Contracts on U.S. indices advance with global stocks as U.S.-Iran tensions ease. While Treasurys and oil found their footing, gold and the yen extended a selloff.
This recent geopolitical headwind comes against the backdrop of an improving narrative for the U.S.-China trade war and a U.S. Fed that joined major global central banks in supporting the economy, alongside low rates, low inflation and low growth — creating a Goldilocks economy — and helping investors accept risk.
U.S. futures extended an advance, building on a rally for their underlying gauges, after U.S. President Donald Trump's remarks were considered tempered after a restrained Iran response to the U.S. air strike that killed General Qassem Soleimani, commander of the Quds Force last week.
The STOXX Europe 600 Index opened higher, forming simultaneously a rising gap and an upside breakout of a congestion serving as a continuation pattern – rising for the third straight day and scoring a new record, to boot.
Asia was painted green across the digital boards. Japan’s Nikkei outperformed, surging 2.31%, and even Australia’s ASX 200, the lagger, gained 0.83.
Treasurys were sold off after Iran’s retaliation was not as bad as feared. Technically, yields returned to struggle with the 200 DMA, which has been a focal point for rates since Dec. 12, after yields crossed above the downtrend line since November 2018. Rates seem to be struggling between the long-term downtrend whose top was November 2018 and the short-term uptrend, from the Sept. 3 bottom.
The dollar extended the rebound against the yen to the fourth day, crossing back above all the major moving averages. However, the dollar-yen pair is still below the December highs, which met a resistance that forced the pair below its uptrend line since late August.
Gold, too, retreated from the heights of fears of military escalation in the Middle East. Gold has had a powerful rally, opening the possibility for profit taking. We can see how far it surged above its recent uptrend line below the $1,500 psychological level, and before that, by the longer uptrend line, at $1,365.
After dropping for three days, oil established its footing. Technically, it found support above the 50 DMA, which recently climbed above the 200 DMA triggering a Golden Cross, at the bottom of a rising channel. The MACD and RSI suggest oil has room to fall.
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- The yield on 10-year Treasuries fell less than one basis point to 1.87%.
- Germany’s 10-year yield climbed one basis point to -0.19%.
- Britain’s 10-year yield increased one basis point to 0.83%.