FTSE +16 points at 7316
DAX +95 points at 11852
CAC +34 points at 4901
Euro Stoxx +18 points at 3327
Traders trimmed their net long USD speculative positions to a four-month low last week, as net short JPY positions retreated to a two-month low.
Gold made a soft start to the week. After three straight weeks of gains, gold ETFs (Exchange Trade Funds) and hedge funds waned their long positions, either due to intermediate profit taking before a further rise, or less likely due to the hawkish Federal Reserve (Fed) rhetoric. The price of an ounce remained below $1235 in Asia. Last week’s double top at $1245 could discourage the short-term longs and push the price of an ounce down to $1215 (minor 23.6% retracement on January 14 to February 8 decline), before $1198 (major 38.2% retrace).
Pullbacks in gold markets could be interesting opportunities to strengthen long positions as the mid-term view in the market remains bullish on gold. The ETFs worldwide expanded their long gold holdings by 2.4% on month to February 17. Gold is an efficient hedging instrument against the inflation and the market volatility. As such, the Trump-based reflation trade could keep the buying interest tight, as headwinds on higher US rate expectations are mostly priced in at this point.
The yen gave back gains against the greenback. The appetite in the USD/JPY improved in Tokyo, as Japan’s larger than expected trade deficit revived the Bank of Japan (BoJ) hawks at the early hours of trading. Japan printed 1086.9 billion yen trade deficit in January, versus -625.9 billion yen expected and -640.4 billion yen a month earlier. The pair advanced to 113.24. The strengthening positive momentum suggests the possibility of a further recovery to 113.35 (200-hour moving average), 113.65 (100-hour moving average), before hitting the 114.00 option barriers. Solid support is presumed at 112.65 (100-day moving average).
Nikkei (+0.09%) and Topix (+0.16%) were better bid on the back of a softer yen, yet the surprisingly high trade deficit keep the appetite limited.
The US dollar traded mixed versus the G10 currencies. After being the major driver of currency markets last week, the US dollar is expected to stay sideways this Monday due to the US bank holiday. Kraft (NASDAQ:KHC), Unilever (NYSE:UN) no deal will likely remain on the headlines after Kraft gained more than 10% at Friday’s close. Kraft pulled back its $143 billion bid as a reaction to Unilever's unwillingness to start talks. Although Citi analysts claim that Kraft’s withdrawal would 'unlikely be the end’, we could expect a sharp correction in both Unilever's share price at today's open and Kraft’s stock price at Tuesday’s open.
The EUR/USD hold ground above the 1.06 mark. Last week’s failure to trade above the 100-day moving average (1.0671) may have reinforced the resistance at this level. The bias in the EUR/USD remains negative, as put options trail below the 1.0625 strike at today’s expiry. The upside potential could be limited throughout the day. Meanwhile, a break through 1.0670/1.0680 resistance could trigger an uptick to the critical 1.0707 (major 38.2% retracement on post-Trump decline).
Cable stabilized around the 100-day moving average (1.2420). In the absence of major macroeconomic news, the GBP/USD will certainly remain rangebound between 1.2370 – 1.2575 (50-day moving average – minor 23.6% retracement on post-Brexit sell-off) before Wednesday’s GDP data. GBP/USD below 1.25 is favourable for FTSE buyers. The FTSE futures (+0.39%) were well bid at the overnight trading, hinting at a solid open in London.
All major European indices are poised for a strongly positive open this Monday.