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Risk-off returns as stocks and Oil slump; Euro PMIs disappoint


  • European markets fall lower on risk-off flows 
  • Eurozone PMIs suggest slow down may be more than temporary
  • US500 closes gap higher
  • Oil slides on large DOE build
  •  GBP falls after UK CPI drops back

There’s been some pretty large declines for stock indices today, with the bright start to the week subsiding. Looking at the DE30 daily chart we can see that the yesterday’s candlestick painted a doji pattern within the range of mid-term resistance zone. This pattern indicates indecisiveness of investors and may herald a trend reversal and barring an impressive recovery this evening an evening star formation will be printed

A negative Asian session set the tone for a red day, and things got worse not long after the European open with the release of the latest PMIs from the bloc. The PMIs are dropping like stones - 5th in row for manufacturing (lowest since January 2017) and 4th for non-manufacturing (lowest since February 2017) effectively erasing the whole 2017 gains. That’s an ugly picture for the ECB. The EURUSD has fallen to its lowest level of the year and dipped below the 1.17 earlier. 

 The US500 has also declined today after the market gapped sharply higher on Sunday’s open after the US-China trade truce was declared over the weekend but a failure to take out the 2740 level decisively has seen the market fall back to the bottom of its recent range and close the gap. If traders can defend the 2700 floor successfully then the range will remain in tact, but should bears manage to push the market below 2700 then a larger decline becomes possible.

The weekly DOE inventories always feature prominently on the economic calendar of oil traders, and this afternoon’s release is a good example of the impact it can have on the market. The print of +5.8M was well above both the expected (-2.5M) and the prior (-1.4M) and also represents a large beat on last night’s API equivalent (-1.3M)

British inflation slowed more than forecast in April illustrating that companies still faced hurdles in passing rising production costs on consumers. Inability to lift prices mirrors tight competition as well as a subdued demand. The GBPUSD has extended its slide following the inflation release, but it’s nearing the first more important support line set at 1.33. 


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