Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Markets Lower As Correction Long Overdue

Published 30/01/2018, 09:53
EUR/USD
-
GBP/USD
-
USD/JPY
-
UK100
-
US500
-
FCHI
-
DE40
-
VIX
-

Markets across Europe have dropped lower on the open, taking the lead from sharp declines in US and Asia overnight as investors keep a nervous eye on bond yields.

Investors sold out of US equities on Monday as the sell off in US treasuries deepened, sending bond yields above 2.7%, to the highest level since 2014. The move demonstrates concerns in the market that higher future interest rates could call an end to the current bull market. These fears sent the down plummeting 177 points in the previous session, whilst the S&P closed 0.7% lower.

The negative sentiment has ensured a weaker start in Europe with the FTSE off by 0.3% whilst the Dax and the CAC are trading 0 .4% and 0.3% lower respectively. Equity indices have been on a spectacular run over the past few months with the S&P rallying over 7% in the past month alone, a price correction is overdue and does not necessarily point to the end of the bull market.

Whilst the volatility index (VIX), often referred to as a fear gauge for the market jumped, 24% in the previous session, the USD/JPY, which also gauges market sentiment is proving to be fairly resilient. USD/JPY these levels of 108.65 is not considered dangerous territory, if we see a fall towards 107.50 -107, this would definitely set alarm bells ringing.

May in the danger zone (again) sends sterling lower

The pound continued to show signs of pressure as Brexit headlines pick up again after a quiet January. UK Prime Minister Theresa May is once again hanging on to power by a thread as members of her own party and the EU criticize her lack of vision and clarity over Brexit and the transition period. GBP/USD is being held at support in the $1.4020 region. The next support can be found at $1.40, a decisive move below this level could open the door to a sell off towards $1.3930.

EUR/USD looks to GDP data and German CPI

Higher US treasury yields and concerns over a gradual winding down of the ECB’s bond buying programme mean the EUR/USD extended declines in Asia and into the early part of the European session, hitting a low of $1.2236. However, the last the pair has jumped higher as US treasury yields have retreated, pulling the dollar lower. Euro traders will now look towards the eurozone Q4 GDP which is expected to show a move higher to 2.7% on an annualised basis, from 2.6%. German CPI will also be under the spotlight shedding some light on the on the inflation picture in Germany, ahead of the inflation release for the eurozone tomorrow.

State of the Union address

Looking ahead towards the US session, investors will be positioning themselves for President Trump’s State of the Union address. Whilst this speech doesn’t typically move markets, given Trump’s tendency to stray from the norm, some dollar hitting comments could be on the cards.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Original post

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.