Written by Hussein Sayed, Chief Market Strategist at FXTM
European and Asian stocks received a boost on Tuesday as Wall Street’s all four major indices closed at record highs for the first time since 1999. The bulls ignored the slight pull off in global treasury yields, but rather focused on the oil rally which was driven by renewed hopes that OPEC members will strike a deal next week. There are clearly no signs of profit taking yet, with Donald Trump’s reflationary economic plans of cutting taxes, infrastructure spending and less regulations remain to be the number one reason fueling stocks’ gains. Although the bull might become tired soon, shorting equities at record highs doesn’t seem a great idea.
WTI has rebounded by more than 15% from its November 14 low to trade at its highest levels in three weeks after comments from Iran and Iraq, who are considered OPEC’s most hesitant members to cut or freeze output are sending signs that they are willing to join forces. Russia was also an additional factor contributing to the rally with Putin saying he sees a high probability that an agreement to curb production will be reached by end of November. Prices are clearly driven by sentiments and there is still more room to the upside, so it’s better for OPEC to be united in Vienna, not only to spike prices, but to gain back some credibility.
The greenback is showing some signs of strength after retreating from 13.5-year high yesterday. EURUSD which broke a record losing streak on Monday faced strong resistance at 1.0650, sending back the pair at near 1.06. Meanwhile USDJPY also recovered towards 111 after tumbling by more than 50 pips, after news of a 7.4 magnitude earthquake hit northern Japan early today. There are no tier one economic releases on the calendar today, so expect currency markets to continue trading in narrow ranges for the rest of the day.
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