Global stocks slump, US dollar gains as risks remain
European stocks and American futures dipped today as traders worried about the volatile sentiment in UK stocks and a cash squeeze in China. The DAX index dropped by more than 1% while the FTSE 100 index fell by more than 0.9%. In France, the CAC 40 index declined by 1.1%. In the United States, futures tied to the Dow Jones fell by more than 295 points while those linked to the S&P 500 fell by 1.15%. The biggest concern is about the recent volatility in US equities where traders in social media have been hyping some of the most shorted companies. As a result, the fear and greed index gauge has dropped to the fear zone.
The euro wavered today after Germany released better-than-expected preliminary GDP data. The country’s economy contracted by 2.9% in the fourth quarter after falling by another 3.9% in the previous quarter. This decline was better than the expected contraction of 3.4%. Further data showed that the German unemployment rate remained unchanged at 6.0% in January while the unemployment change dropped by about 41,000. Elsewhere, in Spain, the economy contracted by 9.1% in the fourth quarter.
The Australian dollar declined slightly today because of the relatively stronger US dollar due to rising global risks. The US dollar index rose by more than 0.30%. Earlier today, data by the Australian Bureau of Statics showed that the producer price index rose by 0.5% in the fourth quarter leading to an annual decline of 0.1%. Elsewhere, in Japan, household confidence fell to 29.8 while housing starts declined by 9%.
The EUR/USD pair was little changed today and is trading at 1.2120. This price is slightly below this week’s high of 1.2190. On the hourly chart, the price has moved below the 25-day moving average. Also, the pair seems to have formed an inverted cup and handle pattern. The current consolidation is partly because it is in the handle part of this pattern. In technical analysis, this is usually a bearish sign. Therefore, the pair will likely continue falling in the near term.
The GBP/USD declined today because of the stronger dollar. It fell to a low of 1.3675, which is along the lower line of the ascending channel. The price has also moved below the variable index dynamic average. At the same time, oscillators like the Relative Strength Index (RSI) and MACD are at the neutral level. As such, a break below the support will be a sign that bears have prevailed, which will see it drop to 1.3630.
The USD/JPY price bounced back today after the mixed economic data from Japan. It rose to an intraday high of 104.30, which is the highest it has been since November last year. Before the jump, the pair had formed a bullish flag pattern, as shown below. The 25-day and 15-day moving averages have made a bullish crossover while the MACD has continued to rise. The pair will continue rising as bulls aim for the psychological level of 105.00.