S&P 500 futures point to a record open on trade optimism
Global stocks were mixed today as investors reacted to the postponed review of the China and US trade talks. In Asia, the Hang Seng and Shanghai rose by 0.65% and 2.35% while in Europe, the DAX index and FTSE 100 jumped by 0.11% and 0.35% respectively. In the United States, futures tied to the Dow Jones and S&P 500 rose by 0.20% and 0.30% respectively. The S&P 500 has jumped for the past three consecutive weeks and is slightly below the highest level on record. The current rally has been fuelled by cyclical stocks, including those in the energy and financial sectors.
The Japanese yen strengthened against the US dollar as investors reacted to GDP data from Japan. According to the Cabinet Office, the economy contracted by 7.8% in the second quarter which is worse than the estimated decline of 7.6%. The economy contracted by 27.8% on an annualised basis. This was the worst contraction ever recorded and was the third consecutive quarter in the red. According to the office, the decline was mostly because of an 8.2% contraction of consumer spending, which represents about 50% of the GDP. External demand and capital expenditure declined by 3.0% and 1.5%, respectively.
The British pound was little changed as investors reacted to the Household Finance Index data released by Markit. The index, which measures the financial health of British households dropped to 40.8 in August from 41.5 in July. The drop was mostly because of a sharp decline in job security. Other data released by Rightmove showed that the house price index declined by 0.2% in July. Investors are also focusing on the Brexit meetings that started today in Brussels. Analysts are hoping to see whether the two sides will reach an agreement after failing to do so in the past five rounds.
The EUR/USD pair rose by 0.15% because of the overall weakness of the US dollar. On the four-hour chart, the price is a few pips below last week’s high of 1.1916. The price is above the 50-day and 100-day exponential moving averages. The pair also seems to be forming a bullish pennant pattern that is shown in white. Also, the moving average of oscillator has started to move up. Therefore, the price is likely to continue rising as bulls target last week’s high of 1.1916.
The EUR/GBP pair is little changed at 0.9042. On the daily chart, the price is stuck along the 50-day and 100-day EMA and the 61.8% Fibonacci retracement level. The price is also above the ascending trend line that is shown in white. The RSI has stabilised around 53. Therefore, the price is likely to continue rising as bulls aim for the important resistance level at 0.9150.
The USD/CHF pair declined to a low of 0.9078, mostly because of a weaker US dollar. The daily chart shows that the pair struggled to move above 0.9245. The price is below the 50-day and 100-day exponential moving averages. It is also between the lower and the middle lines of the Bollinger Bands. Also, the signal and main lines of the MACD have moved below the neutral line. Therefore, the price is likely to continue falling as bears attempt to move below the support at 0.9050.