• Market mood lifted by US-China trade optimism
  • Pound braces for another showdown in Westminster
  • Dollar sags into quiet trading week
  • Gold hunts for fresh directional catalyst

There is a mood of optimism and hope across financial markets on Tuesday morning thanks to upbeat comments from President Donald Trump regarding the progress of trade talks with China.

Given how the President said China has signaled that negotiations over the initial trade deal are moving in the right direction, expectations remain elevated over both sides signing an agreement at a meeting in Chile next week. This positive sentiment is supporting Asian stocks during early trading and is likely to trickle down to European markets later this morning. While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour.

Pound volatility expected as Brexit drama continues

The past few days have been volatile for the British Pound due to ongoing uncertainty and constant drama revolving around Brexit.

Sterling seems to be catching its breath early this morning as MP’s prepare to vote on Boris Johnson’s Withdrawal Agreement Bill later this afternoon. If the deal hits a brick wall, the ball then gets hurled back to Brussels as we await confirmation of the Government’sBrexit extension request. Should MPs back the Prime Ministers deal, a programme of motion will take place shortly after, followed by a debate on amendments of the bill on Wednesday. Regardless of what happens today, the British Pound is set to remain volatile.

With regards to the technical picture, GBPUSD has broken above the bearish channel on the weekly timeframe. A daily and weekly close above 1.30 should trigger a move higher towards 1.3160 in the medium term. Should 1.30 prove to be a stubborn resistance level, Sterling could decline back towards the 1.2700 support.

Dollar Index poised for further declines?

There has not been much action in the Dollar Index (DXY) since the start of the week with prices trading around 97.76 as of writing.

The heavy selloff witnessed last week has placed bears in a position of power. The DXY is under pressure on the daily charts with prices trading under the 200 Simple Moving Average. Sustained weakness below the 97.50 level should encourage a decline back towards 97.00 in the short to medium term.

Commodity spotlight – Gold

Gold is likely to remain on standby in the absence of a fresh directional catalyst.

The precious metal is waiting for the next big theme or market-moving event that will influence global sentiment and risk appetite. Until something fresh is brought into the picture, Gold is positioned to trade within a modest range in the short to medium term.

Looking at the technicals, all eyes will remain on the psychological $1500 level. Sustained weakness below this point should inspire a decline towards $1470. Alternatively, a solid breakout above $1500 will most likely open the doors towards $1515 and $1525, respectively.

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