Markets nurse hangover from Trump slump

Global stocks regained some composure on Tuesday with most arenas’ edging higher after investors re-evaluated if Trump’s failure on healthcare reforms would negatively impact his ability to pass other key reforms in the future. Asian stocks marched into the green territory as participants remained cautiously optimistic over the proposed tax cuts and fiscal stimulus with the upside momentum elevating European equities. Wall Street could find itself supported this evening as markets seemingly overlook the recent setbacks to giving the global reflation trade the benefit of the doubt. Although the current stock market resilience may be commended, stocks could still be exposed to downside risks, especially if investors become jittery ahead of the Article 50 invoke on Wednesday.

Sterling pressured ahead of Article 50 invoke

Sterling was slightly pressured during trading on Tuesday with investors observing the currency from a distance as anticipation mounted ahead of the Article 50 invoke on Wednesday. With the Brexit procedure officially switching from amber to green this week when the government delivers a letter to Donald Tusk, Sterling could become extremely sensitive. The fact that the formal negotiations may not start until after the second round of the French presidential election in May and potentially as late as June could expose Sterling to downside shocks as anxiety erodes buying sentiment further. From a technical standpoint, the GBPUSD exists in a very wide range on the daily timeframe with 1.2775 acting as a resistance and 1.2000 a solid support. Much attention will be directed to how prices react below the 1.2650 regions with any weakness opening a path lower back towards 1.2400.

EURUSD momentarily clips above 1.0900

The receding political risks in Europe coupled with growing speculations of a potential QE tapering by the ECB in the future have boosted the Euro with prices clipping 1.0900 this week. A vulnerable Dollar from the renewed Trump jitters has attributed to the EURUSD resurgence with further inclines expected if 1.0900 is conquered. From a technical standpoint, prices are turning increasingly bullish on the daily timeframe as there have been consistently higher highs and higher lows. The candlesticks are trading above the daily 20 simple moving averages while the MACD has also crossed to the upside. If bulls manage to break above and secure a daily close above 1.0900 then the next level of interest is around 1.1000. On the other hand, weakness below this critical resistance could invite a decline back down towards 1.0750.

Dollar subdued ahead of Consumer Confidence

The Greenback remains on a back foot as the terrible combination of protectionism fears, Trump jitters and questions over the longevity of the reflation trade encourages sellers to attack the currency. Dollar bullish investors are in desperate need of inspiration to revive the Dollar with the pending consumer confidence report and speech from FOMC member Kaplan offering an opportunity. A positive consumer confidence report that exceeds expectations combined with a hawkish tone from Kaplan could offer the Dollar a temporarily lifeline above 99.00. From a technical standpoint, the Dollar Index remains under pressure on the daily charts with weakness below 99.00 potentially opening a path lower towards 98.50.

Commodity spotlight – WTI Crude

Oil prices were vulnerable to losses during trading on Monday with prices pressured on Tuesday after another weekly rise in U.S oil rig count compounded to the oversupply woes. Optimism continues to diminish by the day over the effectiveness of OPEC’s output cuts to stabilize the oil markets while uncertainty over whether the cartel will extend its production cuts hasweighed on sentiment. The fact that oil prices remain subdued below $50 despite Dollar’s vulnerability continues to highlight how the oversupply concerns have become bone deep. With the bias towards oil clearly bearish, sellers may exploit the technical bounces to install heavy rounds of selling. From a technical standpoint, weakness back below $48 could open a path lower towards $47.