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Equity markets continue to plunge – Trade war fear continue; Gold and Oil surge; USD shock – sellers drive USDJPY back into the 104 Handle.

Mar 26, 2018 | Daily Market Outlook

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US markets – extended their heavy losses on Friday night closing out a horror week. The Dow Jones finished the session 424.69 lower, the S&P500 closed 55.43 points lower and the NASDAQ finished 174.01 points lower. At one stage during the session buyers had retraced all of the sessions loses but sellers retook control sending price back lower. Week to date, the major averages posted their worst week since January 2016. The Dow and S&P 500 dropped 5.7 percent and 5.9 percent, respectively, while the Nasdaq pulled back 6.5 percent. The week also ended with eight of 11 S&P 500 sectors in correction. Trade war fears continued to develop on Friday. The U.S. president signed an executive memorandum that will impose tariffs on up to $60 billion in Chinese imports. In response, China’s commerce ministry proposed a list of 128 U.S. products as potential retaliation targets, according to a statement on its website posted Friday morning. Beijing’s ministry said it will take measures against the 128 U.S. goods in two stages if it cannot reach an agreement with Washington, adding that it could also take legal action under World Trade Organization rules. Government shut down fears were averted by President Trump signing a $1.3 trillion omnibus spending bill into law Friday, despite threatening to veto the legislation earlier in the day. “I will never sign a bill like this again,” Trump said during a news conference. “As a matter of national security, I’ve signed this omnibus bill.”

European markets – succumb to continued trade war worries to close lower for the 2nd day. The FTSE lost a further 30.65 pts, the DAX dropped by 213.77 and the CAC fell by 71.99. The U.S. president also announced exemptions for the European Union and six other countries, at least temporarily, from the steel and aluminium tariffs. In Italy, political parties looked to secure a parliamentary deal on Friday, but a new government is far from being put together after the inconclusive election earlier this month. Italy’s parliament will open for the first time since the March 4 vote.

Oil – rallied on Friday ignoring weaker equity markets. Buyers supported after the Saudi energy minister said OPEC would need to keep coordinating supply cuts with non-member countries including Russia into 2019. “Geopolitical tensions are coming to the front. But global balances are relatively tight at the moment. That’s enough to amplify relatively small factors,” said Andrew Wilson, head of energy research at BRS Brokers. “There are sufficient reasons to expect oil prices to strengthen further from here, and we stick with our (Brent) $75 per barrel call for Q3,” Morgan Stanley said. Goldman Sachs said in a note this week demand and OPEC cuts pushed their Brent spot price expectations to $82.50 a barrel by mid-year. USOUSD added 160 cents in Friday’s session and has added a further 47 cents in this mornings trade. Price is trading close to the $66.30 January high.

Forex – the USD was hit by the developing trade war trading near 1-month lows. The USDJPY hit hard losing 50 pips to close inside the 104 handle. Price has made a new breakout on the daily chart to the downside after sellers broke the 105.30 low. Risk traded mixed to the USD the EUR and GBP stronger but the AUD gave up a 48 pip rally to just finish in the black. The Japanese Yen finished stronger to majors after trimming losses, buyers driven by the developing trade worrie fears. The USDCAD rejected a seller breakout but closed 48 pips weaker. This morning the USD remains under pressure as risk is seeing demand. Gold had a strong session as traders looked for a safe haven asset. Price rallied closing $18 higher. Traders, keep an eye on 1350.40 4H level. We’ve seen two rejections at this point including one this morning.

USDJPY returned to 104 handle after losing 182 pips in three sessions. 105.30 low was beaten soundly, sellers would be looking at this point to become a resistance to show continued bearish momentum.

Good trading from Eightcap.

Sources; CNBC. All times are AEDST

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