European markets are under the influence of feeble German GDP data. The strongest economy of the Eurozone is sick . Its GDP shrunk to – 0.1 percent while the previous reading was 0.4 percent. The euro-dollar pair bounced back on the back of this data because the number was in line with expectations.
Speculators aren’t convinced that the current upward move will last for long because it is highly likely that France, Italy and Spain may follow the same route very soon. Moreover, the European Central Bank is going to look at the overall picture in Eurozone and that only tells one story; the sick man needs its medicine. Hence, the German Chancellor, Angela Merkel, will have to unleash a new fiscal stimulus package for her country to combat the effects of U.S.-China trade war. This may just do some of the tricks for Eurozone’s economy.
Don’t Buy The Old Film
As for the US markets, if you are thinking that the dead cat bounce is going to last for some time, then perhaps you may be wrong. Traders should not be betting on the long side when it comes to equities and this is because we have seen these lifeless promises several times before. President Trump decided to delay the new tariffs on China by another 3 months and traders reacted way over the top yesterday.
Yes, I concur that it is a step in the right direction, but I am not convinced it is going to yield anything again. Yesterday’s bounce in the equity markets was purely due to way too oversold levels. A corrective move was long due. But this doesn’t mean that the current downtrend is going to change. The downtrend is likely to continue.
Chinese Economic Data – Centre of Attention
Moreover, I do not think that traders have paid much attention to the important economic numbers out of China. The Chinese industrial number was much softer, it printed the reading of 4.8% missing the forecast of 6% and the retail sales data also echoed the same message. It came in at 7.6% while the forecast was 8.6%.
So, do you still think that there is a valid reason to celebrate?
As long as we do not see any serious progress on the trade war front, any rebound in the equity market could be an opportunity to slam it down.
Gold Price Still Likely To Move Higher
So, overall, we could see a little bit of risk on today. The gold price may struggle to touch its highest level of the year which sits at $1,535. But I am convinced the path of least resistance for the gold price is skewed to the upside. it is only a matter of time before bulls push the price back above the 1500 mark and start targeting the level of $1,550 again.