Main Market Themes
- The financial markets saw a roller-coaster day yesterday, torn between US political noise and trade headlines.
- US stocks dropped modestly overnight in reaction to ongoing US political drama as a whistleblower report exposed President Trump’s attempt to seek Ukrainian help to intervene in the 2020 General Election raised impeachment risk.
- On a brighter note, China’s foreign minister said that they are willing to buy more US products needed by the Chinese markets on the sideline of the UN General Assembly and expressed hope that both side could take more enthusiastic measures to reach a deal.
- Bonds rallied as sentiments turned less upbeat leading treasury yield to slip by 2-5bps along the curve. Benchmark 10Y UST yield dropped by 5bps to 1.69%.
- Oil prices closed mixed amidst overall market jitters, Brent crude rose 0.6% to $62.74/barrel but WTI was down 0.1% to $56.41/ barrel
- Still looking towards the USD strength, the majors continued to retreat from the USD on Thursday with the EUR (note dovish comments from the ECB’s Lane) and GBP underperforming across the board. Despite the Fed’s Barkin sounding less than dovish, there was no single driver of dollar strength with traders remaining antsy amid a range of usual negatives including USD funding pressures, Trump whistleblower/impeachment concerns, Brexit, month/quarter end flows, Sino-US and EU-US trade tensions. Overall, the DXY closed above the 99.00 region.
- On the calendar today, look to the the Fed’s Quarles (1230 GMT), the ECB’s Lane and Hernandez at 1230 GMT and 1300 GMT, and the Fed’s Harker at 1700 GMT.
EURUSD (Intraday bias: Neutral, Bearish below 1.0960 targeting 1.0885 test)
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 put options due next week EUR1.6bn at 1.0900 and EUR1.3bn at 1.0875.
EURUSD…UPDATE anticipated test of 1.0928 lows plays outs out with fresh year to date lows as 1.0960 continues to cap upside expect a test of bids to 1.0885. Only a move back through 1.0980 would reduce bearish pressure.
GBPUSD (Intraday bias: 1.2310 target achieved)
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 downside target achieved will be watching for intraday reversal patterns towards 1.22 to attempt long positions for a move back through 1.23. A failure to find support in the1.22 zone would be a bearish development exposing 1.20 as the next downside objective, on the day only a move back through 1.24 would delay further downside.
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.
USDJPY…UPDATE as 107.40 supports intraday expect a test of offers to 108.20, a breach of 107.40 opens another test of 107.
AUDUSD (Intraday bias: Bearish below .6800 targeting .6688)
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. DTCC shows decent strikes maturing next week – 0.6800-05; and around 0.6750.
AUDUSD…UPDATE downside extended to test bids to .6740 as .6800 caps the upside expect a test of bids towards .6725. A move back through .6780 is needed to renew bullish bias
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.