European update – Trade war, Fed, gold, oil

Caution Ahead of Trade Talks

European markets are edging lower and US futures eyeing a similar open, as traders display caution ahead of US-China trade talks later in the week.

Source – Thomson Reuters Eikon

I wouldn’t say there’s much optimism ahead of the talks, we’re very much getting the usual rhetoric from the Trump camp and China seems intent on an agreement around areas that are easily resolvable, something the US President does not yet seem particularly receptive to, although that could change.

But they’re still of crucial importance and in this environment, investors seem more comfortable waiting to see how things pan out. The Fed minutes on Wednesday add an additional layer of interest, with the central bank seen as having done just about enough so far to sustain markets.

Of course, Powell will make two more appearances ahead of the meeting which could steal the show if he’s seen to be yielding to market demands for more rate cuts, as many as two this year. That would be out of character for the Fed Chair though who will likely stick to the party line.

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Gold traders not abandoning ship just yet

Gold is back below $1,500 but traders aren’t rushing to abandon ship just yet, a sign that sentiment remains fragile across the markets. That may not last though if $1,480 falls again as the near term trend is very much against gold.

A break of this will draw attention back to $1,460 but the correction could be deeper, with $1,440-1,450 potentially offering further support. Even this may not hold up though, especially if the dollar remains strong.

Gold Daily Chart

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Oil stumbles after rebound

Oil prices have been edging higher over the last few days as it continues to test the summer lows around $55-57. It has run into some resistance around $60 in the near-term, as global growth fears persist and focus shifts back to the worrying demand side of the equation.

The Saudi oil facility attack a few weeks ago has been long forgotten it seems, with any premium in prices long gone. Traders are instead left focusing on the weaker economic numbers we’ve been seeing, particularly in global manufacturing, but as we’ve seen overnight, that is spreading to services.

Brent Daily Chart

Economic Calendar

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.