European and US equities had a subdued session yesterday as traders spent much of the day waiting for the US to announce its decision in relation to the Iranian nuclear deal, and stock markets had a muted reaction to the news. The FTSE 100 in early trading hit a 14-week high, as it missed out on the positive move continental Europe had on Monday, but gave up its gains.
The Dow Jones, S&P 500 and NASDAQ 100 all finished the session largely unchanged. The relatively high US government bond yields has gotten traders thinking about their investment decisions, as equities carry considerably more risk than government securities. The Dow Jones and the S&P 500 are still above their respective 200-day moving averages, but both have been edging lower since late February, and those key metrics could be tested again in the near-term. Thanks to impressive earnings by tech stocks in recent weeks, the NASDAQ 100 is well above its 200-day moving average.
The oil market had a volatile session yesterday after President Trump announced the US would withdraw from the Iranian nuclear deal. There was much speculation that this would happen, and it was reported a few hours before the official time.
The move will see the reintroduction of sanctions on Iran, and the various aspects of its economy, such as energy, insurance and finance could be targeted. Iran is one of the largest suppliers in OPEC, and traders are fearful the sanctions will weigh on global supply. The oil market has been in an upward trend for nearly eleven months, and given the Iranian development it is likely to continue.
The US JOLTS report, which measures job openings, hit a record high yesterday. This underlings how strong the US jobs market is, but it its worth remembering that we are still not seeing any sign of wages being pushed higher. Later today, traders will keeping an eye out for the US PPI report, and the consensus is for it to fall back to 2.8% from 3%. The PPI readings can act as a front runner to inflation, as costs at the factory level usually get passed on to consumers.
The US dollar index reached a new high for 2018. Jerome Powell, the head of the Federal Reserve stated future interest rate hikes won’t disrupt the financial markets, and any changes to the monetary policy will be well planned out, and won’t come as a surprise.
EUR/USD – has lost a lot of ground since the middle of April, and if the bearish move continues it could put 1.1800 on the radar. A move back above the 200-day moving average at 1.2012, could pave the way for 1.2138 to be retested.
GBP/USD – is hovering around the 200-day moving average at 1.3545. If that level can be held, we might see a bounce back at 1.3712, and beyond that bulls might look to 1.3800. A break below 1.3545 could send it to 1.3300.
EUR/GBP – has been staging a comeback since mid-April, and the 200-day moving average at 0.8876 might act as resistance. Support might come into play at 0.8700.
USD/JPY –while it remains below the 200-day moving average at 110.17, its outlook is likely to remain negative. Support might come into play at 108.00. A break above 110.19 could bring 111.48 into play.
FTSE 100 is expected to open 8 points higher at 7573.
DAX is expected to open 23 points higher at 12935.
CAC 40 is expected to open 6 points higher at 5527.
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