U.S stocks retreated among Deutsche Bank troubles generating a shift to risk off trading. Fear that woes would spread throughout the financial sector saw the DAX drop 300 pips and the S&P slip 0.9% evaporating the gains made by from the OPEC agreement. Risk aversion saw JPY gain against all pairs. Should we see further effects on stocks for Deutsche and the financial system, key currencies to watch will be NZD/JPY currently at 73.250 with target at 72.350 should the downtrend continue.
AUD/USD has also been affected by the risk off mood swing overnight worsened by a 2.6% drop in the Dalian iron ore price complimenting a 1% fall in all ore’s. The looming Australian long weekend also added complications for traders in Sydney. Tuesday’s week low at 0.7612 may well be challenged if bearish sentiment continues and selling heads towards the 50 day moving average at 0.7598.
XAU priced currently at 1323.30 did not experience the expected reaction following the stock markets selling continuing its small downtrend towards the recognised support of 1310.00. If the environment continues to worsen this evening gold may well rally to target 1336 before its forced to break trend.
GBP Current account data tonight will be another signal before PMI on Tuesday as to whether the UK economy continues to perform following Brexit and when, if at all, a negative effect will take hold. The main pairs to watch are GBP/AUD and GBP/NZD.