Main Market Themes
- US stocks and treasuries yields fell overnight as risk-off mode plagued markets following US House Speaker Nancy Pelosi’s announcement of an inquiry to impeach President Donald Trump.
- Trump lambasted China at the UN General Assembly, and investors were concerned that this could derail current US-China trade talks. Adding to the worried was the poor reading of September US consumer confidence, reflecting Americans’ rising concerns over slower growth outlook.
- Oil prices plunged after Trump ratcheted up attack on China alongside a buildup in US crude stocks- Brent crude settled 2.6% lower at $63.10 and WTI dropped by 2.3% to $57.29/barrel.
- In the UK, the Supreme Court had ruled that PM Boris Johnson’s advice to the Queen to suspend/prorogue the Parliament was unlawful, returning Parliament back into session and allowing lawmakers more time to scrutinise Johnson’s Brexit plan ahead of the 31 Oct deadline.
- It’s not just the impeachment static. In the near term, the USD may remain susceptible to impeachment concerns but broader risk aversion may well continue to muddy the dollar’s broader directionality. Apart from global macro negativity, note that broader Sino-US trade tensions remain near the surface with Trump’s isolationist address and diatribe against China at the UN.
- The calendar today includes a heavy line-up with ECB and Fed speakers. Watch in particular for comments from ECB’s Coeure (1400 GMT) and Fed’s Evans (1200 GMT).
EURUSD (Intraday bias: Neutral, bullish above 1.10 supports, bearish below 1.0960)
From a technical and trading perspective EURUSD has potentially posted a major double bottom at the yearly S1 pivot. Price action is setting the stage for a more meaningful recovery to the upside, however, a sustained failure below 1.10 opens 1.0965 as intraday support ahead of 1.0930. A move back through 1.1050 is needed to suggest downside risk has been eliminated and reset focus on offers above 1.11. Note Huge option strike at 1.1000 rolls of this week totalling more than EUR7.6bn.
EURUSD…UPDATE we have tested the weekly S1 and have found some initial support the weight of option strikes and the likely gamma positioning should stem a rapid descent from current levels we likely continue to rotate in and around the 1.10 strike at least until the 26th when the major expiries occur
GBPUSD (Intraday bias: Bearish below 1.25 targeting 1.2310)
From a technical and trading perspective I now see the potential for a pullback to test bids towards 1.2385, where I will be watching for intraday bullish reversal patterns to set long positions targeting a test of 1.2650 a failure below 1.23 would suggest a more meaningful correction is underway to retest support at 1.22.
GBPUSD…UPDATE rally on Supreme Court ruling is short lived as 1.25 caps expect a second leg of downside to develop to test the equidistant swing objective at 1.2334, will be watching for intraday reversal patterns around 1.23 to set long positions.
USDJPY (intraday bias: Neutral bullish above 107.50 bearish below 106.40)
From a technical and trading perspective 1.08 objective achieved, as 107.50 contains the correction there is scope for the current grind higher to test offers above 109 where I will be watching for momentum and sentiment divergence to complete the current sequence and present an opportunity to initiate short exposure targeting a move back through 108 and a retest of bids below 107. Note decent option strikes roll off this week; strikes from 107.00 to 109.00
USDJPY…UPDATE prices pulled back to make an early test of 107 bids which have supported on the initial test as 107.80 caps the upside price looks poised to test the pivotal 106.5, failure below 106.40 would be a bearish development exposing stops below the August lows
AUDUSD (Intraday bias: Bullish above .6760 targeting .7000)
From a technical and trading perspective the anticipated correction from the .6900 resistance zone has played out and extended to .6760 as this level supports .6840 becomes the immediate upside hurdle, however, a failure below .6760 would concern the bullish view and expose stops below .6700
Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.