Global stocks were left vulnerable to losses during trading on Tuesday following the hefty decline in oil prices which weighed heavily on global sentiment consequently souring investor risk appetite. Asian markets descended into the red territory with Japanese shares faltering post BoJ disappointment. In Europe, no prisoners were taken as the amalgamation of depressed banking stocks and tepid manufacturing data obstructed attempts for upside gains. Wall Street was pressured by the decline in energy shares and could be poised for steeper losses this week if the bearish domino from Asia and Europe encourages investors to attack American stocks. The stock market rally may be displaying signs of exhaustion with the central bank inaction and concerns over the global economy potentially diminishing appetite for riskier assets.

WTI Crude cuts below $40

WTI Crude has descended into a bear market with prices plunging over 20% from its peak in June as the persistent concerns over the excessive oversupply haunts investor attraction. Sentiment remains bearish towards the commodity and the mounting anxiety towards its incessant declines could provide an additional foundation for bears to install another round of selling. The factors supporting bears remain overwhelming while pessimism amongst investors over the future of oil has boosted speculative shorts. Dollar weakness did little to quell the selloff and further losses could be expected as the horrible mixture of oversupply fears and depressed demand attract sellers to attack. From a technical standpoint, the breakdown below $40 on WTI could open a path towards $37.50.

Sterling bears on the prowl

Sterling weakness remains a recurrent theme in the currency markets with the combination of uncertainty and expectations over the Bank of England cutting UK interest rates encouraging sellers to pounce. The currency remains highly sensitive and seems to react explosively to negative domestic data which reinforces speculations of a potential UK interest rate cut. Construction PMI was positive on Tuesday with the release exceeding expectations which offered Sterling bulls a temporary lifeline. Regardless of these short term gains, sentiment towards the Sterling is still bearish and the currency could enter a mode of standby ahead of Thursday’s Bank of England monetary policy meeting.

Dollar remains pressured

The Dollar displayed signs of weakness during trading this week following the string of soft US economic data which punctured expectations over the Federal Reserve raising US rates in 2016. ISM Manufacturing PMI fell below expectations on Monday while last week’s soft second quarter GDP continues to pressure the Dollar further. Although the overall sentiment still remains bullish towards the Dollar, Friday’s NFP may have to exceed expectations to bolster hopes of the Fed breaking this trend of central bank inaction. Investors may direct some attention towards Wednesday’s ADP Non-Farm Employment Change for additional clarity on the health of the US economy ahead of Friday’s release.

Commodity spotlight – Gold

Gold bulls were on the offense on Tuesday with prices charging towards fresh three-week highs above $1360 as the potent mixture of Dollar vulnerability and growing uncertainty over the Fed’s decision to raise US rates provided a foundation for bulls to attack. It seems this yellow metal is regaining its safe-haven allure and could be set for further inclines if the persistent concerns over the global economy continue to attract anxious investors to safety. Dollar weakness from the string of soft US data could ensure Gold remains buoyed while the lingering post-Brexit uncertainties propel prices higher. The Non-Farm payroll will be very critical for Gold this week with the result lurching Gold higher or potential dragging prices lower.

From a technical standpoint, Gold is bullish on the daily timeframe and previous resistance around $1345 could transform into a dynamic support which encourages a further incline towards $1370.