&P 500 snapped 10-month winning streaks, their longest since 1959. “The volatility is being caused by one overarching theme: The market doesn’t know what to expect from the Fed,” said Tom Essaye, founder of The Sevens Report. “There’s uncertainty around that and it’s going to continue for the next several months.” The Dow Jones closed 380.83 lower – The S&P500 lost 30.45 points and the NASDAQ lost 57.35 points.

Oil – talk before last night was a worry about rising US stockpiles due to high US production. Oil tracked higher most of Wednesday. Last night’s oil inventories confirmed these fears. Oil settled 128 cents lower at $61.25. U.S. crude inventories rose by 3 million barrels for the week ending Feb. 23, compared with analyst expectations for a build of 2.1 million barrels. Gasoline inventories rose by 2.5 million barrels, compared to analyst expectations for a 190,000-barrel draw-down. Traders $61.10 -$61.15 is the current support low price tested overnight. Buyers could be looking for a confirmed hold at this point or sellers could be looking for a fail.

European markets – finished lower on Wednesday, the FTSE lost 50.54, the DAX lost 54.88 and the CAC closed 23.44 pts lower. Moves where tamer than in the US but traders should we watching 12,356 on the GER30 daily, this level has been repelling sellers since the 15th of February. A break of this level starts to confirm a break of the recovery rally in our opinion. The UK100 has breached 7205 support, a close below 7200 show’s seller momentum adds real pressure to the recovery rally. Buyers would be looking for further resistance and hold at these levels today.

Forex – the USD hit 5-week highs on Wednesday. GDP hitting expectations and future interest rate rises supporting its charge. The USDCAD rallied by a further 57 pips taking its tally to 195 pips for the week so far. The GBP was flogged last night. The GBPUSD lost 140 pips and the GBPJPY lost 244 pips. Both pairs making new weekly and monthly lows. The GBPJPY breaking below its October 2017 low. The main reason sellers opened up on the sterling was the U.K. PM blasting EU’s draft deal as unacceptable, reigniting Brexit fears. The Japanese Yen didn’t ignore other majors sending them lower, the EURJPY and USDJPY finishing sharply lower. 106.50 is showing short-term support this morning for USDJPY buyers. It’s yet to be confirmed so buyers should be giving this level more time.

Gold held up well last night considering. Buyers continue to hold firm from 1313.60 – 1316.70. Traders could keep an eye on this level for potential support to confirm. A break could set up a fast move lower to possibly test 1300.

Good trading from Eightcap.

Sources; CNBC. All times are AEDST

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