Top Story

EU stocks could join Wall Street rally if US-China trade dispute resolved

There’s no doubt in my mind that Fed Chair Jerome Powell was deliberately preparing the market for a pause in the once-a-quarter rate hikes in 2019 yesterday. So, I think the Fed will hike one more time in December, but it will then go in a wait-and-see, data-dependant mode. While this clearly is a negative development for the dollar, the frustrating thing for the dollar bears is that other central banks are also not in a rush to normalise their respective monetary policies. As such, the downside for the dollar could be limited — especially against the likes of the Swiss franc and Japanese yen, with the Swiss National Bank and Bank of Japan continuing to be among the most dovish of major central banks out there. But the Fed turning less hawkish is definitely good news for emerging market currencies, some of which have had a year to forget. If EM currencies now stabilise then this should be good news also for equities, particularly if the US and China manage to end their trade dispute at the G20 summit which begins on Friday.

DAX could benefit from a potential rebound for EM currencies

A potential rebound in EM currencies should help to boost demand from places like China again, which should be good news for export-oriented economies such as Germany. The German DAX index could therefore stage a rebound, if things unfold as we have outlined above. Technically, the DAX may have already created a reversal pattern after failing to hold beneath its old low at 11050. This potential false break reversal pattern would be confirmed upon a break above the most recent high at 11440, although a break of the downtrend will also be a bullish development. Conversely, a break below the 11270 support level would be deemed a bearish outcome.

Source: TradingView and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.