CFD – Mid-day Euro Snapshot August 28

  • Geopolitical worries has equities on the defense
  • Curves flatten on Ukraine headlines
  • Safe haven bets supports gold

The German DAX has been on the defensive all day, especially after Ukraine’s comments of a Russian invasion. It’s currently down -1.29% from its all time high and knocking on the door of Monday’s bottom (9,414). Through here with any momentum, all should starts to swing things more bearish with 9,334 Fibo of this month’s gains being the next key level on the downside.

Gold is up today ($1,292.50 +0.71%), but off its intraday highs, following today’s US economic news – preliminary GDP beat expectations (+4.2% vs. +4.0%), while US weekly jobless claims fell -1k. A stronger labor market does not signify the need for ‘extraordinary’ monetary conditions. The uptick in Ukraine/Russian tension in being felt in both metals and energy markets. Gold’s weekly resistance remains untested at $1,299-1,300 while support moves up to $1,280.

Both the Bund and Gilt curves are flatter on the geopolitical headlines. Ukraine President Poroshenko’s invasion comments has sent December 10-year Gilt prices to new highs and managed to flatten 2/10’s for Bunds and Gilts, respectively.

The periphery bonds are the worst performers as investors seek sanctuary in the go to safer haven UK and German sovereign debt market. The 10-year Greece/Germany spread has been the worst performer (+20bps wider to +470bsp). Outright 10-year Greek bonds have backed up from the June low at +5.475% to just shy of +5.80%. Portugal is the second worst offender, and this after outperforming for most of this week – 2.95% was this week’s low and technically, through +3.25% will be a concern to the market.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell