USD/JPY and AUD/USD both gain following US-China trade talks announcement, GBP outperforms
Safe haven currencies in retreat this morning while high-beta and commodity currencies outperform on increased risk appetite.
EUR/USD: Heavily retracing off the low as bearish technicals get tested
Yesterday’s move put a dent in the bear trend technical overview for this pair, with market focus mostly in a risk-on attitude following an easing of risks, and with this morning’s announcement of US-China trade talks aiding high-beta currencies and hurting safe haven ones. Retail traders weren’t complaining though, with previous heavy long bias of 75% dropping to 6% as of today morning on long profit-taking. In terms of data, service PMI figures showed ongoing expansion as expected, and while there’s German factor orders this morning, the focus will be more on the USD aspect given ISM and ADP tonight, and the closely watched NFP and Powell speech tomorrow.
GBP/USD: Pound outperforms as no-deal Brexit vote passes, political uncertainties remain
Parliament voted to prevent a no-deal Brexit, and with the likelihood of it dropping the pound outperformed for the session. As it stands however, uncertainties still remain regarding elections, and any political announcements in this regard may keep the pound more volatile. UK services PMI was worse than expected yesterday though avoided contraction, and with UK data relatively light today and tomorrow, the economic calendar will shift its focus towards significant US data. From a technical standpoint – and they’ve been hit hard by fundamental forces – the pair’s bear trend line on the daily chart is just barely holding and still below all its main long-term moving averages. Retail bias is down 5% on long profit-taking, with more needed to undo those longs given they’ve been initiated at higher price levels.
USD/JPY: Yen lags heavily as US-China trade talks and easing of risks dent safe haven appetite
Safe haven appetite was dented yesterday on a slight easing of risks, and the announcement of US-China trade talks earlier this morning has put it in further retreat whereby its price is hovering near its short-term resistance level. But the gains in USD/JPY were limited given the greenback was the second-worst performer yesterday, and overall its consolidatory overview showing conflicting technicals continues to rely on either risk-on/off scenarios for significant movement, or significant data like tonight and tomorrow’s US data. In the bond market, Japan’s 30-year auction netted an average 0.14% compared to the last one’s 2.9%, but with bid interest the same (unlike Germany’s 10-year where the Bundesbank had to snap up the remainder of its negative-yielding bunds due to a lack of interest).
USD/CAD: Canadian dollar outperforms on surge in oil and BoC’s unchanged monetary policy
The Bank of Canada kept rates on hold at 1.75% as expected with no hints of future rate cuts, with markets pricing in a rate cut before the end of the year. The lack of easing and the combination of a surge in oil prices aiding the commodity currency’s energy underlying helped make it the second-best performer after the pound. In terms of significant data, it’ll have to wait until tomorrow where both aspects of this pair will be in focus, as US NFP and Fed Chair Powell’s speech will effect the numerator, while Canadian employment data will keep the denominator volatile. Any significant contrasting data between the two (or further changes in the price of oil with EIA’s release tonight) will likely make this pair the most volatile, and in the face of fundamental data technicals ought to be shelved. From a sentiment standpoint, retail bias is down 9% as averaged-in shorts take profit following weeks of movement at the highs.
AUD/USD: Outperforming heavily following successive risk-on plays
The high-beta and proxy currency finished the day higher yesterday in an easing of risks and is up today morning on news that US-China trade talks are set for October. Better than expected Australian trade data released this morning never hurts, and tomorrow’s economic calendar will include construction data. However, with significant US data in store and commodities making fresh highs, those items should be noted prior to initiating a trade in this currency pair, especially as those fundamentals could easily upend its current technical overview that has shifted from what was a stalling and weakened bear trend oscillating at the lows to a more consolidatory outlook with its price at its short-term resistance level, and with a positive DMI cross occurring yesterday. On significant news contrarian strategies will be more ideal, especially as fading and reversals could be prone to getting stopped out.
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