The Trump jitters have returned with a vengeance this week with global stocks coming under renewed selling pressure as uncertainty mounts over Donald Trump’s proposed economic growth agenda. Asian shares were vulnerable to steep losses during early trading on Wednesday posting their largest drop in two weeks amid the risk-off trading mood. In Europe, no prisoners were taken as the bearish contagion from Asian markets contaminated European equities. With recent reports of the Trump administration facing legislative obstacles to a health care bill sparking concerns over the future of the promised corporate tax cuts, Wall Street may be in store for further punishment this evening.
The growing threat of Donald Trump’s proposed pro-growth policies falling short of market expectations may expose stock markets to further downside losses as investors scatter away from riskier assets to safe haven investments.
US Dollar Index breaks below 100.00
The terrible mixture of protectionism fears and renewed Trump jitters have exposed the Greenback to steep losses this week with the Dollar Index breaking below 100.00. Bears have effectively exploited the “dovish hike” to attack the Dollar repeatedly with the uncertainty over Trump’s economic growth agenda providing a foundation for sellers to install renewed rounds of selling. Although the technical break below 100.00 marks a major turning point in the trend, the downside may be limited in the longer term as sentiment remains bullish towards the US economy.
Dollar bullish investors are in desperate need of inspiration to elevate the Greenback and such may be provided by Yellen this week if she provides a hawkish surprise. From a technical standpoint, the Dollar Index is under intense pressure on the daily charts. Persistent weakness below the 100.00 resistance could encourage bears to send the Index towards 99.50.
Commodity spotlight – WTI
Oil prices were vulnerable to downside shocks on Tuesday with WTI Crude descending towards $48 as the growing concerns over the excessive oversupply in the global markets weighed heavily on sentiment. The bias towards oil is turning increasingly bearish and the fading optimism over the effectiveness of OPEC’s supply cut deal has enticed bears to install repeated rounds of selling.
WTI crude may be instore for further punishment moving forward with production in the United States rising consistently and the inflated inventories simply counteracting the efforts of OPEC to stabilize the oil markets. Although most remain somewhat optimistic over OPEC extending its six-month contract, the resurgence of U.S shale coupled with concerns of some members not fully respecting the compliance in cutting production could obstruct the deal.
Much attention may be directed towards the pending EIA data this evening which could expose oil prices to further losses if crude stocks build. From a technical standpoint, the fact that oil markets remain subdued despite the Dollar’s vulnerability continues to highlight how bone-deep the oversupply concerns have become. A breakdown below $48 on WTI Crude could encourage sellers to send prices lower towards $47.00.
Currency spotlight – USD/JPY
The growing appetite for safe-haven assets amid the Trump jitters has boosted the Yen’s allure on Wednesday with the USD/JPY sinking below 111.60. The currency pair is coming under noticeably pressure on the daily charts with the break below 111.60 potentially providing permission for bears to drag prices lower towards 111.00. If the Dollar continues to depreciate and risk aversion intensifies, then the bearish combination could provide enough inspiration for sellers to look beyond 111.00. From a technical standpoint, weakness below 111.60 could act as encouragement for bears to eye 111.00 and potentially lower.
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