Overnight on Wall Street: Tuesday 17/12/19

Investors are finding support on both the geopolitical and economic front. There are a number of issues that have kept the markets on edge in 2019, but as the year comes to an end, the risks (at first glance) appeared to be dissipating.

A partial trade deal, hopes of an orderly Brexit after the UK election, upbeat US and Chinese data are bringing some reassurance that the downturn may be bottoming.

Even though there is a dearth of details on the trade front and investors are unclear of China’s commitment to boost US agricultural imports, Wall Street managed to eke out some gains and finished the day in positive territory.

• Dow Jones Average Industrial gained 100 points to finish at 28,236.
• S&P500 rose by 22 points at 3,191.
• Nasdaq Composite added 80 points at 8,814.

In a more than a year-long trade dispute, investors have been navigating in a trade-centric environment. Market participants are therefore cheering the recent positive news and are driving global equities to new highs.

Yet, it is a déjà vu situation whereby there is much optimism and renewed hopes about the partial trade deal. Without any specific details of the agreements and more cautious comments from Chinese officials, the rally remains fragile.

Currency Markets

In the FX market, major currencies were mixed against the greenback. On the economic front, the data releases were mixed:

• China’s Industrial Production and Retail Sales came above expectations at 6.2% and 8% respectively compared to a 5% and 7.6% forecasted.
• US preliminary Markit PMI figures were also upbeat. Manufacturing PMI met estimates while Services and Composite were better-than-expected at 52.2.
• US NY Empire State Manufacturing Index ticked higher at 3.5 compared to the previous reading but did not meet expectations.

Overall, the risk tone has been upbeat but traders remain cautious on Monday:

AUDUSD

The Doji candle on the daily chart indicates the indecision between bulls and bears. At the top of the trend, it may also be a sign of possible reversal of price direction. The RBA minutes will be the main event for traders on Tuesday.

AUDUSD (Daily Chart)

Source: GO MT4

GBPUSD

The pair has been on the rise since the election has been announced and kept its upward trend during election polls. After the election, the GBUSD pair has lost some steam but remains in elevated levels at around 1.32. The Cable is also finding support on the partial trade deal. However, the pair may come under pressure until there are not more clarifications that allow traders to eliminate a hard-Brexit scenario.

In the meantime, traders should keep an eye on the BoE and UK employment numbers later this week for fresh trading impetus.

GBPUSD (Daily Chart)

Source: GO MT4

Commodities

The positive trade news, upbeat data and deeper production cuts are driving the oil rally. As of writing, WTI and Brent Crude are currently in the region of $60 and $64 respectively. On the daily chart, both remain in a bullish channel.

USOUSD and UKOUSD (Daily Chart)

Source: GO MT4

Gold has been trading sideways and is trapped in a cautious rally. The XAUUSD was practically unchanged at $1,475 on Monday.

XAUUSD (Hourly Chart)

Source: GO MT5

Key upcoming events

Home Loans, RBA Meeting Minutes and Investment Lending for Homes (Australia)
Claimant Count, ILO Unemployment Rate, and Average Earnings (UK)
Building Permits, Housing Starts, and Industrial Production (US)
GDT Price Index (New Zealand)

Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.