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The markets opened with a strong risk-off sentiment after the UK government unveiled their tax cuts plans. The Pound is the biggest loser despite recovering much of the losses as investors price in an emergency 150bps hike intervention by the BoE by November. The US dollar surged higher ahead of Fed Chair Powell’s Tuesday address. ECB, BoE, and Fed members will be speaking later in the New York session.
GBPUSD plunged by -4.45% early Monday morning preceding Friday losses. The markets took fright at the latest UK government tax plan causing a major sell-off in Pound pairs. The USD gained strength on safe-haven bids amidst hawkish Fed sentiments. The pound plunged to a record low against the USD at 1.0350 level and a break below that level could reinforce selling pressure towards the parity level. Upside gains are capped by the 1.1000 psychological level. However, a break above that level could trigger buying pressure towards the 1.14000 level.
EURCAD was slightly lower by -0.17% as the German Ifo business index fell from 87.0 to 84.3. The Euro recovered ahead of ECB members’ speech ahead of this week’s Eurozone Inflation print. The Canadian dollar struggled to maintain gains ahead of Canadian Wholesale Sales data and the drop in crude oil prices weighed on the currency. The pair recovered earlier losses after bulls bounced off the 1.3000 psychological support and upside gains are capped by the 1.3200 level and a break above that level could see bulls rallying towards the 1.3400 psychological level.
AUDJPY recovered Friday’s losses by +0.32% post-BoJ comments on FX intervention. BoJ Governor Kuroda indicated that the Japanese government would continue to maintain an ultra-loose policy despite an intervention. There is still weakness in the Australian dollar as investors pay close attention to AUD Retail Sales due for release on Wednesday morning. The pair found near-term support at the 93.20 level, an 8-week low and upside gains are capped by the 94.00 psychological level. However, a break below the near-term support, bears could trigger selling pressure toward 90.50, a 4-months low.
European stocks slumped in the European session as markets shift focus to the BoE intervention. FTSE100 dropped by -0.83% breaching a 6-months low at 6975 level and the next critical level is at 6900 level. DAX edged lower by -0.51% as the index enters the negative territory. Bulls are capped by the 12500 psychological level, while downside targets are at 12000 and 11500 levels in the near term. CAC40 lost -0.84% and bears are currently trading above a 19-months low at the 5750 level. A break below that level could trigger selling pressure towards the 5600 and 5200 psychological levels.
US stock futures flirt near bearish levels as US Yields climb to a 12-year high ahead of Fed Chair Powell on Tuesday. S&P500 futures slumped by -0.90% towards a 3650 support and critical levels to watch out for are the 3700 resistance and 3500 support. Nasdaq100 futures were down by -0.86% as Fed tightened weighing on Tech stocks at a 23months support level. Critical levels to watch out for are the 10800 support and 11500 resistance. DJIA index edged lower by -0.86% breaking below the 29650 level and the next target is at the 28500 level.
Gold remained on the backfoot on Monday as investors remain cautious ahead of Fed speeches this week. The yellow metal dropped by -0.22% as bears continue to dominate the trend below 1680, a previous-support-turned-resistance. Bears may target 1600 support if the 1645 level fails to hold.
