Currency and equity markets seem to stabilize after last week's losses on the back of Turkey's troubles and the focus today shifts to fresh data from Europe. An easing of the risk-off sentiment helped the European majors find a bottom and traders will now look towards reports from the Eurozone and the UK to dictate the price action. Equity markets ended the day in the red yesterday but futures on both sides of the Atlantic are pointing towards a recovery this morning.
The Euro bounced off its lows below 1.14 yesterday and this morning a correction attempt is under way. Fresh German and Eurozone GDP data and the ZEW Survey report may help the Single currency extend this recovery. Bloomberg expects German growth to have rebounded over the last month and if we see an encouraging reading in the ZEW data as well then the Euro will attempt to climb above the 1.1450 figure. The question is whether the shared currency will be able to overcome the 1.15 mark which is the major resistance. As long as prices remain below this level the bias remains bearish but if we see a break higher then this could encourage traders to rejoin the bulls' side. On the opposite case, if the Euro rejects this resistance a consolidation between 1.1350 and 1.15 will be the most likely scenario.
The Pound will also be front and center this morning in light of the UK employment data release. Expectations are set for a steady printing of the unemployment and wage growth components which will not help Sterling find positive momentum. However, with the Pound oversold in the medium-term charts a technical recovery might take place; the respite seen in all markets this morning could prompt short-term focused traders to take some profits off the table. From a technical perspective though, as long as the Pound remains below the 1.30 mark the broader bias points towards more losses soon with the 1.28 area coming into focus.
Commodities have been rather volatile over the past 24 hours with Gold breaking lower and Oil briefly dipping below $66. For the yellow metal, the technical bias is clearly bearish, Dollar's momentum is not helping Gold develop any kind of “safe have” demand and after it broke below the $1,200 figure yesterday the bears seem to remain in control. The calmer bias seen in the markets this morning will not likely help Gold attract demand; even though some profit-taking could prompt a short-term recovery the next level to the downside seems to be the $1,185 area. Oil recovered immediately after yesterday's losses indicating longer-term demand which, if it manages to extend higher, should help prices move towards the $69 mark again.
Equities are seen opening higher this morning after a negative session at the start of the week. Investors' worries that the situation in Turkey might spill over to Europe are dissipating for the time being and this change in sentiment will help stocks recover. News that the US made it clear that they will not back down from this confrontation with Turkey until the detained US pastor is released is a sign that at least the two sides are talking to each other, downplaying the aggressive tone coming from Erdogan over the weekend.
MARKET EVENTS TO WATCH
- UK Unemployment Rate - 12.30 pm
- Euro-Zone Gross Domestic Product - 1pm
- German/Eurozone ZEW Survey - 1pm
All times are GMT +4.
Written by Konstantinos Anthis, Head of Market Research