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The sterling gives away part of the gains recorded last Friday on the back of the resumption of some mild buying interest surrounding the greenback on Monday.
Despite Cable has regained the psychological 1.30 mark in past sessions and the move allow for some extra upside in the short-term horizon, the scenario looks fragile for the quid.
Indeed, Brexit headlines are posed to dominate the price action and the volatility in the British pound in the next days ahead of the crucial EU Summit later in the week (October 15-16).
The continuation of the upside momentum in GBP/USD could extend to the Fibo leve just below 1.3200 the figure ahead of 2020 highs around 1.3480 (September 1). This move, however, would need a slew of really positive news around Brexit, which does not seem likely just now. On the downside, the loss of the 1.3000 level carries the potential to re-visit the 1.2870 area (Fibo level) ahead of the key 200-day SMA, today at 1.2709.
The sterling gives away part of the gains recorded last Friday on the back of the resumption of some mild buying interest surrounding the greenback on Monday...READ MORE
Bitcoin (BTC) jumped above $11,000 at the end of the previous week and stopped within a whisker of a local resistance created by $11,500. At the time of writing, BTC/USD is changing hands at $11,350, mostly unchanged both on a day-to-day basis and since the beginning of Monday. The pioneer digital currency gained over 6% in the last seven days. However, it is still below the 2020 high.
Bitcoin's market capitalization has increased to $2210 billion, 58.4% from the total value of all digital assets in circulation.
A sustainable move above $11,000 has improved BTC perspectives and offered hope that the coin is ready to realize its bullish potential. From the fundamental point of view, at least three factors imply that the flagship cryptocurrency is well-positioned for a further trip to the North.
1. U.S. Dollar is losing ground
The U.S. currency used to be the vital financial safe-haven in times of market and geopolitical turbulence. However, times change slowly but surely. Overaccomodative monetary policy and the FED's attempts to print its way out of the economic crisis have been eroding people's confidence in the U.S. Dollar as a reserve currency.
Dollar Index hit the recovery high at 94.11 on September 24 and resumed the decline. At the time of writing, DXY sits at 93.00. Once this psychological barrier is out of the way, the index may retest the low of 91.75 reached on September 1, which is also the lowest level since April 2018.
According to Goldman Strategists, the U.S. Dollar will continue moving down on the expectations of Joe Biden winning the U.S. election.
The risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive outcome -- a win by Mr. Trump combined with a meaningful vaccine delay, they wrote in a note Friday.
The massive dollar devaluation comes hand in hand with the inflation threat and brings Bitcoin (BTC) to the fore as a store of value and a hedge against inflation. A limited supply brings BTC on par with gold as a store of value, while its decentralized nature protects it from manipulations and abuse.
2. Regulatory clarity is a welcome thing
The regulatory clean-up launched by the authorities worldwide is actually a good thing for the industry as it makes it more mature and suitable for mass adoption.
The vast majority of cryptocurrency experts accept this truth and emphasize that the restrictions are necessary in the long run. They help reduce fraudulent activity within the space and protect the customers. Moreover, the market reaction to the news confirms the idea that the regulators are no longer regarded as an evil force.
According to the report published by Fundstrat Global Advisors LLC, this trend will harm individual companies and people, but Bitcoin's trend will stay unaffected.
Actions unsurprisingly indicate U.S. and global regulators are committed to stomping out an illicit activity, securities violations, money laundering, price manipulation, and noncompliance with banking regulations. On balance, we view recent news as a positive for crypto markets, despite select smaller pockets of risk, and we believe the prevailing bull market trend is intact.
3. BitMEX woes passed unnoticed
The regulatory scandal around the trading platform for cryptocurrency derivatives is dying out. Vivien Khoo, a new Interim CEO, has ties with CME and other regulatory structures worldwide. Arthur Hayes and Samuel Reed resigned from their top positions, while the latter was released on bail right after the resignation.
While the development is bad for BitMEX founders as they are effectively kicked out of business, the cryptocurrency market will benefit as the exchange will stay afloat and continue business as usual.
Basically, this is just another example of how the industry integrates with the existing regulatory and legal frameworks.
BTC/USD: The technical picture
Meanwhile, the technical picture may be a bit less optimistic, at least in the short run. T.D. Sequential indicator hints that the price may be ready for a downside correction both on 12=hour and daily chart, while a failure to close above $11,500 within the nearest sessions will signal that the bullish momentum is fading away.
If the signal is confirmed, the price may retreat to $11,00o that served as a strong resistance since the beginning of October. This area is likely to slow down the sell-off and trigger a new recovery wave.
On the other hand, a sustainable move above $11,500 will confirm that the bullish trend has resumed and push the price towards the initial target of $12,000.
The on-chain data confirms that there is a strong barrier located at $11,000. Over 1.5 million addresses containing 1 million BTC are likely to protect their breakeven and absorb the downside pressure. If it is broken, the sell-off may continue towards $10,400.
On the upside, we have 1 million addresses with over 600,000 BTC sitting around the above-mentioned resistance of $11,500 with very little in terms of resistance above this level.
To conclude: the fundamental environment is positive for Bitcoin's growth; however, the coin may retreat to $11,000 before the growth is resumed. From the technical point of view, the upside is considered as a path of least resistance. A sustainable move above $11,500 will confirm the bullish trend.
On the other hand, strong support comes at $11,000. The move below this area will negate the immediate bullish scenario and push the price towards $10,400.
Bitcoin (BTC) jumped above $11,000 at the end of the previous week and stopped within a whisker of a local resistance created by $11,500. At the time of writing, BTC/USD is changing hands at $11,350, mostly unchanged both on a...READ MORE
Here is what you need to know on Monday, October 12:
The market sentiment remains buoyed by China’s fresh policy measures, deployed over the weekend, to curb the yuan appreciation while the country’s central bank set financial institutions free from the need to set aside cash when purchasing FX for clients through forwards.
The US dollar wallowed in two-week lows against its main peers amid dull trading as the American and Canadian markets are closed on Monday, in observance of Columbus Day and Thanksgiving Day respectively.
The Asian equities traded mostly higher, led by the rally in the Chinese stocks amid a slump in the yuan. The US stock futures flashed moderate gains despite all the hopes watered down on a US fiscal stimulus deal likely to be reached ahead of the US election.
House Speaker Nancy Pelosi and Senate Republicans on Saturday rejected President Donald Trump's roughly $1.8 trillion stimulus proposal. Trump's $1.8 trillion offer is a tad better than the $1.6 trillion aid package offered earlier this week but remains well below the $2.2 trillion in the bill House Democrats passed last week.
The coronavirus resurgence in the Old continent is intensifying, with France having reported record-high new daily cases of about 27K on Saturday. In Spain, with Madrid under localized lockdowns, the regions of Catalonia and Navarre will tighten restrictions on working and public gatherings after the continued rise in COVID-19 cases.
In response to the coronavirus concerns in Europe, the EUR/USD pair gapped nearly 25-pips down in the weekly Asian opening to test the 1.1800 level before reversing towards 1.1830. Focus remains on the ECB President Christine Lagarde’s speech.
GBP/USD refreshed five-week highs at 1.3051 despite the looming Brexit concerns, as the UK PM Boris Johnson gears up or an Australia-style trade deal if there’s no agreement by October 15 deadline.
Also, markets shrug-off rising virus cases in the UK. Stricter virus-led lockdown conditions are set to be announced by the PM for tier-3 hotspots. BOE Governor Andrew Bailey is due to speak at a virtual Citizens' Panel Open Forum.
Gold consolidated last week’s surge to two-week highs of $1930, as the bulls now await a strong catalyst to surpass the critical $1939 barrier.
WTI fell over 1% to $40 mark amid an end to the Norwegian strike and restoration of US oil output, as the hurricane Delta weakened.
Cryptocurrencies consolidated their gains, with Bitcoin keeping its range around $11,300.
The market sentiment remains buoyed by China’s fresh policy measures, deployed over the weekend, to curb the yuan appreciation while the country’s central bank set financial institutions free from the need to set aside cash when purchasing FX for clients through forwards...READ MORE
Three weeks until the election
Next week is littered with major risk events, from stimulus talks in Washington to Brexit talks on the other side of the Atlantic. What’s more, earnings season has crept up on us, with Covid and the US election stealing all of the headlines. Apple is also releasing a new 5G iPhone so there really is something for everyone.
The upcoming week is jam-packed with risk events. First and foremost, stimulus talks will closely be watched to see if the Trump administration capitulates to House Speaker Nancy Pelosi’s demand to deliver a broader stimulus bill and not just a stand-alone bill to support the airlines. The virus spread continues to intensify across most of the country and that will bring back stringent lockdowns and restrictive measures.
Earnings season is upon us and this time, expectations are high for the banks to kick it off with a bang. The big US banks are likely to post a profit in the third quarter and see estimated provision for loan loss reserves decline significantly.
Technology stocks will likely take a queue from the reaction to Apple’s October 13 “Hi, Speed” event. Apple is expected to unveil the biggest overhaul to the iPhone in years. Four new iPhones that support 5g are expected to be released and if successful, could provide strong support to Apple and all of its suppliers.
It has been a couple of tough weeks for President Trump. He lost the first presidential debate against former-VP Biden, caught COVID-19, and has seen his poll numbers slide even further. President Trump is eagerly looking to get back on the campaign trail and is also pushing for only in-person debates. This election for many is a referendum on the Trump administration’s handling of the virus and right now the virus spread is worsening in the US. With 41 states seeing a rise in new cases and 23 states with at least a 10% surge in hospitalizations, the country does not seem ready to handle a winter wave that could make the virus spread much worse.
We now know why policy makers were so keen to clarify Christine Lagarde’s comments on the exchange rate the weekend after last month’s meeting, with the minutes highlighting that they are indeed concerned about the pace of appreciation and the challenge it poses for inflation. I expect we’ll hear a lot more of these murmerings given the bloc has historically had with inflation and we could even see hints at more easing, with the challenges coming this winter.
With one week to go until the mid-October “deadline” you would imagine the last week would have been very constructive as the two sides iron out the final differences and move towards a deal, but that wouldn’t be very Brexit, would it. This is going to the eleventh hour and that doesn’t mean next week. Another week of talks will take place and some compromise will be needed on the two remaining issues in order to signal there’s something worth taking to the last minute. This is going to drag on a little further and with every passing week, the pound is likely to increasingly see sensitivity to the prospect of no deal.
No deal Brexit and a severe second wave of Covid remains the biggest downside risks for the UK economy in the final quarter and right now, both remain a significant possibility. The economy didn’t grow as expected in September and at 9.2% below pre-pandemic levels, hasn’t recovered to the extent the BoE anticipated. I imagine we’ll be hearing more easing noises from policy makers over the next couple of months with the extra QE funds running dry by the end of the year.
China released strong PMI data and saw impressive CNY appreciation on Friday after returning from an 8 day holiday.
Balance of Trade and Inflation data the week’s highlight with the political front quiet domestically.
Sentiment vulnerable to increasing anti-China rhetoric from White House and sanction threats on Tencent and Ant Financial.
No data this week. Market anticipation building for Ant Financial IPO date which should come to market in the next two weeks before US election. Positive for technology stocks.
Evergrande dodging another debt bullet will give confidence to property sector equities.
RBI finally convened a new committee to announce rate decision Friday. The episode has been another black mark on India’s economic management.
Heavy data week Industrial Production still harshly negative, WPI rising and Balance of Trade negative continuing to hold India in a stagflationary embrace. Negative for Indian equities and fixed interest.
Covid-19 continues to crush economic activity and India’s potential recovery.
Election at the end of the week with the incumbent Labour Party set for landslide victory. Neutral to slightly positive for New Zealand Dollar and equities.
Covid-19 has been eliminated once again but RBNZ continues to be ultra dovish announcing preparation for negative interest rates. NZ Dollar in danger of tracing a major bearish reversal as a result.
Federal budget well received. Business confidence data expected to show continuing rebound. RBA rate decision Tuesday, unchanged with market looking for negative interest rate comments. If mentioned, strongly negative AUD.
Stocks and currency positive on the back of firm commodity prices and data. Both though are vulnerable to the nuances of the dreaded Trump tweet next week.
Services PMI and Household Spending expected to show domestic recovery remains slow and patchy. Yen negative. Talk still circulates of further fiscal stimulus although authorities are reluctant to commit.
Japan equities vulnerable to Trump tweets along with the rest of the world. USD/JPY has traced out a major bullish technical formation implying a move to 108.00 or higher.
Oil prices are seeing a little profit-taking heading into the weekend following a 10% rally this week in response to a number of short-term bullish factors lifting the market. Hurricane Delta has been upgraded to category three and forced the closure of most oil production in the Gulf of Mexico, amounting to around 1.67 million barrels per day.
North sea outages as workers strike over pay has resulted in another 330,000 barrels of oil equivalent per day of additional shutins and that could rise to 966,000 by the middle of next week if a resolution isn’t found.
That’s a lot of lost production, it’s hardly surprising we’ve seen the spike we have. It also means there’s a long way to fall if the Hurricane causes minimal damage and the strike is resolved.
Trump’s confidence in a stimulus package being agreed is rubbing off on the markets and risk assets are reaping the benefits.
And right now, gold falls into that bracket, having aligned itself with positive risk apetite this year rather than its traditional safe haven role. There is an added element here as well, with gold also typically viewed as an inflation hedge so a massive stimulus package could be doubly positive for the yellow metal.
Despite the market getting excited about the prospect of stimulus, I’m not there yet and think this gold rally may be a little premature, leaving it vulnerable to a further corrective move to the downside.
This will only be short-term – the decline since August is, itself, corrective – but I don’t view this month as strongly risk on unless something changes. Still, a move above $1,920 may reinforce the counter view, at which point the $1,960-2,000 region becomes very interesting indeed. There’s a cluster of resistance here which, if overcome, could be very bullish indeed.
Saturday, Oct. 10
– Kim Jong Un might have a military parade to mark the 75th anniversary of North Korea’s ruling Workers’ Party.
China money supply and new yuan loans to be released sometime this week
Sunday, October 11th
– Hungary holds a special election for a parliamentary seat, with Prime Minister Viktor Orban’s legislative supermajority hanging in the balance. The race will test the united opposition, which plans to field joint candidates in the 2022 elections.
Monday, October 12th
– Bond markets will be closed in the US and Canada for the US Columbus Day holiday and Canada’s Thanksgiving Day, respectively.
– Brexit endgame: The UK is coming up against another deadline to secure a trade deal with the EU. Limited progress has been made as sticking points on fisheries and state aid remain.
– The UK is weighing tougher coronavirus restrictions after lockdown failures
– ECB President Christine Lagarde leads off the virtual annual meetings of the International Monetary Fund and the World Bank Group. Through Oct. 18.
– Bank of England policy maker Jonathan Haskel speaks on the University of Exeter Economics Society’s webinar.
– BOE Governor Andrew Bailey appears at the BOE Citizens’ Panel open forum.
– The Institute of International Finance holds its annual membership meeting. BOJ Governor Haruhiko Kuroda and Riksbank Governor Stefan Ingves are among the speakers at this five-day event. Live-streamed, through Oct. 16.
– Milken Institute 2020 Global Conference convenes virtually with a theme of “Meeting the Moment.” Speakers include Pfizer CEO Albert Bourla and Anthony Fauci, the top U.S. infectious-disease official. Though Oct. 21.
– Switzerland publishes updated economic forecasts.
Mexico industrial production
Japan PPI, core machine orders
South Africa manufacturing production
Turkey current account balance, unemployment
India CPI, industrial production
Tuesday, October 13th
– Earnings Season begins! JPMorgan and Citigroup kick things off in the morning.
– IMF World Economic Outlook is published
– Apple officially launches iPhone 12. A total of four iPhones will be launched.
US September CPI M/M: 0.2% eyed v 0.4% prior
Mexico international reserves
New Zealand food prices
Japan money stock
Germany ZEW survey expectations
Turkey industrial production
UK unemployment rate, jobless claims
Wednesday, Oct. 14
-Hong Kong Chief Executive Carrie Lam delivers the annual policy address.
-IMF Managing Director Kristalina Georgieva and World Bank President David Malpass give press conferences from the annual IMF/World Bank Meetings
– Bank of America and Goldman Sachs report earnings before the bell.
-Fed Vice Chair Richard Clarida speaks with IIF President Tim Adams at the IIF annual meeting.
-Dallas Fed President Robert Kaplan and Randal Quarles, vice chair for supervision at the Fed, will speak on financial supervision at an event hosted by Hoover Economic Policy Working Group. Kaplan will also hold a virtual town hall on recent economic developments.
-ECB Chief Economist Philip Lane and Governing Council members Francois Villeroy de Galhau, Robert Holzmann and Pablo Hernandez de Cos speak during an online conference.
-BOE Chief Economist Andy Haldane gives the Engaging Business Summit autumn lecture.
US Sept PPI Final Demand M/M: 0.1% eyed v 0.3% prior
Australia Westpac consumer confidence
Singapore monetary authority policy statement, GDP
Japan industrial production, capacity utilization
India wholesale prices
South Africa retail sales
Euro-area industrial production
Thursday, October 15th
– EU leaders meet for a two-day summit in Brussels. Topics to be covered include Brexit, climate change, Covid-19 and relations with Africa.
– Minneapolis Fed President Neel Kashkari talks to NYU Stern’s Center on the economy. Richmond Fed President Thomas Barkin speaks at the Economic Club of New York.
– Bank of Canada’s Deputy Governor Timothy Lane speaks on a panel.
– EIA crude oil inventory report
US Weekly Initial Jobless Claims, Empire manufacturing: 12.0eyed v 17.0 prior
Australia unemployment, participation rate
China PPI, CPI
Trade: Indonesia, India
Japan tertiary industry index
Italy industrial orders
Friday, October 16th
– US retail sales for September could show the slowdown is here already. |
US: Baker Hughes rig count, September Advance Retail Sales M/M: 0.7% eyed v 0.6% prior, September Industrial Production 0.6%eyed v 0.4% prior, Oct Prelim Univ. of Michigan sentiment: 80.0eyed v 80.4 prior, TIC flows
Canada manufacturing sales
New Zealand performance of manufacturing index
Singapore non-oil domestic exports, electronic exports
Sovereign Rating Updates:
– United Kingdom (Moody’s)
– France (DBRS)
Next week is littered with major risk events, from stimulus talks in Washington to Brexit talks on the other side of the Atlantic. What’s more, earnings season has crept up on us, with Covid and the US election stealing all of the headlines. Apple is also releasing a new 5G iPhone so there really is something for everyone...READ MORE
While reflation hopes are somewhat on standby – postponed, if not cancelled – the case for sustained USD weakness towards year-end is paused. As a result, economists at Danske have flattened they EUR/USD profile: they now see the cross peaking in three-to-six months at 1.20 (previously 1.23) and for now, the cross looks in the 1.15-1.19 range.
“We expect the cyclical uptick in Europe (and elsewhere) to continue over the coming months. The introduction of new European lockdowns, a marginally hawkish Fed, mild weakness in the data, verbal intervention from the ECB and a likely postponement of the payments linked to EU fiscal support have caused EUR/USD to take a step back from previous highs (1.18-1.20), to around 1.17.”
“Upside risks to take us above 1.20 include the EU proving to be an engine of world growth and/or the Fed credibly committing to inflation overshooting (which it has not as of today). The combination of positive progress with US fiscal policy, Brexit, the corona situation and global growth may culminate by year-end. If all goes well, we could see a new test of 1.20.”
“We see scope for a new test of 1.20 but risks have increased over September, as we have seen a hawkish Fed and Europe has disappointed across data, politics and the handling of corona. We have lowered our three-to-six months projections to 1.20. We note that December includes an unusual number of events that we expect to define the risk and EUR/USD as we go in to 2021. Until we see a firm change in the macro narrative, we expect EUR/USD to range-trade at 1.15-1.19 and for volatility to remain.”
While reflation hopes are somewhat on standby – postponed, if not cancelled – the case for sustained USD weakness towards year-end is paused. As a result, economists at Danske have flattened they EUR/USD profile: they now see...READ MORE
Gold has been on the rise, holding above $1,900 amid hopes for a further cash injection from the government. XAU/USD’s path of least resistance is up ahead of Powell’s speech as technical set up points to the additional upside.
“Attention remains on the US stimulus talks likely to be continued this Tuesday, as the fundamentals continue to play second fiddle. Trump’s coronavirus updates will be also closely followed for fresh incentives. Speech by the US Federal Reserve (Fed) Chair Jerome Powell will be eyed, as he is due to speak about the US economic outlook at the National Association of Business Economics annual meeting.”
“Gold looks to extend Monday’s rally, having carved out a potential bull flag formation on the hourly chart. A bull flag is a bullish continuation pattern, with the validation likely to occur on an hourly closing above the falling trendline resistance at $1913.51. The pattern target is measured at $1940. The hourly Relative Strength Index (RSI) has turned lower but holds well above the midline, at 53.11, allowing for more upside.”
“To the downside, the falling trendline support at $1906.51 is likely to offer an immediate reprieve to the bulls. A break below which the $1900 mark will be put at risk.”
Gold has been on the rise, holding above $1,900 amid hopes for a further cash injection from the government. XAU/USD’s path of least resistance is up ahead of Powell’s speech as technical set up points to the additional upside...READ MORE
Here is what you need to know on Tuesday, October 6:
Markets are mixed and the dollar is finding its feet after a risk-on mood on Monday. President Trump is out of the hospital but doubts persist over his condition. Intensive fiscal stimulus talks continue, and investors are waiting for white smoke. The RBA left rates unchanged, Powell and Lagarde speak later.
"Buy the rumor, sell the fact" – stocks advanced and the safe-haven dollar retreated while the world waited to see to President Donald Trump leave the Walter Reed hospital. He was eventually discharged but will continue receiving 24-hour care in the White House and his doctors said he is still not out of the woods. Several questions remain about the president's disease.
US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi held an hour-long phone call regarding fiscal stimulus. The extended conversation implies progress, yet investors still await substance.
The latest sums suggest a gap between $1.5 trillion that Republicans want and $2.2 trillion desired by Democrats. Last week's market moves suggest the relief package is the more significant driving force in markets.
Recent opinion polls continue showing that Trump is significantly trailing rival Joe Biden in polls conducted after the debate and around the president's positive coronavirus test. The vice-presidential debate is the next significant event of the campaign.
Gold has been on the rise, holding above $1,900 amid hopes for a further cash injection from the government.
Jerome Powell, Chairman of the Federal Reserve, will speak about the economic outlook later in the day. Powell is likely to reiterate the bank's commitment to low rates, yet without pledging any additional bond-buying in the near future.
The US JOLTs job openings for August are projected to show ongoing recovery in the labor market. While the figure is lagging the Non-Farm Payrolls, they are watched by the Fed. On Monday, the ISM Services Purchasing Managers' Index came out above expectations.
Tech stocks are on the back foot in response to a report suggesting a House panel will examine breaking up tech giants.
The Reserve Bank of Australia left the interest rate and bond-buying schemes unchanged as expected. AUD/USD moved higher before falling back below 0.72. The RBA seems marginally more confident about the recovery in the land down under.
Christine Lagarde, President of the European Central Bank, will speak twice on Tuesday, amid rising COVID-19 cases in the old continent. Spain and Paris stand out, with bars closing in Paris on Tuesday. EUR/USD has been hesitating under 1.18.
Brexit negotiations continue after a top-level conversation over the weekend. Both sides remain at odds over several topics including fisheries and state aid, yet the lack of adverse headlines allows sterling to recover.
Cryptocurrencies advanced on Monday and are stabilizing on Tuesday, with Bitcoin holding above the $10,700 mark.
Markets are mixed and the dollar is finding its feet after a risk-on mood on Monday. President Trump is out of the hospital but doubts persist over his condition. Intensive fiscal stimulus talks continue, and investors are waiting for white smoke. The RBA left...READ MORE
Or so the old saying goes
You’re going to be hearing the word uncertainty a lot over the next month. We have political uncertainty ahead of what is going to be a highly unusual election, economic uncertainty as Congress fails to pass another relief package, uncertainty around Covid should the dreaded winter spike occur. Now we have Presidential uncertainty after Donald Trump became the latest world leader to test positive for Covid-19. “Markets hate uncertainty” is both a cliche and a fact. And we may see it a lot more over the next month, in particular.
Uncertainty reigns supreme after President Donald Trump and first lady Melania Trump tested positive for coronavirus. Wall Street will closely watch to see how bad the virus spreads across Washington DC and if President Trump will have a mild or severe battle with the virus.
Following a disappointing nonfarm payroll report, the last one before the election, the focus shifts to release of the Fed policy minutes for the September 16th policy decision. The Fed has clearly signaled rates will be near zero well into 2023, the minutes could show what they might need to see before they could raise rates. With many signs that the economic recovery is losing steam, the Fed may have discussed increasing asset purchases.
The vice presidential debate between California Senator Kamala Harris and Vice President Mike Pence will not be anything like the President Trump’s no-holds barred debate with former-VP Biden. The democrats are growing confident they will take back the White House and given Biden’s age, he may only serve one term. For many Americans, this will be their first look at Kamala Harris and this could be critical to see if she is the favorite to lead the party after Biden.
Biden is enjoying a comfortable lead in the national polls, but the lead is not as strong in the battleground states. The chances are dwindling that Trump could steal the election but they still exist.
ECB minutes next week will be of interest, although with the central bank not showing any inclination to ease again this year, despite the rising Covid numbers and economic slowdown, I don’t expect the minutes will offer much in terms of new information. The comments on the exchange rate were the most interesting take away from the meeting itself but policymakers were quick to clarify.
Hopes earlier this week that common ground had been found on level playing field were short-lived and we now enter the final weeks of the negotiations with the major issues unresolved. High level talks between Boris Johnson and Ursula Von Der Leyen will commence on Saturday ahead of more meetings next week. It’s looking less likely that a deal will be agreed by mid-October, meaning these talks may well run into November, to the surprise of no one.
Winter has come early for the UK. The weather has turned, nights are drawing in sooner and Covid is on the rise meaning more restrictions and another hit to economic activity just as things were starting to move again. It’s another week of low-tier data, with an appearance from BoE Governor Andrew Bailey to add some interest. I’m not sure we’ll learn anything new though, with the central bank still considering negative rates but seemingly no closer to actually implementing them.
China on holiday until Friday.
Friday services and composite PMI released, expected to confirm China recovery remains on track. Sentiment dominated by the Trump Covid-19 situation and its evolution.
Arrests continue under new security law. Ant Financial IPO announcement date likely to dominate headlines.
Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and over 5 million cases this week with no end in sight.
RBI rate decision postponed due a lack of members to make a quorum! This will further undermine confidence in India. Demonstrations continue over the agriculture reform bill.
Services PMI on tuesday expected to show India still marooned in contractionary territory.
Pre-voting starts for New Zealand’s October 17th election. Market has priced in Labour clean sweep with movement in the polls that threatens unstable coalitions weighing on the NZ Dollar. A deterioration in the risk environment due to Trump’s Covid-19 illness will also weigh on NZD.
Busy data week with PMI’s Monday, RBA rate decision and trade balance on Tuesday, home loans on Friday. RBA will remain unchanged but the possibility exists of another rate cut to 10 basis points. A rate cut and talk of negative rates from RBA will see AUD move lower.
AUD and Australian equities as a pro-cyclical play, are acutely vulnerable to increased risk-off sentiment next week if the Trump/Covid situation deteriorates.
Heavy data week with services PMI’s, bank lending, household spending and machinery orders all expected to show Japan’s recovery is slow and uneven. BOJ Governor Kuroda makes speeches on Monday and Wednesday. Will be closely watched for signs of more easing to combat slowdown. Negative Yen, bullish Japan stocks.
Japan stocks are vulnerable to a deteriorating risk environment next week. Japan fund managers bought Yen heavily versus the US Dollar today after the Trump announcement. A deterioration in that situation will see the repatriation flows increasing pushing USD/JPY lower.
Oil prices are slipping again today, in line with the broader risk off move. While some will want to link this to the election, or the prospect of a Biden victory, I’m not really buying it. This is something that’s been building recently and the only reason it hasn’t materialised earlier is due to the warnings from the Saudi Energy Minister.
The simple fact remains that we’re heading into a worrying period for Covid and the impact on the global economy and oil demand will be significant. OPEC+ will likely be forced to hold a special meeting prior to December if they want prices to hold around $40.
Gold is continuing to push hard against $1,900 and is having a little success but it’s struggling to gather any significant momentum above these levels, which could be a sign of weakness. The jobs report didn’t cause too much of a stir for the dollar and so the impact on gold has been minimal.
If the yellow metal fails to secure a weekly close above $1,900, it may start next week on the back foot. The momentum indicators are favourable for the yellow metal and the jobs report hasn’t changed that. This will be a very interesting test and more downside may follow.
Saturday, October 3rd
-The ruling U.K. Conservative Party 4-day conference begins
Sunday, October 4th
-Czech regional elections expected
Monday, October 5th
-Nobel prizes for 2020 are announced in medicine, physics, chemistry, literature, economics and peace.
-Brexit in focus. The final formal round of talks is over, the British government expects trade negotiations to continue up to the EU summit in mid-October.
-Turkey and Greece may resume exploratory talks over maritime disputes this week.
-National Association for Business Economics (NABE) holds its 62nd annual meeting, virtually. The three-day event will focus on “Global Reset? Economics, Business and Policy in the Pandemic.” Chicago Fed Chair Charles Evans will speak.
-Atlanta Fed President Raphael Bostic speaks at the Fintech South event on regulating financial technology.
-South Africa’s ruling party continues meeting to discuss a proposed economic recovery plan.
U.S. ISM services, Markit services/composite PMIs
South Africa PMI
Services PMI: Euro-area, U.K.
Singapore retail sales
Tuesday, October 6th
– Top diplomats from ‘Quad’ countries meet in Tokyo, seen as a democratic counter to China’s influence in the Indo-Pacific region. U.S. Secretary of State Michael Pompeo, Japanese Foreign Minister Toshimitsu Motegi, Australian Foreign Minister Marise Payne and India’s Subrahmanyam Jaishankar will attend.
– The RBA Interest Rate Decision: No changes expected with its main policy programs and cash rate.
-IMF Managing Director Kristalina Georgieva delivers IMF’s annual curtain raiser speech, previewing key issues for the IMF/World Bank meetings next week.
-Fed Chair Jerome Powell and ECB Chief Economist Philip Lane deliver keynote addresses at the NABE conference.
-Philadelphia Fed President Patrick Harker discusses machine learning via a webinar hosted by the Global Interdependence Center. Atlanta Fed President Raphael Bostic will speak to Leadership Florida about “An Inclusive Recovery.”
-Bank of Mexico Governor Alejandro Diaz de Leon discusses the global economy with Dallas Fed President Robert Kaplan, via webcast.
-ECB President Christine Lagarde participates in a panel discussion organized by the Bridge Forum Dialogue.
-German Chancellor Angela Merkel speaks at a German industry event in Berlin.
-Norwegian Central Bank Governor Oystein Olsen speaks in Oslo.
–South African Reserve Bank will publish its six-month Monetary Policy Review.
U.S. trade balance
Germany factory orders
India services PMI
Wednesday, Oct. 7
-Pompeo visits South Korea. Seoul is pushing for a resumption of stalled nuclear negotiations between President Donald Trump and North Korean leader Kim Jong Un.
-U.S. Vice Presidential debate takes place in Salt Lake City. Vice President Mike Pence will square off with Joe Biden’s running mate, California Senator Kamala Harris.
– EIA crude oil inventory report
-Fed Presidents Raphael Bostic (Atlanta), Neel Kashkari (Minneapolis) and Eric Rosengren (Boston) speak at a virtual event on “Racism and the Economy.”
-New York Fed President John Williams moderates a discussion with Henry Kissinger, hosted by the Economic Club of New York. Williams will also discuss “Flexible Average Inflation Targeting” at an event hosted by Hoover Economic Policy Working Group.
-Chicago Fed President Charles Evans discusses the outlook for the U.S. economy.
-ECB’s Lagarde and Governing Council Member Francois Villeroy de Galhauspeak at the Paris Europlace conference.
-IMF releases the analytical chapters of its World Economic Outlook: one on mitigating climate change and one on the economic impact of the great lockdown.
–The minutes of the Sept. 15-16 meeting of the FOMC will closely be watched for hints on what conditions are necessary to trigger a rate increase. The minutes may also reveal whether policy makers discussed increasing asset purchases, continuing to restrict bank dividends, and allowing higher inflation and lower unemployment than officials previously had tolerated.
US FOMC meeting minutes
South Africa gross/net reserves, business confidence
Poland rate decision: Base rate to remain unchanged at 0.10%
Germany industrial production
Spain industrial output
U.K. house prices
Switzerland foreign currency reserves
Thursday, Oct. 8
-BOE Governor Andrew Bailey, ECB Executive Board member Isabel Schnabeland Governing Council member Pablo Hernandez de Cos speak at the Single Resolution Board conference.
-The ECB publishes the account of the monetary policy meeting of the Governing Council, held on Sept. 9-10.
-Bank of Canada Governor Tiff Macklem gives a speech via videoconference.
-Nigerian President Muhammadu Buhari may present his 2021 budget.
-OPEC publishes the World Oil Outlook.
US initial jobless claims
Mexico CPI, central bank policy minutes
Bank of France industrial sentiment
UK RICS house prices
Canada housing starts
Japan current account balance
New Zealand business confidence
Friday, October 9th
Industrial production: France, Italy, U.K.
US Baker Hughes rig count, wholesale inventories
Canada unemployment rate
Japan household spending
Sovereign Rating Updates
– Poland (S&P)
You’re going to be hearing the word uncertainty a lot over the next month. We have political uncertainty ahead of what is going to be a highly unusual election, economic uncertainty as Congress fails to pass another relief package, uncertainty around...READ MORE
One last chance – US Treasury Secretary Steven Mnuchin has given himself and House Speaker Nancy Pelosi another go at reaching a deal on a new relief package, and both are reporting progress. Optimism from Capitol Hill is boosting markets and pushing the safe-haven dollar lower.
EUR/USD is zooming in on the weekly high of 1.1755. Can it break that level? Momentum could push it higher but risks are prevalent.
First, Democrats want a stimulus bill worth more than $2 trillion, while Mnuchin is reportedly only ready for around $1.5 to $1.6 trillion. While both sides seem to agree on sending another check to all Americans, aid to states seems like a stumbling block.
And while announcements of layoffs – from Disney through airlines and to banks – have nudged these two politicians, not all are on board. Senate Majority Leader Mitch McConnell and White House Chief of Staff Mark Meadows seem skeptical about reaching an accord.
In the meantime, investors are content with President Donald Trump's signing of a stopgap measure to prevent a government shutdown. A potential breakdown of talks could bring stocks down and the dollar back up.
Another risk comes from Trump – the president refused to commit to accepting the election results in his presidential debate with rival Joe Biden. Opinion polls following the chaotic clash show the challenger may strengthen his lead in the polls.
While markets prefer certainty – a clear winner – they are still concerned that the president would refuse to step down in an extreme scenario.
A third factor to consider is the ongoing increase in European COVID-19 cases. While deaths from the disease are still low in comparison to the US, fears of a devastating winter may weigh on the euro.
In the immediate term, investors will be watching data. ADP's jobs report showed an increase of 749,000 private-sector positions, better than had been expected. Another hint toward Friday's Non-Farm Payrolls comes from the ISM Manufacturing Purchasing Managers' Index. While the headline is projected to edge higher, hiring is forecast to remain depressed in America's industrial sector.
Economists expect weekly jobless claims to resume their drop after an unexpected bump higher last week. The US also releases Personal Spending and Personal Income figures for August, potentially showing the impact of the lapse of several government support programs that month.
Overall, there are still several reasons to remain worried, potentially reversing a break higher and creating a "fakeout" – common in EUR/USD trading.
Break or bounce at 1.1755? That is the question. The line is the weekly peak and the highest since September 23. It is followed by 1.1765, where the 100 Simple Moving Average on the four-hour chart hits the price. Further above, 1.1785 was a swing low in early September and it is followed by 1.1810, which is where the 200 SMA hits the price.
Euro/dollar is benefiting from upside momentum and has secured its move above the 50 SMA. However, the Relative Strength Index is nearing 70, closer to overbought conditions.
Support is at 1.1740, a support line from last week, followed by 1.1685, a swing low recorded on Wednesday. The next lines to watch are 1.1625 and 1.1610.
One last chance – US Treasury Secretary Steven Mnuchin has given himself and House Speaker Nancy Pelosi another go at reaching a deal on a new relief package, and both are reporting progress. Optimism from Capitol Hill is boosting markets and pushing the safe-haven dollar lower...READ MORE
Here is what you need to know on Thursday, October 1:
US politicians are reportedly making progress toward a fiscal stimulus deal, prompting a risk-on sentiment that boosts the stocks and weighs on the dollar. Markets await hints toward Friday's Non-Farm Payrolls and are worried about layoffs.
US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have both reported progress in agreeing on a new fiscal stimulus bill after several measures expired in late July and seem to be weighing on the economy. Layoff announcements by Disney and airlines may have been pushing lawmakers to action.
EUR/USD is trading closer to 1.1750, GBP/USD settles above 1.29, and commodity currencies are on the rise as well. Gold is nearing $1,900 and WTI Oil recaptured the $40 level.
Senate Majority leader Mitch McConnell and White House Chief of Staff Mark Meadows has cast doubts on agreeing on a $2 trillion+ package that Democrats want. Headlines are set to rock markets on Thursday as well. Both sides agreed on a stopgap measure to maintain government funding and also reportedly on sending Americans another check.
The US Presidential Debates Committee announced changes in the next two televised encounter. President Donald Trump and rival Joe Biden clashed in a chaotic clash. Snap polls conducted after the event showed Trump performed poorly, raising the chances of a Biden win. However, markets remain worried about a contested election.
The first day of the month features a long list of manufacturing purchasing manufacturing indexes. The ISM Manufacturing PMI is set to hold onto the high ground but may see a drop in the employment component. It serves as another hint toward Friday's Non-Farm Payrolls. ADP's labor report showed an increase of 749,000 private-sector positions, better than expected.
The US also publishes Personal Spending, Personal Income, and weekly jobless claims, which are projected to resume their downtrend after bumping higher last week. While the data is unrelated to the NFP, it may have an impact on markets and elected officials.
Eurozone and UK final manufacturing PMIs are set to confirm the ongoing recovery in the industrial sector, yet the resurgence of COVID-19 cases could weigh down on these forward-looking indicators.
Coronavirus vaccine disappointments: Moderna, one of the firms conducting a Phase 3 trial, said it would be unable to report progress until November 25, diminishing hopes for early immunization. The US Food and Drugs Administration (FDA) is widening its inquiry into AstraZeneca's COVID-19 vaccine's safety procedures, potentially also delaying progress.
Trading in Tokyo was halted due to "network issues" raising suspicions of a hack.
Cryptocurrencies have been extending their gains, with Bitcoin hovering around $10,800.
US politicians are reportedly making progress toward a fiscal stimulus deal, prompting a risk-on sentiment that boosts the stocks and weighs on the dollar. Markets await hints toward Friday's Non-Farm Payrolls and are worried about layoffs...READ MORE
Here is what you need to know on Wednesday, September 30:
The first presidential debate descended turned ugly and President Trump's refusal to say he would accept the election results is weighing on the market mood. ADP Non-Farm Payrolls, final US GDP stands out as September draws to an end.
President Donald Trump and rival Joe Biden clashed in an acrimonious televised debate. S&P 500 futures advanced at first but retreated as Trump refused to say he would accept the election results. Biden came into the televised clash with a lead and it will take several until new polling shows any change in voting intentions.
The US dollar is marginally higher and gold is paring some of the gains recorded before the debate.
Chinese purchasing manufacturing indexes for September came out marginally above estimates, pointing to ongoing growth in the world's second-largest economy. That has been insufficient to help Australian and New Zealand dollars.
Christine Lagarde, President of the European Central Bank, is due to speak in Frankfurt and may shed light on the ECB's next moves. She speaks after German and Spanish inflation figures reflected ongoing weakness and coronavirus cases are rising in the old continent. EUR/USD managed to rise above 1.17 on Tuesday, potentially also worrying the bank, that would like to see a lower exchange rate.
Brexit talks continue with somewhat less optimism than seen earlier in the week. GBP/USD failed to rise with EUR/USD on Tuesday. Final Gross Domestic Product figures are showing a fall of 19.8% crash in the second quarter, an upgrade from -20.4% initially reported.
ADP, America's largest payroll provider, publishes its jobs figures for September. The first hint toward Friday's official labor statistics is set to show a pick up in hiring. It is essential to remember that the firm's data has not been well-correlated with government data in recent months.
The final US GDP for the second quarter is set to confirm an annualized fall of 31.7%. A substantial rebound is due in the third quarter. Pending home sales for August and speeches from Federal Reserve officials are also awaited.
Canadian GDP figures are projected to show an extended recovery in July, following the 6.5% expansion in June. USD/CAD is trading around 1.34, rising as oil prices are on the back foot.
Cryptocurrencies have been paring their gains, with Bitcoin changing hands at around $10,700.
The last day of the month tends to feature last-minute portfolio adjustments from money managers. That may trigger higher volatility around the London fix.
The first presidential debate descended turned ugly and President Trump's refusal to say he would accept the election results is weighing on the market mood. ADP Non-Farm Payrolls, final US GDP stands out as September draws to an end...READ MORE
EUR/USD is now forecasted to test the upper end of the 1.1630/1.1830 range in the next weeks, according to FX Strategists at UOB Group.
24-hour view: “We expected EUR to strengthen yesterday but the sudden surge in momentum came as a surprise as it blew past the ‘stiff resistance at 1.1720’ and hit a high of 1.1745. While the rapid rise appears to be running ahead of itself, there is scope for EUR to test the next resistance at 1.1775 first before a more sustained pull-back can be expected. For today, an advance beyond 1.1800 is unlikely. Support is at 1.1715 but the stronger level is at 1.1690.”
Next 1-3 weeks: “The break of our ‘strong resistance’ level at 1.1720 yesterday (high of 1.1745) indicates that the negative phase in EUR that started about 2 weeks ago has run its course. In other words, last Friday’s (25 Sep) low of 1.1611 was the extent of the EUR weak phase (in our latest narrative, we held the view that EUR could dip below 1.1600 but 1.1565 is expected to offer formidable support). The current movement is viewed as the early stages of consolidation even though the improved shorter-term momentum suggests that EUR is likely to probe the top of the expected consolidation range of 1.1630/1.1830 first. At this stage, the prospect for a sustained advance above 1.1830 is not high.”
EUR/USD is now forecasted to test the upper end of the 1.1630/1.1830 range in the next weeks, according to FX Strategists at UOB Group...READ MORE
Last week, the S&P 500 officially entered correction territory, down 10% from its September 2nd peak, while the Nasdaq has fallen even further, down nearly 12%. Lisa Shalett from Morgan Stanley lays out three key catalysts behind the latest swoon in US stocks.
“A new stimulus bill has stalled. Surprisingly, Senate Republicans have apparently walked away from the possibility of further fiscal stimulus this calendar year. Almost every Wall Street analyst, myself included, had expected another round of spending that would help state and local governments, support key industries and provide aid to small businesses and the unemployed.”
The Fed has yet to provide further details on how its new plan for ‘average inflation targeting’ would work, or how it will eventually roll back or taper the massive quantitative-easing stimulus programs put in place during the crisis. Instead, the Fed has only confirmed that it will keep the key federal funds rate near zero for at least the next three years. That signaling has contributed to an all-time low in interest-rate volatility and moderately higher long-term yields. One side effect of those higher Treasury yields: Tech stocks, often viewed as higher-risk growth investments that tend to trade at a given premium above the benchmark 10-year Treasury yield, now look even more expensive. That’s likely one reason tech stocks have been hit particularly hard lately.”
“Uncertainty is rising around when the US presidential election will be finalized. Normally, we would advise investors to ignore election-related volatility. However, circumstances surrounding the general election add a layer of uncertainty that we have never encountered before. It is unclear whether finalized results will be known within days, weeks or, through court battles, months.”
Last week, the S&P 500 officially entered correction territory, down 10% from its September 2nd peak, while the Nasdaq has fallen even further, down nearly 12%. Lisa Shalett from Morgan Stanley lays out three key catalysts behind the latest swoon in US stocks...READ MORE
Bitcoin was created in response to the Financial crisis of 2008 and developed within a narrow circle of computer geeks, coders, and libertarians fixated on personal freedom, anonymity, and independence from all sorts of authorities. Sometimes drug dealers and gun traders got interested in the new type of money. It allowed them to do their shady business sidestepping banks and other state-controlled and regulated financial institutions.
However, time passed, Bitcoin matured and gained popularity among ordinary people, interested in innovations and new ways to invest money and preserve wealth. New coins emerged based on the same idea of the distributed ledger, and the cryptocurrency industry entered a new era of mass adoption.
While the process is still ongoing, it is safe to say that we have already passed the point of no return.
1. Emerging markets move to crypto
Emerging countries, especially with weak economies and high inflation, demonstrate a strong interest in digital currencies. The latest statistical data confirms the theory that Bitcoin may serve as a protective asset or a hedging tool in the ailing economies.
The data from Statista shows that cryptocurrency is most prevalent in Turkey, Brazil, and Colombia. According to recent surveys, 20%-18% of the population in these countries own digital assets. Columbia, Argentina, South Africa, and Mexico also boast a high percentage of crypto holders.
Notably, the developed countries like the UK, US, or Japan are at the end of the list with less than 7% of users. It means that citizens from the troubled countries tend to reduce their national currencies exposure and resort to alternative ways of storing wealth.
Data from the P2P Bitcoin trading platform LocalBitcoins shows that the trading volumes are growing strongly in the South American countries and in Africa, where the small cryptocurrency transfers increased by over 50% in the last year.
If the trend continues to gain momentum, the developed world will have to follow. The irresponsible monetary policies in such countries as the US will only speed up the process. CFA Charterholder and founder of investment platform Revix, explains the phenomena:
"Money is meant to act as a stable store of value. But for many emerging market citizens, this is not the case. Their currencies have deteriorated in value to the point where their hard-earned savings are worth far less in real global terms.
"Lots of people think they've already missed out on crypto's growth. However, its value today is only a tiny fraction of the trillion-dollar markets that it stands to disrupt. What if even a single cryptocurrency becomes the currency of choice for a nation plagued by hyperinflation or if the Federal Reserve prints another $3-trillion?"
2. Global regulators accept the inevitable
The monetary authorities and financial regulators around the globe moved from the denial stage to constructive thinking. The US tax authority wants to update its standard 1040 form with the aim force the citizens to report their cryptocurrency holdings.
Sure enough, this move is an unwanted development for those who use Bitcoin for tax evasion purposes. However, it may signal that the authorities have already come to grips with the idea that digital currencies are not a joke or a short-lived trend, but they are here to stay.
The European Commission recently published a comprehensive proposal on integrating the new type of assets into the existing financial system. They are ready to develop rules for those instruments that cannot be covered by the existing legislation. This is another evidence that cryptocurrencies are considered as an objective phenomenon that needs to be reckoned with.
3. The traditional financial industry joins the game
Note how big players with big pockets enter the cryptocurrency space and motivate it by the necessity to protect their assets from inflation. As the FXStreet recently reported, Grayscale Investments added 17,000 BTC to their portfolio, while the CEO of MicroStrategy confessed that Bitcoin investments are an attempt to preserve their wealth. The company spent about $500 million on Bitcoins recently.
According to the famous cryptocurrency analyst Willy Woo, many crypto market participants are captivated by short-term price movements, temporary correlations, and technical setups. Meanwhile, the big money and real HODLers are focused on long-term perspectives, and they are bullish.
4. Number of active users is growing
Bitcoin is used more actively than in 2017 when the ICO mania gripped the industry, and BTC cost nearly $20,000. According to the Glassnode's data, the number of unique users, excluding multi-wallet addresses belong to one entity, has been growing since May 2018 and surpassed the all-time high reached in December 2017. Moreover, the trajectory points upwards, implying that Bitcoin is spreading faster than ever.
The stats are confirmed by Coin Metrics data on Bitcoin addresses with at least $10-worth of BTC. The number of addresses hit a new record high of 16.6 million in August, which is 14% higher from the previous maximum reached at the top of the 2017 bubble. Basically, it means that people are using Bitcoin and joining the network more readily than at the height of the previous bull market.
To conclude: Short-term Bitcoin price movements have little effect on the cryptocurrency mass adoption. The process has already started, and it is gaining pace as the technology becomes more mature and user-friendly for non-tech savvy people.
Creating a legal field and a regulatory framework for the new type of assets will lift the barriers that stopped large institutions and cautious retail users from joining the industry. At the same time, economic woes and geopolitical tensions will only speed up moving to alternative money.
Here is what you need to know on Tuesday, September 29:
Stock markets remain cautiously optimistic and the dollar is on the back foot, extending the reversal from last week's moves. Investors are eyeing a slew of Federal Reserve speeches, fresh hopes related to Brexit, and the first presidential debate.
The dollar is edging lower in a risk-on mood. Talks between Republicans and Democrats continue in Washington, with House Speaker Nancy Pelosi offering a new deal worth $2.2 trillion. The fresh hopes replace the narrative that the focus on nominating a new Supreme Court Justice would divert energy from further relief.
Gold has been consolidating around $1,880, looking for a new direction.
Investors – especially pound bulls – are also content with reports of some progress in Brexit trade talks. The EU is reportedly ready to work on a legal agreement.
Reported coronavirus deaths have hit the grim milestone of one million, with cases increasing quickly in Europe and resuming their rises in the US.
Christine Lagarde, President of the European Central Bank, expressed concerns about the impact of the virus on the economy. Preliminary German and Spanish inflation figures for September are due out on Tuesday.
The economic calendar features a long list of Federal Reserve speakers, with Vice-Chair Richard Clarida standing out. The Fed encouraged the government to provide more fiscal relief and does not plan to increase QE at this point.
The Conference Board's Confidence Confidence gauge for September is set to extend its recovery.
President Donald Trump and Democrat rival Joe Biden are scheduled to clash in the first presidential debate late in the day. The incumbent is the underdog in the polls but the challenger is considered a worse debater. The narrative emerging from the event may move markets. Investors are concerned about the specter of an inconclusive election.
Oil prices have been stable with WTI trading around the $40 mark.
Cryptocurrencies are edging lower in well-known ranges. Bitcoin is changing hands at around $10,700.
Stock markets remain cautiously optimistic and the dollar is on the back foot, extending the reversal from last week's moves. Investors are eyeing a slew of Federal Reserve speeches, fresh hopes related to Brexit, and the first presidential debate...READ MORE
The stakes are high and the result is far from clear in the US November elections. A Biden victory would drive EUR/USD higher, while his tax plans could cause some concerns amidst equity investors. On the other hand, a second term for Trump would be full of uncertainties, strategists at Nordea report.
“We think the race is much closer than the polls imply, and even if a Biden victory is the most likely outcome, such a scenario is far from a given. If Biden wins and the Democrats also take control of the Senate (the House is very likely to remain in Democratic hands in any case), we could expect to see European assets outperforming US ones and a higher EUR/USD.”
"The tax hike aspects of Biden’s agenda could put some pressure on equity markets. Even if the tax hikes are mainly targeted towards higher-income taxpayers, his plans would include higher corporate, dividend and capital gains taxes, which could scare equity investors to some extent. In the short run, however, sizable fiscal stimulus could offset such concerns.”
“A Trump victory coupled with a Republican-led Congress remains a viable scenario as well (around 30% probability). Trump would favour more tax cuts, deregulation and a more limited stimulus package. The Democratic House would probably block most of his plans, though Trump could push through some more deregulation using his presidential powers. Trump could quickly become frustrated by the inability to forward his domestic agenda, and could concentrate on trade policies instead. The trade war could escalate and his unpredictability could dent risk appetite longer out. Global trade policy would become even more uncertain, supporting the USD. EUR/USD would drop, especially if tariffs on European cars would return on his agenda.”
The stakes are high and the result is far from clear in the US November elections. A Biden victory would drive EUR/USD higher, while his tax plans could cause some concerns amidst equity investors. On the other hand, a second term for Trump would be full of uncertainties, strategists at Nordea report...READ MORE
Gold is likely to face further downside pressure, especially if the dollar continues to firm, Howie Lee, Economist at OCBC Bank, reports. XAU/USD has started the week trading listless around $1860.
“Gold broke below $1900/oz last week and bulls have not shown any inclination to buy on dips despite prices being at a two-month low.”
“With the dollar expected to continue strengthening in the current risk-off environment, the inverse correlation between gold and the dollar may push gold further down in the immediate future.”
Gold is likely to face further downside pressure, especially if the dollar continues to firm, Howie Lee, Economist at OCBC Bank, reports. XAU/USD has started the week trading listless around $1860...READ MORE
Here is what you need to know on Monday, September 28:
The US dollar extended Friday’s pull back from two-month highs, undermined by the improved risk sentiment amid optimism over the US fiscal stimulus and China’s economic recovery.
China’s industrial profits rose for the fourth straight month, suggesting the economic rebound is regaining momentum. Meanwhile, late Friday, US Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi agreed to restart formal talks on a new coronavirus fiscal aid.
Further, investors refrained from placing fresh long bets on the greenback, as the focus shifts to the first US Presidential election debate this Wednesday.
The Asian markets traded mostly higher while the US stock futures extended its winning streak into the third day on Monday.
Among other developments, the US District Court halts the Trump administration’s ban on TikTok downloads while US President Donald Trump dismissed the NY Times report as fake news. The US daily reported that Trump’s taxes show chronic losses and years of income tax avoidance.
Within the G10 fx basked, AUD/USD recaptured 0.7050, having extended the bounce from Friday’s lows amid the upbeat market mood. The kiwi also followed suit and regained 0.6550. New Zealand PM Jacinda Ardern said that a travel bubble with some of the Australian states could restart before Christmas. USD/JPY dropped back below 105.50, as the demand for the yen returned amid hopes of additional stimulus from Japan and subdued Treasury yields.
EUR/USD stalled its decline while holding steady above 1.1600. The bearish bias, however, remains intact, as the shared currency will continue to face the hear from the virus surge and restrictions in different Euro area economies. Also, the European Central Bank (ECB) policymakers’ concerns on the euro strength could weigh on the currency. All eyes on President Christine Lagarde’s speech due later on Monday.
GBP/USD bounced-back towards 1.2800 on renewed Brexit optimism. British diplomats are optimistic about reaching a post-Brexit transition trade deal with the European Union (EU). The UK Cabinet Minister Michel Gove visits Brussels ahead of the ninth round of talks this Tuesday, the final stage of Brexit trade negotiations.
Gold traded listless around $1860 ahead of the election debate and US payrolls release. WTI dropped 1$, below the $40 mark amid oil demand recovery concerns.
Cryptocurrencies’ broke the weekend’s consolidation to the upside, with Bitcoin challenging $11K.
The US dollar extended Friday’s pull back from two-month highs, undermined by the improved risk sentiment amid optimism over the US fiscal stimulus and China’s economic recovery...READ MORE
Prepare for turbulence
For a long time we’ve been warned that the final months of the year will be extremely eventful and if recent weeks are anything to go by, that may be an understatement. With the US election fast approaching, Covid on the rise again and Brexit negotiations reaching a critical point, financial markets are about to get very interesting, indeed.
The labor market recovery is stalling, and pressure continues to grow for Congress to provide more support. The September nonfarm payroll report will be the last jobs report before the presidential election. Most leading indicators show the joblessness issue is about to get worse. Weekly initial jobless claims remain elevated and the labor outlook for the rest of the year looks dismal as the winter wave of the virus will likely bring back many lockdowns and restrictive measures across the country.
The upcoming jobs report is expected to show 900,000 jobs were created, down from the prior gain 1.37 million in August. The nonfarm payroll consensus range goes from a decline of 100,000 jobs to a gain of 1.8 million jobs.
Democratic presidential candidate Joe Biden and President Donald Trump will have their first presidential debate on Tuesday, September 29th. Both sides are trying to lower expectations heading towards the three presidential debates. President Trump has maintained his aggressive attacks on Biden’s acumen, while Biden is likely to focus on his opponent’s handling of the coronavirus pandemic.
Prior to COVID-19, it was a foregone conclusion President Trump would have an easy path towards re-election. The focal point for the debate will be the coronavirus/economy. Biden’s lead in most battleground states is in the low to mid-single digits. This election has the smallest amount of undecided voters so its impact might be minimal in the polls.
EU continues to see surging Covid cases that’s already weighing on economic activity. More data next week will likely make for difficult reading. ECB has been reluctant to hint at more stimulus but that may not last. Christine Lagarde will speak next week which may offer more insight into how the central bank may respond in the final months of the year.
Talks will continue next week after the UK side pushed back further Parliamentary debates on the Internal Markets Bill until December and only in the event that no-deal Brexit is happening. This episode has frustrated many people in Brussels and London and is widely seen as a negotiating ploy to ensure no-deal is as undesirable for the EU as it will be for the UK. Regardless, time is running out and with only a couple of weeks to go until the EU summit, it’s time for compromise. A deal by mid-October still looks hopeful but then, we’re used to deadlines not being met. Sterling volatility may intensify further in the coming weeks if negotiators play hard ball.
The UK has imposed tighter restrictions and announced new job support measures in an attempt to slow the spread of Covid-19 and reduce the spike in unemployment that will happen at the end of next month when the furlough scheme draws to a close. The economy will naturally take a hit again with restrictions potentially lasting six months. Still, the biggest risk to the currency remains Brexit, or no-deal to be more specific. The next two weeks will be crucial.
TikTok gains injunction to stop US ban from app stores. The US government has until today to respond. It is increasingly unlikely the China Government will approve the US TikTok deal though dealing another blow to US/China relations.
China Industrial Profits released Sunday. A large deviation could cause a spike in volatility on equity and currency markets on Monday morning.
China PMI’s Wednesday should be market positive. China is on holiday for one week from Thursday.
WGBI inclusion will have no noticeable effect on currency.
Mid-autumn holidays next week. No significant news or data. Ant Financial IPO expected early October after China holiday. HSBC shares hit 1995 lows, fears over money laundering and US/China politics.
Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and hit 5 million cases this week with no end in sight.
RBI rate decision Thursday. Expected unchanged as the economy caught in stagflation vice. Potential protests over the farming reform bill that has been snuck through the government by PM Modi.
No significant data or news.
ANZ Business Conf. and Manufacturing PMI expected to show further improvement. No other news or event risk. Iron and Copper prices are resilient and market supportive.
AUD and Australian equities are moving in lockstep with Wall Street. Wall Street weakness next week threatens AUD/USD key support at 0.7000.Australian markets could rally on strong China data however.
Heavy data week with Industrial Production, Retail Sales and Tanken survey and PMI’s. All are expected to show the economy mired in recession, especially domestic consumer data.
No significant event risk.
USD/JPY regains 105.00 on global equity sell-off and rise in US bond yields.
With risk appetite taking another beating this morning, oil is once again coming under pressure although, broadly speaking, it’s pretty much barely moved since Monday’s close. The sell-off earlier this week came as stock markets were falling aggressively on Covid and lockdown fears. Since then it’s stabilized surprisingly well, or perhaps not so surprisingly.
When the Energy Minister of the most powerful OPEC+ nation is warning the market against shorting oil and suggesting they’ll suffer the consequences, it has the potential to put a floor under the market. I think we’re seeing those words take effect. Whether it lasts is another thing, the group may need to follow through on the threats eventually to be taken seriously and reinforce the floor he’s attempted to put in place.
Gold is slightly lower again this morning and heading back towards $1,850, around where it found support over the last 48 hours. The yellow metal is being pressured by a resurging dollar, which broke out of its downtrend in the middle of this month before stalling. It wasn’t for long though and it’s well and truly taken off this week.
To be clear, this only looks to be a corrective move at this stage but that doesn’t mean we won’t see $1,800 coming under pressure in gold in the not-too-distant future. The shift to a more risk-averse environment is favouring the dollar once again, at the expense of the once safe haven gold. Longer term prospects remain unchanged but in the near-term, the path of least resistance is below.
Saturday, Sept. 26
– President Donald Trump to announce Supreme Court nominee to fill Ruth Bader Ginsburg’s seat
Sunday, Sept. 27
– Swiss voters will vote on whether to tear up a pact with the EU on the free movement of people, after a referendum campaign that exposed rifts in society over foreigners who make up a quarter of the population.
China industrial profits
Monday, Sept. 28
– Brexit negotiations. The final scheduled round of talks between the U.K. and EU on a post-Brexit trade deal takes place in Brussels. Prime Minister Boris Johnson’s Internal Market Bill may get a rough ride through Parliament, despite Johnson already agreeing on a compromise with members of his Conservative Party.
– ECB President Christine Lagarde attends a European Parliament hearing.
– Cleveland Fed President Loretta Mester participates in an economic equality webinar hosted by the African American Chamber of Commerce of Western Pennsylvania.
– Turkey and Greece may resume exploratory talks to try and solve their maritime dispute.
Japan leading index
Tuesday, Sept. 29
– The first US presidential debate between President Donald Trump and Democratic opponent Joe Biden will take place at Case Western University in Cleveland.
-Philadelphia Fed President Patrick Harker discusses machine learning at an Official Monetary and Financial Institutions forum.
-New York Fed President John Williams speaks at the U.S. Treasury Market Conference
-Riksbank Governor Stefan Ingves delivers an online speech on monetary policy.
U.S. wholesale inventories, S&P CoreLogic CS home prices, consumer confidence
Canada industrial product price
South Africa unemployment
South African Reserve Bank’s quarterly bulletin.
Euro-area consumer confidence
Wednesday, Sept. 30
– Minneapolis Fed President Neel Kashkari discusses Covid-19 and the economy in a virtual forum hosted by Wisconsin Manufacturers & Commerce.
-The ECB holds its annual “ECB and Its Watchers” conference. President Christine Lagarde is among those speaking at the event.
– EIA crude oil inventory report
U.S. GDP (3rd reading) Annualized Q/Q:-31.6% eyed v -31.7% prior, Sept ADP employment change:650K eyed v 428K prior, pending home sales for August: 2.0% eyed v -2.0% prior
Chile copper production
Brazil primary budget balance
New Zealand building permits, ANZ business confidence
Japan retail sales, industrial production, housing starts, construction orders, machine tool orders
China manufacturing PMI, Caixin PMI manufacturing
Australia private sector credit, building approvals
CPI: South Africa, Euro-area, France
GDP: U.K., Canada
Thailand trade, BoP
Hong Kong retail sales
Philippines bank lending
Turkey trade balance
Thursday, Oct. 1
-EU summit in Brussels. Tensions with Turkey are at the top of the agenda. Separately, new Trade Commissioner Valdis Dombrovskis faces a confirmation hearing in the EU parliament. Through Oct. 2.
-New York Fed President John Williams delivers welcoming remarks at the New York Fed Conference on FinTech. He’ll also moderate a virtual discussion with Merck CEO Ken Frazier, hosted by the Economic Club of New York.
-Eastern European central bank governors meet in Rovinj, Croatia to discuss monetary policy and financial stability during the pandemic.
– US automobile sales for the third quarter are expected to increase despite lackluster sales to rental car companies.
U.S. initial jobless claims, personal income/spending, Sept ISM manufacturing: 55.9 eyed v 56.0 prior, construction spending, auto sales
Manufacturing PMI: US, Mexico, Canada, India, Spain, Italy, France, Germany, Euro area, U.K., Poland, Czech
Australia AiG performance of manufacturing index, commodity index
Japan Tankan large manufacturing index, vehicle sales, Jibun Bank PMI manufacturing
South Korea trade
India rate decision: Expected to keep Repurchase Rate unchanged at 4.00%
PMI: Hungary, South Africa
Friday, Oct. 2
-The September U.S. employment report will be the last before the November election. Nonfarm payrolls are expected to show 850K jobs were created, down from the prior 1.371 million created in August, but still the fifth straight month of gains.
-Philadelphia Fed President Patrick Harker speaks at a virtual event on an inclusive workforce recovery.
U.S. Baker Hughes rig count, unemployment, University of Michigan sentiment, factory orders, durable goods
Japan jobless rate, monetary base
Australia retail sales
Thailand foreign reserves
Sovereign Rating Updates:
– Belgium (Fitch)
– Cyprus (Fitch)
– Germany (S&P)
– France (S&P)
– Iceland (Moody’s)
– Sweden (DBRS)
For a long time we’ve been warned that the final months of the year will be extremely eventful and if recent weeks are anything to go by, that may be an understatement. With the US election fast approaching, Covid on the rise again and Brexit negotiations reaching a critical point, financial markets are about to get very interesting, indeed...READ MORE
Bitcoin recently encountered an expected resistance under $11,200 on the run-up to $12,000. A reversal ensued, initially finding support at $10,800. Attempts to recover the lost ground and close the week above $11,000 failed amid exhaustion in the bullish camp. On the other hand, bearish positions increased on Monday, culminating in a breakdown to $10,300.
Glassnode’s Spent Output Profit Ratio (SOPR) enters “Buy the Dip” territory
On-chain data is gradually becoming a fundamental factor in the cryptocurrency market. Traders are employing different on-chain metrics to predict market trends and capitalize on both upswings and downswings. The SOPR indicator by Glassnode, a renowned provider of on-chain insights, assists in understanding the economics within Bitcoin’s ecosystem. The index brings to light instances when the average stakeholder is either at a profit or a loss. According to Glassnode:
SOPR represents the profit ratio of coins moved on-chain, measured through the variation between the purchase price and sale price. It is calculated by dividing the realized value of a spent output (in USD) by the value at creation (in USD)"
Therefore, a SOPR value of more than one suggests that stakeholders are selling at a profit, on average. In other words, the price sold surpasses the price paid for the coins. Subsequently, a SOPR value of less than one suggests that stakeholders are selling at a loss.
The SOPR index explained
The SOPR tracks both bullish and bear markets. Traders need to know that the market tends to reverse quickly during bull runs, in turn, pushing the SOPR value below one. It also means that most people are selling at a loss. On the flip side, during breakdowns, markets tend to reverse, pushing the SOPR value above one (these are the prices where profits are being encountered). In other words, stakeholders get anxious that prices will continue to fall; for this reason, they sell at break-even points.
According to Philip Swift, the co-founder of Decentralized.com, the SOPR index presents a “buy the dip opportunity.” As explained before, the SOPR is falling below one, and during bulls markets, this could be an excellent time to buy. However, informed traders would have to support this idea with key fundamental levels and technical analysis before diving to “Buy the Dip.”
Looking at the daily range, BTC/USD is trading within a symmetrical triangle pattern. Breakouts and breakdowns are likely in these types of chart patterns. Therefore, if Bitcoin bulls hold above $10,400 (short-term support), a push for gains towards $11,000 could eventually confirm a breakout. A close above last week’s resistance at $11,200 would pave the way for advancements targeting $12,000. The Relative Strength Index seems to be stabilizing above 40, while a return to levels above the midline would mark the beginning of upward price action.
Not much can be said about the weekly chart. However, if the descending wedge pattern is confirmed, a breakout would ensue, sending Bitcoin towards $12,000. Simultaneously, if the pattern leads to a bull flag, Bitcoin could still break out, targeting $12,000. Moreover, the Moving Average Convergence Divergence (MACD) is holding well in the positive territory, highlighting buying pressure.
IntoTheBlock’s IOMAP model shows high congestion of sellers between $10,466 and $10,775. Here, 1.22 million addresses previously purchased 1.01 million BTC. It will not be easy to bypass this supply zone; hence Bitcoin may start a reversal to the most formidable support between $9,520 and $9,829, an area where 1.12 million addresses bought about 750,000 BTC.
Looking at the other side of the fence
It is worth mentioning that although a recovery took place immediately after the dip to $10,300, the flagship cryptocurrency stalled marginally below the 50 Simple Moving Average (SMA) in the hourly range ($10,600). Another bearish correction from the hurdle appears to be confirming a bear flag pattern, likely to send BTC back to $10,300.
The extent of the ongoing bearish leg cannot be determined at the moment; we will have to wait to see it play out. However, the IOMAP model has already highlighted more resistance to $11,000. On the downside, significant support can only be found in the range between $9,520 and $9,829.
Bitcoin recently encountered an expected resistance under $11,200 on the run-up to $12,000. A reversal ensued, initially finding support at $10,800. Attempts to recover the lost ground and close the week above $11,000 failed amid..READ MORE
Gold (XAU/USD) extends sell-off into a third straight day on Wednesday, having settled at $1900 on Tuesday. Renewed US-China tensions and Fed’s optimism are set to boost the greenback while the $1863 August low is eyed.
“The yellow metal remains undermined by the relentless haven demand for the US dollar seen across the board, as investors shun riskier assets amid coronavirus resurgence in Europe and the UK. US Federal Reserve (Fed) Chair Jerome Powell’s testimony and solid US housing data collaborated with the US dollar surge. Powell said the US economy remains resilient throughout the crisis.”
“Renewed US-China tensions, following US President Donald Trump’s speech at the United Nations (UN) General Assembly on Tuesday, continue to temper the risk sentiment and render dollar-supportive. Trump said China must be held accountable for mishandling the coronavirus outbreak. Attention now turns towards the US Markit Manufacturing PMI and Day 2 of Powell’s testimony on the economic impacts of COVID-19 before the House Select Committee.”
“Gold has resumed its recent downside momentum, having confirmed a symmetrical triangle breakdown on the hourly chart, opening floors for a test of the pattern target near the August month low of $1863. The path of least resistance remains to the downside, as the bearish Relative Strength Index (RSI) probes the oversold territory at 31.17, allowing for more declines.”
“Any recovery attempts could meet the immediate upside hurdle at $1901/02, where the bearish 21-hourly Simple Moving Average (HMA) coincides with the pattern support now resistance. Further north, the next cap sits at the downward-sloping 50-HMA at $1913, above which Tuesday’s high of $1920 could be put to test. Only a sustained move above the 100-HMA at $1931 could likely offer some reprieve to the XAU bulls in the near-term.”
Gold (XAU/USD) extends sell-off into a third straight day on Wednesday, having settled at $1900 on Tuesday. Renewed US-China tensions and Fed’s optimism are set to boost the greenback while the $1863 August low is eyed...READ MORE
Here is what you need to know on Wednesday, September 23:
The US dollar continued to draw haven demand amid renewed US-China tensions and dwindling global economic recovery, as coronavirus resurgence rattled Europe and the UK. An optimism tone struck by the Fed policymakers and strong US housing data offered extra legs to the greenback rally.
Fed Chair Jerome Powell said the economy stands resilient throughout the crisis while the Chicago Fed President Charles Evans noted that the central bank could raise interest rates before the 2% average inflation target is reached.
The US-Sino tensions once again resurfaced after US President Donald Trump accused China once again before the United Nations General Assembly, holding it accountable for having "unleashed" COVID-19 on the world.
Asian equities were a mixed bag, albeit supported by the bounce on Wall Street overnight. The US stock futures traded with mild gains, as the dollar remained robust across the board.
AUD/USD was the weakest across the fx board, courtesy of the Reserve Bank of Australia (RBA) rate cut calls and Australian Retail Sales slump. NZD/USD briefly bounced from monthly lows of 0.6599 on the Reserve Bank of New Zealand’s (RBNZ) status quo on the interest rates and asset purchases. The RBNZ, however, flagged the prospects of negative rates, which clipped the kiwi’s rebound. USD/JPY kept the bid tone intact while holding steady just above the 105 level.
EUR/USD dropped to fresh two-month lows of 1.1675, as the shared currency remained undermined by rising growth worries, in the face of restrictions and localized lockdowns in many Eurozone economies amid surging virus cases. All eyes remain on the Eurozone Preliminary Manufacturing and Services PMIs.
GBP/USD held the lower ground on 1.2700 after UK Prime Minister (PM) Boris Johnson unveiled new restrictions while the Bank of England (BOE) Governor Andrew Bailey ruled out negative interest rates in the near-term. Brexit drama is back in the spotlight, as EU’s Barnier heads to London for informal trade talks. Sky News reported that the Brexit talks are going “a bit” better than expected.
Gold extended declines below $1900 ahead of the second day of Powell’s testimony on the virus impact. WTI traded in the red below $40 after a surprise rise in the API US crude inventories.
Cryptocurrencies’ traded subdued, with Bitcoin ranging around the $10,500 level.
The US dollar continued to draw haven demand amid renewed US-China tensions and dwindling global economic recovery, as coronavirus resurgence rattled Europe and the UK. An optimism tone struck by ...READ MORE
Gold (XAU/USD) plummeted 3% and reached the lowest levels in six-week at $1882 on Monday. The yellow metal treads water above $1900 in Tuesday’s trading so far, as the dollar bulls take a breather, digesting the release of the Fed Chair Jerome Powell’s prepared remarks ahead of his three-day Congressional testimony, FXStreet’s Dhwani Mehta briefs.
“Powell said that the Fed is committed to using all policy tools available to support the post-pandemic economic recovery. The sentiment on the global stocks will remain in focus for fresh impetus on gold. Should the risk-aversion deepen in the sessions ahead, the safe-haven dollar could see a fresh leg higher, weighing once again on the USD-denominated gold.”
“Although a brief bounce cannot be ruled out before the yellow metal resumes the sell-off. The 14-day Relative Strength Index (RSI), currently at 43.85, has turned flat, backing the case for a temporary pullback, especially given Monday’s slump. Therefore, the immediate upside barrier is aligned at the pattern support now resistance at $1930. A break above which the confluence of the 21 and 50-DMAs around $1940/41 will limit the recovery attempts.”
“To the downside, the $1900 level could be once again challenged by the bears. The next downside target at $1882 (Monday’s low) could be put at risk. A failure to defend the latter could expose the August low at $1863.”
Gold (XAU/USD) plummeted 3% and reached the lowest levels in six-week at $1882 on Monday. The yellow metal treads water above $1900 in Tuesday’s trading so far, as the dollar bulls take a breather...READ MORE
The EUR/USD pair witnessed some aggressive selling on the first day of a new trading week and dived to six-week lows amid a strong pickup in the US dollar demand. Rising odds of fresh lockdown measures to curb the second wave of coronavirus outbreak triggered a fresh wave of the global risk aversion trade. The anti-risk flow was evident from a selloff in the equity markets, which, in turn, provided a strong boost to the greenback's status as the global reserve currency.
Apart from this, the shared currency was further weighed down by not so optimistic comments by the ECB President Christine Lagarde, saying that the economic recovery remains very uncertain, uneven and incomplete. Lagarde reiterated that the ECB stands ready to adjust all of its instruments as appropriate and that a higher exchange rate put prices under downside pressure. The combination of factors led to steep intraday fall to the 1.1730 region, though the pair showed some resilience at lower levels and finally settled around 40 pips off daily lows.
The USD bulls turned cautious amid expectations that the Fed Chair Jerome Powell will reaffirm to keep interest rates lower for longer during his congressional testimony later this Tuesday. This makes it prudent to wait for some strong follow-through selling before traders start positioning for any further near-term depreciating move. In the meantime, Tuesday's release of the preliminary estimate of Eurozone Consumer Confidence for September, along with the second-tier US economic data will be looked upon for some trading impetus. The US economic docket features the release of Existing Home Sales and Richmond Manufacturing Index, which might influence the USD price dynamics and help traders to grab some short-term opportunities.
From a technical perspective, the set-up now seems tilted in favour of bearish traders and supports prospects for further downside. Hence, some follow-through weakness towards August monthly swing lows, around the 1.1700-1.1695 region, now looks a distinct possibility. Failure to defend the 1.1700 mark will be seen as a fresh trigger for bearish traders and turn the pair vulnerable to prolong the recent corrective slide further towards testing the 1.1600 round-figure mark.
On the flip side, the 1.1800 mark becomes immediate strong resistance. Any subsequent positive move might now be seen as a selling opportunity and remain capped near the 1.1850-60 supply zone. That said, a sustained move beyond might trigger a short-covering move and push the pair further towards the 1.1900 mark en-route the next major hurdle near the 1.1935-40 region. The momentum could further get extended towards the key 1.2000 psychological mark.
The EUR/USD pair witnessed some aggressive selling on the first day of a new trading week and dived to six-week lows amid a strong pickup in the US dollar demand. Rising odds of fresh lockdown measures to curb the second wave of...READ MORE
Here is what you need to know on Tuesday, September 22:
The US dollar consolidated the surge to six-week highs, as the bulls took a breather amid holiday-thinned quiet trading and ahead of the US Federal Reserve (Fed) Chair Jerome Powell first of three appearances on Capitol Hill this week.
According to the prepared remarks released early Monday, Powell is expected to say that the Fed committed to using all tools available to ensure a strong recovery.
The uncertainty and delays in US fiscal stimulus combined with mounting coronavirus risks on the global economic recovery spurred the haven demand for the greenback at the expense of the risk assets.
The omnipresent US-Sino tensions also added to the downbeat market mood. The Global Times reported that Beijing is unlikely to approve the Tik Tok-Oracle deal, which is in-principally approved by US President Donald Trump.
Asian equities traded mostly lower, despite the easing of the Wall Street sell-off towards the closing. The US stock futures also traded on the back foot, reflective of the tepid risk sentiment.
Across the fx board, AUD/USD tested two-week lows sub-0.7200 after the Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle unveils four policy options, including currency intervention and negative interest rates. USD/JPY stabilized around 104.50 following the rejection near the 104.80 region.
EUR/USD remained under pressure above 1.1750 amid the virus resurgence and localized lockdowns in different countries in the Old Continent. The European Central Bank (ECB) President Christine Lagarde’s downbeat outlook on the economy also weighed on the shared currency.
GBP/USD’s rebound stalled above 1.2800, as traders await the Bank of England (BOE) Governor Andrew Bailey’s speech and UK Prime Minister (PM) Boris Johnson’s emergency COBRA meeting amid a spike in infections. A two-week nationwide lockdown could be on the table. Pubs and restaurants in England will be shut after 2200 hours.
Gold attempted a bounce on the $1900 level after Monday’s 3% slump. WTI licked its wounds below $40, in the face of rising concerns over global economic recovery.
Cryptocurrencies’ remained in downside consolidation mode, with Bitcoin hovering below the $10,500 level.
The US dollar consolidated the surge to six-week highs, as the bulls took a breather amid holiday-thinned quiet trading and ahead of the US Federal Reserve (Fed) Chair Jerome Powell first of three appearances on Capitol Hill this week...READ MORE
Open interest in Gold futures markets rose by nearly 3K contracts at the end of last week according to preliminary data from CME Group. On the other hand, volume retreated for the second session in a row, this time by around 104.1K contracts.
Gold now targets $1,992/oz
Prices of Gold edged higher on Friday amidst rising open interest, opening the door to the continuation of the recovery. That said, the next target of relevance still emerges at the monthly tops around $1,992 per ounce in the short-term horizon.
Open interest in Gold futures markets rose by nearly 3K contracts at the end of last week according to preliminary data from CME Group. On the other hand, volume retreated for the second session in a row, this time by around 104.1K contracts...READ MORE
The EUR/USD pair lacked any firm directional bias on Friday and seesawed between tepid gains/minor losses, well within a familiar trading range around mid-1.1800s. Concerns about the second wave of the COVID-19 infections and fading prospects of a sharp V-shaped economic recovery weighed on investors' sentiment. This was evident from a weaker trading sentiment around the equity markets, which coupled with Wednesday's not so dovish FOMC statement drove some haven flows towards the safe-haven US dollar. The greenback was further underpinned by the better-than-expected release of the preliminary Michigan Consumer Sentiment Index, which improved to 78.9 in September from 74.1 previous.
The supporting factors, to a larger extent, were negated by growing optimism over a potential vaccine for the highly contagious coronavirus disease. This coupled with worries that the lack of additional fiscal stimulus measures could halt the current US economic recovery held the USD bulls from placing any aggressive bets. This, in turn, failed to provide any meaningful impetus to the major and led to a subdued/range-bound price action. The pair finally settled nearly unchanged for the second consecutive week and formed a Doji candlestick pattern, indicating a tug of war between bulls and bears.
The pair managed to regain some positive traction on the first day of a new trading week as market participants now look forward the Fed Chair Jerome Powell's comments for a fresh impetus. Powell is also due to testify before the Congressional committees later this week, which, along with scheduled speeches by other influential FOMC members will influence the near-term USD price dynamics. Apart from this, traders will further take cues from Wednesday's release of the Eurozone preliminary PMI reports for September before positioning for the pair's next leg of a directional move.
Short-term technical outlook
From a technical perspective, the emergence of some dip-buying near 50-day SMA favours bullish traders. However, the lack of any strong follow-through buying warrants some caution before positioning for any further appreciating move. Hence, any subsequent positive move is more likely to confront a stiff resistance near the 1.1900 mark. That said, some follow-through buying might trigger some near-term short-covering move and push the pair further beyond the 1.1935-40 supply zone, towards reclaiming the key 1.2000 psychological mark.
On the flip side, the 1.1800 mark now seems to have emerged as immediate support, below which the pair could slide back to the 1.1750 horizontal level. Sustained weakness below, leading a subsequent break through the 1.1735 area (50-DMA), will be seen as a fresh trigger for bearish traders. The pair could then accelerate the fall further towards August monthly swing lows, around the 1.1700-1.1695 region. Failure to defend the 1.1700 mark would now turn the pair vulnerable to prolong the recent corrective slide towards testing the 1.1600 round-figure mark.
The EUR/USD pair lacked any firm directional bias on Friday and seesawed between tepid gains/minor losses, well within a familiar trading range around mid-1.1800s. Concerns about the second wave of the COVID-19 infections and fading prospects of...READ MORE
Here is what you need to know on Monday, September 21:
The US dollar remained on the defensive starting out a fresh week this Monday, extending last week’s softness, courtesy of the gridlock on the US fiscal stimulus. The US lawmakers are still nowhere near agreeing on new relief aid, which could likely thwart the nascent economic recovery.
The greenback failed to benefit from the risk-off market mood amid renewed US-China tensions. Trump administration ordered to ban WeChat and TikTok application from the states, although the curbs were put on hold by a judge. Meanwhile, President Donald Trump approved Oracle Corp.’s bid for the US operations of TikTok “in concept.”
Asian equities tracked Wall Street lower, with Japanese markets closed on a public holiday. Investors weighed in China ratcheting up the risk of military confrontation in the Taiwan Strait, as Sino-American row over Taipei escalates.
AUD/USD was the top gainer in Asia and regained 0.7300, helped by the upbeat comments from Australian Prime Minister (PM) Scott Morrison. He predicts a job bounce-back as Victoria prepares to reopen. The kiwi also followed suit and headed back towards 0.6800 after NZ PM Ardern lowered the country-wide alert outside Auckland to level 1. The yen advanced on broad risk-aversion against the US dollar, with USD/JPY downed to near two-month lows of 104.26.
EUR/USD jumped back onto 1.1850, with the 1.1900 level back in sight, as the common currency shrugged-off concerns over the coronavirus resurgence in Europe. Fresh restrictions were imposed in Greece and Denmark last Friday. Spain and France mulled local lockdowns amid a spike in infections. Among other news, the European Central Bank (ECB) launched a review of its pandemic bond-buying program (PEPP), as cited by the Financial Times (FT).
GBP/USD stood resilient above 1.2950, despite the increasing odds of a nationwide lockdown in the UK. Health Minister Hancock said that the country is at a “tipping point.” Chancellor Sunak may extend business support loans. Optimism over a Brexit deal, courtesy of European Commission President Ursula von der Leyen’s upbeat comments, continued to bode well for the pound.
Gold traded on the front foot above $1950 amid the dollar weakness, ahead of the Fed Chairman Jerome Powell’s speech. Oil prices returned to the red despite the US storm-led production halt. WTI posted small losses to test the $41 mark.
Cryptocurrencies’ traded modestly flat, with Bitcoin probing the $11K level.
The US dollar remained on the defensive starting out a fresh week this Monday, extending last week’s softness, courtesy of the gridlock on the US fiscal stimulus. The US lawmakers are still nowhere near agreeing on new relief aid, which could likely thwart the nascent economic recovery....READ MORE
Powell given a second chance
It’s a fascinating time to be following financial markets. There are so many massive things happening at the same time that it can be difficult to judge what exactly is driving the markets at any one moment. This week, it’s the central banks that have dominated and with Powell making numerous appearances next week, days after disappointing the markets by only be extremely dovish, that’s unlikely to change.
Sunday, Sept. 20
– Secretary of State Pompeo has noted said the US is preparing to reimpose practically all sanctions on Iran.
– The UK’s opposition Labour Party holds its annual conference online. Leader Keir Starmer speaks on Tuesday.
– Italy holds regional elections.
Monday, Sept. 21
– European Union trade ministers meet in Berlin.
– Prime Minister Boris Johnson’s Internal Market Bill may get scrutinized in the House of Lords, despite Johnson agreeing on a compromise with members of his Conservative Party. Attention will also be on the EU, which has threatened the collapse of trade talks unless Johnson withdraws the legislation.
– The Federal Reserve Board holds an open meeting to discuss advance rulemaking on the Community Reinvestment Act.
Tuesday, Sept. 22
– Chicago Fed President Charles Evans takes part in a webinar discussion on the U.S. economy and monetary policy hosted by OMFIF, the Official Monetary and Financial Institutions Forum.
Wednesday, Sept. 23
– Fed Chairman Jerome Powell is expected to testify to the House’s select subcommittee to the coronavirus crisis about the central bank’s response.
– The Chicago Payments Symposium has remarks by Cleveland Fed President Loretta Mester on “payments and the pandemic.” Chicago Fed President Charles Evans takes part in a MNI-moderated discussion on the U.S. economy.
– Boston Fed President Eric Rosengren discusses the U.S. economy at a virtual event hosted by the Boston Economic Club. San Francisco Fed President Mary Daly takes part in a virtual discussion on the impact of the pandemic on the labor force.
– The Trudeau government unveils a new agenda for a spending plan to help drive the economic recovery, in a speech delivered by Governor General Julie Payette at the opening of Canada’s parliament.
– Weekly EIA Crude Oil Inventory Report
Thursday, Sept. 24
– EU summit. Leaders from across the bloc meet in person to discuss industrial strategy in the aftermath of Covid, tensions with Turkey and Russia, relations with China, and the state of the Brexit negotiations. Through Sept. 25.
– Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testify to the Senate Banking Committee about coronavirus relief.
– St. Louis Fed President James Bullard discusses the economy and monetary policy on a Global Interdependence Center webinar. The Chicago Fed’s Charles Evans discusses the outlook for the U.S. economy in a virtual event hosted by the Illinois Chamber of Commerce
– Hungary’s Central Bank Governor Matolcsy, Finance Minister Varga and Mol Chairman-CEO Hernadi headline a two-day annual economics conference.
Friday, Sept. 25
Sovereign Rating Updates:
– Poland (Fitch)
– United Kingdom (Fitch)
– Saudi Arabia (S&P)
– Hungary (Moody’s)
– Sweden (Moody’s)
– European Union (DBRS)
Fed Chair Powell will deliver two days of testimony in Washington DC. On Wednesday, he will testify to the House’s select subcommittee and on Thursday with the Senate Banking Committee. Powell will be asked several questions about the Fed’s new monetary strategy and if they are almost out of ammo. After Jackson Hole and the September FOMC decision, Powell will likely confirm their outcome-based guidance means rates will be lower for longer and highlight the risks to the outlook. Rates are going nowhere for a few years and all the Fed speak this week should lean towards further dovishness.
The US still does not have the virus under control as over 20 states are recording more infections when compared to the prior week. It will be difficult for governments to continue to ease COVID-19 lockdowns if the downward trend in US cases is interrupted. The upcoming round of economic data, the flash Markit PMIs and durable goods data should show economic growth rebound is slowing.
The election is nearing and President Trump may have got his groove back. Joe Biden maintains leads across the national polls but Trump is starting to chip away at his lead. Biden’s lead has fallen to 5.8-points in the RealClearPolitics poll and 6.7-points with FiveThirtyEight’s poll. Trump is benefiting from vaccine optimism and as labor market recovery heads in the right direction, unadjusted claims continue to decline, albeit still quadruple the number before the pandemic.
Policy makers from the ECB were out in force last weekend, clarifying comments from the meeting last Thursday regarding the currency exchange rate. Lagarde’s comments in the press conference gave the impression that the central bank was very relaxed about the currency’s rapid appreciation but policy makers, including Lagarde, were keen to stress otherwise. The free run at 1.20 against the dollar may not be so welcome afterall.
Especially not with Covid cases rising rapidly across Europe which threatens the recovery that had already started stalling. The ECBs optimistic assessment may be pared back between now and the end of the year. PMIs next week could provide more insight into how the situation is impacting business confidence.
Not the best week for the UK as far as Brexit is concerned. Talks with the EU are not progressing, with the Internal Market Bill only serving to further frustrate Brussels. It’s not just Brussels that’s taken issue with it, though. Democratic Presidential hopeful Joe Biden weighed in this week, warning that the Good Friday Agreement should not become a casualty of Brexit, effectively echoing Nancy Pelosi’s words last week and insisting it would not pass Congress. This is seemingly one thing both Presidential candidates are in agreement on. Boris Johnson may be able to sell no-deal to some Brexiteers, but no trade deal with the US as well? That will be a whole lot harder. Something has to give.
Coronavirus cases are spiking in the UK and more restrictions are being imposed across the country as businesses once again are forced to contend with the disruption. What’s more, the government is reportedly considering a two week lockdown coinciding with the half term school holiday’s next month which will be another hammer blow to business. On the bright side, more people are taking the government’s advice and returning to work, with the ONS claiming 62% of people went into the office last week.
The Bank of England once again discussed negative interest rates at the meeting this week, triggering another decline in the pound which has spent much of the week recovering the sharp declines suffered in September. With the risk of no deal heightened and deadline less than a month away, the pound will remain volatile and could come under pressure. I still believe a deal will be struck which should be positive for sterling. When that comes and whether the two sides can actually work to a deadline is another thing altogether.
The rand could see further momentum from the potential ending of the SARB’s easing cycle. The September decision to hold rates despite downward pressure on growth and inflation for the rest of the year likely means they are done and that next move will be a hike.
TikTok saga drags on. Very light data with creating a headline driven market with geopolitics to dominate.
China Loan Prime Rate decisions on Monday. Expected unchanged.
China activity will drop as the week progresses ahead of Mid-Autumn holiday the following week.
Covid-19 measures continue to dampen economic activity. No notable data or event risk next week.
Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country and hit 5 million cases this week with no end in sight.
GDP shrank 23.90% in Q2 and is expected to shrink by 10+% for the year, increasing stress on the banking sector. INR appreciation has resumed, supported by e-commerce investment inflows, lower oil prices and high interest rates, with RBI unable to cut in this environment.
No significant data this week.
The New Zealand covid-19 outbreak is bartering. NZD/USD rising as a pro-cyclical recovery play.
RBNZ decision Wednesday will remain unchanged. Markets watching for comments on potential negative interest rates. Could spark a NZD/USD sell-off.
Trade relations with China continue to be a flashpoint. Relatively quiet this week though.
ACT eased interstate movement restrictions. Victoria State’s may ease restrictions next week, equity and AUD supportive.
PMI Wednesday only data of note. AUD/USD supported as pro-cyc;lical recovery play with copper and iron ore prices remaining at one-year highs.
Suga was appointed as the new Prime Minister as expected. Passed without incident.
Bank of Japan rate decision was unchanged and dovish as expected. PMI Wednesday the only significant data. Japan is on holiday Monday and Tuesday, dampening activity next week.
USD/JPY has fallen through monthly support after the FOMC telegraphed lower for longer rates. Yen could strongly appreciate with Japan away early next week.
Saudi Arabia’a Energy Minister, Prince Abdulaziz bin Salman, had some harsh words for anyone wanting to profit from a decline in oil prices after the OPEC+ JMMC meeting this week, warning that the market won’t go unattended and he wants traders to be as jumpy as possible.
With a threat that anyone who gambles on the market will be “ouching like hell”, it will be interesting to see just how oil prices now respond as they near the $40 mark.
The threats weren’t just saved for those that bet on weaker prices, with a thinly veiled warning directed at those not complying within the group. He warned that attempts to over-produce and hide non-compliance have and will always end in failure, a warning clearly aimed at the UAE which has fallen far short of its quota and will make up the short-fall with compensation cuts by year-end.
With Hurricane Sally forcing shut-ins in the Gulf, oil prices have been well supported in recent days and these comments could well put a floor underneath them for the foreseeable.
Even in the event of a Covid-driven demand shortfall, an emergency October meeting will be called to address the change, with the next scheduled meeting taking place in December.
Gold is on course to end the week roughly where it started, despite the Fed not delivering the uber-dovish message the market wanted to hear. The short-squeeze in the dollar was brief but that doesn’t mean it’s all downhill from here.
The dollar has fallen considerably since March which has provided significant support for gold but it’s since entered a period of consolidation. The dollar has threatened a correction but has failed to gather much momentum so far.
The failure of gold to break $2,000 once again doesn’t bode well for the yellow metal. Ultimately though, the range is tightening. The good news is that we may not have to wait too long for a breakout.
It’s a fascinating time to be following financial markets. There are so many massive things happening at the same time that it can be difficult to judge what exactly is driving the markets at any one moment. This week, it’s the central banks that have dominated and with Powell ...READ MORE
Winter is coming and so are negative rates – that is the message from the Bank of England. The BOE has moved from saying that sub-zero borrowing costs are in the toolkit to being briefed on how to implement them effectively.
Negative rates have failed to boost the Japanese and the eurozone economies – but have dampened their respective currencies. So far in the coronavirus crisis, printing more money boosted currencies – as it allows governments to spend more. However, punishing banks for parking their funds with the central banks is unequivocally adverse for the currency.
GBP/USD dropped below 1.29 in response, and there are additional reasons to expect more falls.
Why sterling may continue suffering
Andrew Bailey, Governor of the Bank of England, enjoyed unanimous support in his decision, showing high determination for such a move.
Moreover, the BOE released new guidance – no tightening until there is significant progress on the inflation goal.The "Old Lady" seems to be taking a page from the Federal Reserve's book. It expects inflation to remain below 1% – far off the 2% target – through early 2021.
In addition, the bank says that there is a risk of a longer period of elevated unemployment. It said that for the current third quarter, it expects output to be 7% below the pre-pandemic levels seen in the fourth quarter of 2020.
Overall, the message is clearly dovish and may further weigh on the pound. How low will sterling go? That also depends on other factors.
Concerns about Brexit remain prevalent and the fate of the goevrnment's successful furlough scheme – which kept employment high during the crisis – is unclear.
Winter is coming and so are negative rates – that is the message from the Bank of England. The BOE has moved from saying that sub-zero borrowing costs are in the toolkit to being briefed on how to implement them effectively...READ MORE
“The exchange is a fundamental economic variable which affects imports, exports, imported inflation or deflation,” the European Central Bank (ECB) Vice President Luis De Guindos said during a webinar on Thursday.
“A relatively brisk and intense fluctuation in the exchange rate affects inflation expectations and the conditions that determine inflation.”
“The ECB could not be happy with its own forecast for a 1.3% inflation rate in 2022.”
The euro is little affected by the above comments, as EUR/USD remains at the mercy of the US dollar dynamics. Although mixed Eurozone inflation numbers dragged the pair below 1.1800.
EUR/USD, currently, trades 1.1791, down 0.18% on the day.
“The exchange is a fundamental economic variable which affects imports, exports, imported inflation or deflation,” the European Central Bank (ECB) Vice President Luis De Guindos said during a webinar on Thursday.Additional quotes...READ MORE
Here is what you need to know on Thursday, September 17:
The Federal Reserve's reluctance to signal more stimulus despite cautious forecasts is weighing on stock markets and boosting the safe-haven dollar. Weekly jobless claims and the Bank of England's decision stand out on Thursday.
Fed: Jerome Powell, Chairman of the Federal Reserve, stressed that the outlook is uncertain yet said that the current level of bond-buying is appropriate. The Fed did not surprise markets by hinting that interest rates will likely remain at zero through 2023.
Powell also indicated that additional fiscal stimulus will likely be needed, seemingly passing the ball to lawmakers' court. According to reports, Democrats and Republicans are getting closer to a deal on an injection of around $1.5 trillion.
The new impetus comes after retail sales disappointed with a meager increase of 0.6% in August. The Control Group dropped by 0.1% and all the recent figures came on top of downward revisions. The shortfall seems related to the lapse of government programs at the end of July.
Weekly jobless claims are set to show a small drop for the week ending on September 11, when Non-Farm Payrolls surveys are held. The Philadelphia Fed Manufacturing Index, and housing figures are also of interes.
President Donald Trump contradidcted his own top health officials by claiming a vaccine is coming shortly. Robert Redfield, the head of the Center for Disease Control, and leading epidemiologist Anthony Fauci foresee broadly available immunization to come only in mid-2021.
Brexit: Prime Minister Boris Johnson has ceded ground to "rebels" in his Conservative Party and allowed for greater parliamentary oversight over the controversial Internal Markets bill. The legislation knowingly violates the Brexit accord Johnson signed with the EU last year. The pound advanced in response.
The focus shifts to the Bank of England, which is widely expected leave its policy unchanged. Investors will watch the BOE's guidance amid a stop-start economy. Local lockdowns are enacted in various places in Britain and new restrictions may be added.
The Bank of Japan left its interest rate unchanged at -0.1% as expected, in its first decision after Yoshihide Suga replaced Shinzo Abe as prime minister. The Tokyo-based institution upgraded its forecasts. USD/JPY is trading around 105, rising amid dollar strength and not falling on safe-haven flows.
AUD/USD is trading below 0.73 amid the risk-off mood. However, Australia reported an increase of 111,000 jobs in August, far above expectations and boosting the Aussie.
NZD/USD is trading around 0.67, down on the greenback's strength and as second-quarter Gross Domestic Product dropped by 12.2%, within broad expectations.
OPEC+ members are set to leave oil production goals unchanged. WTI is trading closer to $40. While the damp market mood is weighing on petrol prices, Hurricane Sally and other brewing storms are limiting output and boosting oil prices.
Cryptocurrencies are holding onto recent gains, with Bitcoin trading around $11,000.
The Federal Reserve's reluctance to signal more stimulus despite cautious forecasts is weighing on stock markets and boosting the safe-haven dollar. Weekly jobless claims and the Bank of England's decision stand out on Thursday.READ MORE
Gold (XAU/USD) built on Monday’s 1% rally after a steady start on Tuesday, reaching fresh nine-day highs at $1969. The yellow metal eyes $1980 amid weaker dollar ahead of US data and FOMC decision, FXStreet’s Dhwani Mehta informs.
“Traders now look forward to the US Industrial Production data and the sentiment on Wall Street for fresh trading impetus. Dovish Federal Reserve (Fed) expectations ahead of Wednesday’s monetary policy decision could also bode well for the XAU bulls.”
“A bull flag confirmation on the hourly chart calls for a test of $1979 in the sessions ahead. The price broke through the pattern resistance at $1957 and rallied $10 to surpass last Thursday’s high of $1966.54. The path of least resistance is to the upside, as the next target for the bulls awaits at $1970. The price trades above all the major HMAs.”
“To the downside, Monday’s high of $1962 will offer immediate support on any pullbacks. A break below which the aforementioned pattern resistance now cushion could limit the losses. The next cap is seen at the bullish 21-HMA at $1955. Acceptance below the latter could intensify the bearish pressure, opening floors towards the upward-sloping 50-HMA, now at $1949.”
Gold (XAU/USD) built on Monday’s 1% rally after a steady start on Tuesday, reaching fresh nine-day highs at $1969. The yellow metal eyes $1980 amid weaker dollar ahead of US data and FOMC decision, FXStreet’s Dhwani Mehta informs...READ MORE
Economists at UBS advise to hold their nerve on UK assets despite the heightened concerns over the final stages of the Brexit process as the political and economic incentives point to an agreement eventually being reached. This outlook supports UK assets.
“We are positive on the medium-term outlook for sterling, both against the US dollar and against the euro. In line with this view, we are not hedging sterling risk for UK assets held in international portfolios. By September of next year we expect sterling to rise to USD 1.40, against 1.29 at present.”
“We also like the UK equity market. A positive outcome to talks would also remove a major impediment to the UK equity market, which has lagged global stocks. Added to this, the UK offers an attractive valuation at 15.4x 12-month trailing P/E, which is a 30% discount to MSCI All-Country World. We expect earnings growth to fall substantially this year, but by next year we anticipate a robust rebound driven by an economic bounce-back and a recovery in the oil price. The UK market has a high exposure to cyclical value sectors such as energy and basic materials, which could benefit from a global recovery.”
Economists at UBS advise to hold their nerve on UK assets despite the heightened concerns over the final stages of the Brexit process as the political and economic incentives point to an agreement eventually being reached. This outlook supports UK assets...READ MORE
Chinese figures beat estimates and joined coronavirus vaccine hopes in keeping the mood positive, weighing on the dollar and supporting stocks and gold. The UK's controversial bill passed the first hurdle and pressures the pound. Several economic figures are due out as tensions mount ahead of the Fed.
Asian stocks and S&P500 500 futures are on the rise after China reported a 5.6% yearly increase in industrial output in August, while retail sales are up 0.5% YoY, also above estimates. The world's second-largest economy also extended exemptions on some US goods imports, adding to the positive mood.
The US dollar is on the back foot, especially against the Australian dollar which is benefiting from Beijing's data dump and relatively optimistic meeting minutes from the Reserve Bank of Australia.
Gold is on the rise, breaking out of range and hitting the highest since early September. Citibank says record pace of ETF investors demand, the weaker dollar and negative yields are also underpinning the precious metal.
GBP/USD is failing to benefit from the greenback's decline. The House of Commons passed the controversial Internal Markets bill which violated the Brexit accord with the EU. Several members of Prime Minister Boris Johnson's Conservative Party said they would vote against the legislation when it comes to a final read next week.
UK jobs figures are due out shortly, and they will likely show a modest uptick in unemployment. The fate of the furlough scheme and the Bank of England's decision are awaited.
EUR/USD is on the rise, shrugging off rising COVID-19 cases in the old continent and benefiting from the European Central Bank's lax approach to the exchange rate as expressed last week. The German ZEW Economic Sentiment is eyed.
Tensions are mounting ahead of Wednesday's decision by the Federal Reserve – the last one before the elections. Updated forecasts for employment and |growth are awaited.
Ahead of the Fed, Tuesday's publications include the Empire State Manufacturing Index for September and Industrial Production statistics for August.
USD/JPY is trading on low ground below 106, seemingly unaffected by the ascent of Yoshihide Suga to lead Japan. The outgoing prime minister's right-hand man will assume office on Wednesday.
Oil prices are struggling to rise amid reports that OPEC+ countries are unlikely to deepen petrol production cuts.
Cryptocurrencies have been moving higher, with Bitcoin changing hands above $10,000.
Chinese figures beat estimates and joined coronavirus vaccine hopes in keeping the mood positive, weighing on the dollar and supporting stocks and gold. The UK's controversial bill passed the first hurdle and pressures the pound...READ MORE
Central banks to be called upon again
The final months of the year are going to be extremely challenging for the global economy, with experts predicting another significant wave of Covid-19 which risks further restrictions around the world at the expense of businesses that are already struggling to cope. Central banks are likely to be called upon again before the end of the year and while the ECB opted against laying the groundwork for more stimulus, others may not be so hesitant. With the Fed adopting a slightly modified framework, more easing could be coming.
Key Economic Events
Saturday, Sept. 5
-Italian think tank the European House continues its forum in Cernobbio. French Finance Minister Bruno Le Maire, EU Brexit negotiator Michel Barnier, and German Deputy Finance Minister Joerg Kukies are expected to speak
Monday, Sept. 14
-OPEC Monthly Oil Market Report is released with updates to their demand forecasts and production estimates.
-ECB Chief Economist Philip Lane participates in a fireside chat hosted by SUERF, the European Money and Finance Forum.
-Japan’s Liberal Democratic Party is expected to vote Chief Cabinet Secretary Yoshihide Suga as Prime Minister Shinzo Abe’s replacement.
Tuesday, Sept. 15
-The Federal Open Market Committee begins their two-day policy meeting.
-ECB Executive Board member Panetta delivers a recorded video statement at the 24th Annual Economist Government Roundtable in Athens.
Wednesday, Sept. 16
– The upcoming Fed meeting could reveal some hints as to what needs to happen before policymakers are ready to raise rates.
-The OECD presents new economic forecasts for G-20 economies.
– EIA crude oil inventory report
-UK Prime Minister Boris Johnson appears before Parliament’s powerful liaison committee to discuss the coronavirus crisis and tricky Brexit negotiations.
-ECB Governing Council member Robert Holzmann speaks in New York.
Thursday, Sept. 17
– Bank of England rate decision. BOE policy makers are expected to keep policy unchanged while laying the groundwork for more easing later in the year.
– Bank of Japan expected to keep rates unchanged and to keep supporting the corporate sector.
– The South African central bank (SARB) is likely to cut rates by 25 bps and downgrade their outlook for the rest of the year.
– ECB Governing Council member Olli Rehn speaks in Helsinki.
– The Economic Club of New York hosts a webinar with Larry Kudlow, President Donald Trump’s top economic adviser.
Friday, Sept. 18
– Quadruple witching day for US markets means trading volatility will be elevated.
Sovereign Rating Updates:
– Belgium (S&P)
– Spain (S&P)
– European Union (Moody’s)
– Spain (Moody’s)
Following Jackson Hole, the Fed’s September policy decision will likely emphasize policymakers are ready to do more, but will wait to see if the economic recovery completely stalled and if Capitol Hill was able to accomplish anything with the next round of fiscal stimulus. Many investors will pay close attention to the Fed’s forecasts which will have them improve their employment outlook. At the June meeting, the Fed estimated unemployment will be at 9.3% by the end of 2020. After the August nonfarm payroll report, Wall Street and the Fed were stunned to see the unemployment rate improved dramatically to 8.4%. The Fed will have to acknowledge the improvement with the labor market and traders will look to see if low interest rates might only last a couple years.
Not much has changed in the polls following the Republican convention as President Trump still trails Joe Biden in six swing states. Right now, Biden has low-single digit leads in Arizona, Florida, Michigan, North Carolina, Pennsylvania, and Wisconsin. The first Presidential debate is not until September 29th, so the focus will fall on the several upcoming campaigning events.
The European Central Bank offered a more upbeat view on the outlook for growth and inflation than had been expected and warned that deflationary pressures are only temporary. In the days leading up to the meeting, it had been rumoured that policy makers were falling in line with that train of thought and it turned out to be correct. The euro rallied strongly on Thursday in response before going into reverse.
The central bank made clear that it doesn’t target fx rates, effectively telling the market it’s safe to take a run at 1.20 against the dollar. Traders may decide there’s no rush though, with the pair having rallied strongly in recent months and shaping up for a possible correction in the near term. Plenty of time to see whether the data improves, particularly on the inflation side, and how bad the Covid situation becomes heading into the dreaded winter months.
Another unsuccessful week of talks this week that was overshadowed by the UK government’s baffling decision to introduce legislation into Parliament that undermines the Withdrawal agreement struck earlier this year and break international law. The Internal Market Bill has struck a nerve not just in Brussels but in the UK as well, including among some Brexit backing Conservatives, both in the House and the Lords. If this is a negotiating tactic by the UK government, it doesn’t seem a very good one as it tells anyone they’re hoping to strike a trade deal with, including the EU, that the country isn’t good for its word. Puzzling to say the least and maybe one of the more embarrassing u-turns facing the government in the coming weeks.
The UK grew by 6.6% month on month in July, the third consecutive positively monthly reading as it continues to bounce back from the devastation of the second quarter as the country went into lockdown. The economy remains 11.7% smaller than it was in February though so there’s still a long way to go. With more restrictions likely over winter, it may take some time to make up the deficit.
On a more upbeat note, the UK struck its first post-Brexit trade deal with Japan as it seeks to make a success of leaving the EU. The deal puts zero tariffs on 99% of exports to Japan and reportedly expands on the agreement negotiated with the EU.
The Bank of England meeting next week will be eyed for hints about further easing later this year, with the last increase in the QE program in need of a boost. The central bank has discussed negative rates but more purchases is currently viewed as the preferred option.
TikTok sales deadline this week. They will inevitably have to ask for an extension from the US. A refusal and outright shutdown in the US will ratchet up the geopolitical temperature once again.
China Industrial Production and Retail Sales are expected to show slight improvements which should confirm that China’s recovery is on track and lift sentiment in the region.
China and India’s Himalaya standoff is a potential negative shock not priced by markets.
Arrests continue under new HK security law, but are being completely ignored by financial markets. Industrial Production expected to shrink by 9.50% highlighting Hong Kong’s recession and the challenges it has ahead in the new world order.
Social distancing measures may be lifted next week, boosting domestic consumption, and possibly, HK consumer discretionary stocks.
Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India has become the no 2 infected country with no end in sight.The Indian Rupee’s appreciation has stalled over economic concerns and with Dollar strength last week.
India inflation data is released on Monday with CPI expected to climb to 7.0%, well above the 6% RBI target. With falling growth and rising prices, India’s immediate economic threat is stagflation. A high print for inflation will escalate those fears possibly leading to selling of Indian equities and currency. Having said that, international interest remains high in accessing India’s e-commerce sector.
China and India’s Himalaya standoff is a potential negative shock not priced by markets.
The New Zealand covid-19 outbreak is bartering but the New Zealand Dollar is coming under pressure as expectations rise that the RBNZ will move to negative interest rates by the year’s end. NZ GDP to show 7% QoQ fall this week, although more recent data shows activity rebounding quickly.
A rise in Covid-19 cases in Auckland, or their emergence elsewhere in the country, will have a strong negative impact on the NZD and NZ equities.
Trade relations with China continue to worsen with two Australian reporters evacuated by the government last week from Beijing. The deteriorating relations are weighing on Australian equities with the currency retreating in the face of a stronger US Dollar.
Australian Employment Change on Thursday expected to show a 90k jump. Notoriously volatile, poor numbers will cause short-term selling pressure on the currency and equities.
Victoria State’s lockdown seems to have been priced into Australian markets now..
Abe’s successor will be announced this Monday September 14th with Cabinet Secretary Suga the favorite. Little will change fiscally. The new PM will almost certainly have to fight a new general election in October.
Bank of Japan rate decision on Thursday. We expect unchanged at -0.10% with little to no new insight into future monetary policy. With a new Prime Minister selected on Monday, the BoJ is unlikely to rock the boat in his first week in the office.
Heavy data schedule. Industrial Production will recover slightly, core inflation will ease but the Balance of Payments will rise sharply. None of this will be enough to move the BoJ’s hands.
Oil is in correction mode but has steadied over the last couple of days after plunging more than 15% late last week and early this. Numerous reasons were given for the fall but the reality in situations like this is that there were a lot of stale long positions that bailed the minute it started looking a little weak.
That’s fine, perfectly healthy in fact. And we are heading into a challenging winter period for the global economy. A vaccine is needed or it could be a tough few months for oil producers. With prices back below $40, I can’t imagine there’ll be a great rush among producers to further trim output cuts in any significant way.
Gold has enjoyed a decent week after looking very vulnerable early on. A bullish dollar breakout that appeared to be triggering a correction was very problematic for gold but the breakout has stalled quickly, aided by the ECB opting to take a more considered approach than had been previously rumoured.
As we saw immediately after yesterday’s decision though, the dollar quickly bounced back and with some force, potentially signalling that it’s not giving up the correction easily. Gold remains vulnerable and the path of least resistance looks below. It may just take a little time for the dollar to overcome some of the stubborn shorts.
The final months of the year are going to be extremely challenging for the global economy, with experts predicting another significant wave of Covid-19 which risks further restrictions around the world at the expense of businesses that are already struggling to...READ MORE
The recent appreciation of the euro exchange rate dampens the inflation outlook,” said the European Central Bank (ECB) Chief Economist Phillip Lane in a blog post just a day after the ECB left policy unchanged.
“The scale of upward revision in core inflation has been significantly muted by the appreciation of the euro exchange rate.”
“It should be abundantly clear that there is no room for complacency on inflation.”
“Headline inflation to remain negative for the rest of the year.”
“Governing council stands ready to adjust all of its instruments accordingly.”
EUR/USD holds the bounce from 1.1810 on Lane's jawboning. At the press time, EUR/USD gains 0.14% to trade at 1.1836.
The recent appreciation of the euro exchange rate dampens the inflation outlook,” said the European Central Bank (ECB) Chief Economist Phillip Lane in a blog post just a day after the ECB left policy unchanged...READ MORE
Here is what you need to know on Friday, September 11:
The US dollar consolidated Thursday’s sharp recovery, in the wake of the resurgent haven demand, courtesy of the sell-off in the US stocks. The sentiment around the dollar was also underpinned by the US Senate’s rejection of the slimmed-down Republican coronavirus relief package.
Asian equities failed to shake off the bearish mood on the Wall Street slump. Meanwhile, the renewed US-Sino tensions kept the traders unnerved. The US revoked visas for more than 1,000 Chinese nationals citing security risks.
Among other negative developments, President Donald Trump said, “The deadline set for the Chinese company ByteDance to sell the popular short-video app TikTok's US assets would not be extended.” Separately, Trump threatened to withdraw the US from the World Trade Organization (WTO).
On Indo-Sino escalation, key ministers from both sides agreed that troops should quickly disengage and ease tensions.
Brexit: GBP/USD attempted a relief bounce above 1.2800 ahead of UK monthly GDP report. The cable slumped to a seven-week low of 1.2774 on Thursday, as the Brexit crisis deepened following the emergency meeting fallout. Odds of a no-deal Brexit scaled up after the European Union (EU) gave a three-week ultimatum and threatened legal action if the UK still pushed for the Internal Market Bill. The talks are likely to continue next week, as the negotiators will meet in Brussels.
EUR/USD posted small gains well above 1.1800. The main currency pair reversed the entire European Central Bank (ECB) monetary policy decision-led rally. The euro jumped about 80-pips after the ECB upgraded the growth and inflation forecasts while adding that it’s not concerned about the recent appreciation of the single currency.
USD/JPY remained within a familiar trading range above 106.00, with the yen unimpressed by the improved coronavirus situation in Tokyo. AUD/USD rebounded to 0.7280 while the kiwi followed suit.
USD/CAD extended the drop below 1.3200, as WTI bounced-back above the $37 mark. Oil prices tumbled on an unexpected rise in the US stockpiles and rising demand concerns for oil and its products amid the ongoing coronavirus crisis.
Gold returned to the negative territory following rejection above $1950 once again. Focus shifts to the US CPI release for fresh impetus.
Cryptocurrencies’ remained under pressure, with Bitcoin defending the $10,200 level.
The US dollar consolidated Thursday’s sharp recovery, in the wake of the resurgent haven demand, courtesy of the sell-off in the US stocks. The sentiment around the dollar was also underpinned by the US Senate’s rejection of the slimmed-down Republican coronavirus relief package...READ MORE
Confidence in the recovery or coronavirus fears? That is the main question that investors are asking ahead of the European Central Bank's meeting. Wednesday's report that the ECB will express optimism about the recovery lifted the common currency, but nothing can be taken for granted.
Christine Lagarde, President of the European Central Bank, will present new economic forecasts. While economies have been coping better than expected with the impact of COVID-19, the damage is significant, and rising cases in the old continent remain worrying.
Are markets pricing optimism and set for a disappointment?
Lagarde will likely be asked about the exchange rate – after her Chief Economist Philip Lane said he is "watching it." Comments about FX are uncommon and tend to rock currencies even if the central bank does not plan a direct intervention.
Broader markets are more optimistic than earlier this week, recovering from the blow dealt by the halt of AstraZeneca's Phase 3 coronavirus trial. The British firm paused the wide experiment after a patient fell ill.
After the initial fall in stocks and bounce in the safe-haven dollar, the trend reversed. Investors are encouraged by hopes that the trial will resume next week – and progress made by other efforts. The EU secured millions of immunization doses from Pfizer, which is also in advanced tests of its vaccine.
President Donald Trump has been heavily criticized for downplaying the severity of COVID-19 earlier this year. The revelation by renowned journalist Bob Woodward was seized by challenger Joe Biden, who is leading Trump in the polls.
Contrary to coronavirus and race relations, the president receives better marks on handling the economy. The recent upbeat Non-Farm Payrolls boosted the dollar – but may also reduce Republicans' sense of urgency for providing more relief. Update on America's labor market is due out on Thursday, weekly jobless claims.
The Brexit drama would have a hard time competing for influence with the ECB and US developments. However, while the pound is the main mover, EUR/USD could also shake in response to an emergency meeting held by EU and UK high-level negotiators on Thursday.
Brussels is considering pressing charges against London after the British government released a draft bill that violates the Withdrawal Agreement signed last year.
Overall, the ECB is set to rock the boat, with other factors also of interest.
Euro/dollar has recaptured the uptrend support line, a bullish sign. On the other hand, the currency pair failed to overcome the 200 Simple Moving Average on the four-hour chart. Momentum has all but disappeared and the Relative Strength Index is stable.
All in all, the picture is balanced and awaiting the ECB.
Some resistance awaits at 1.1835, which capped EUR/USD in recent days. It is followed by 1.1880, a cap from last week. The next levels to watch are 1.1885 and 1.1925.
Support awaits at 1.1780, a cushion from last week, followed by 1.1750, a double-bottom. The next levels to watch are 1.17 and 1.1625.
Confidence in the recovery or coronavirus fears? That is the main question that investors are asking ahead of the European Central Bank's meeting. Wednesday's report that the ECB will express optimism about the recovery lifted the common currency, but nothing can be taken for granted...READ MORE
Here is what you need to know on Thursday, September 10:
Markets are calm after a "turnaround Wednesday" which saw a rebound partially triggered by reports about optimism from the ECB, which is the main event of the day. Brexit talks are in crisis following controversial British legislation and coronavirus vaccine hopes remain robust.
The European Central Bank is set to leave its policy unchanged but take stock of the current economic situation. Reports suggest that the ECB's new forecast will convey more confidence in the recovery, despite rising COVID-19 cases in the old continent. EUR/USD advanced and settled above 1.18 ahead of the decision. Comments about the exchange rate of the euro – following concerns previously expressed – are also eyed.
Brexit crisis: The EU may press charges against the UK following London's publication of a draft bill that violates the Withdrawal Agreement – even before it turns into law. The pound dropped on the publication of the legal text but bounced when Brussels announced it would not abandon talks. GBP/USD recovered from under 1.29 to above 1.30 before consolidating its gains.
Emergency meeting: Negotiators from both sides will hold a special meeting in London to discuss the situation. US Speaker of the House Nancy Pelosi said Congress would not approve any US-UK trade deal if Britain breaks the Good Friday peace agreement.
Coronavirus vaccine: Markets recovered from the blow dealt by AstraZeneca's halting of its COVID-19 vaccine Phase 3 trial. Investors hope it would turn into a temporary delay. Moreover, other efforts are underway. The EU secured 200 million vaccine doses from Pfizer and BioNTech, once their immunization passes all the tests.
President Donald Trump admitted he downplayed the significance of coronavirus, according to his admission before legendary journalist Bob Woodward. He said it will go away despite being warned of its dangers. Rival Joe Biden seized on the news and said Trump misled the public. The challenger is widening his lead against the incumbent.
Elsewhere in Washington, Democrats and Republicans remain far apart on fiscal stimulus talks, with some already speculating no deal will be reached before the elections. Upbeat economic figures are reducing the sense of urgency.
US initial jobless claims are set to extend their decline after hitting 881,000 last week. The world's largest recovery is extending its gradual recovery.
Oil prices have been recovering from the lows amid the risk-on mood. WTI topped $38 before edging lower. OPEC+ compliance has increased from 96% to 103% according to a report by Energy Intelligence.
The Canadian dollar benefited from the bump up in petrol prices and by a relatively confident message from the Bank of Canada. The BOC left its policy – including asset purchases – unchanged.
Cryptocurrencies are on a recovery path, with Bitcoin bouncing off $10,000
Markets are calm after a "turnaround Wednesday" which saw a rebound partially triggered by reports about optimism from the ECB, which is the main event of the day. Brexit talks are in crisis following controversial British legislation and coronavirus vaccine hopes remain robust...READ MORE
Brent Crude Oil below $41.38/32 has completed a bear “wedge”. Strategists at Credit Suisse expect the black gold to suffer further falls with a critical area identified at the recent May/June gap of $37.18/35.37.
“Brent Crude has failed to break through its 200-day average at $45.10 and has now confirmed a bear ‘wedge’ pattern as it dropped below $41.38/32, hence turning the risks significantly lower on a 1-3 month investment horizon. Next key supports can be identified at $37.18/35.37, the recent May/June gap, before the 38.2% retracement of the whole April/September upmove at $34.87/33.54.”
“Only a direct and closing break above a distant $46.53 can curtail thoughts of a potential ‘wedge’ with resistance seen next at the 61.8% retracement of the Q1 fall at $50.45.”
Brent Crude Oil below $41.38/32 has completed a bear “wedge”. Strategists at Credit Suisse expect the black gold to suffer further falls with a critical area identified at the recent May/June gap of $37.18/35.37...READ MORE
“A timely exit from temporary emergency measures as the economy improves is just as important as decisive policy action during the crisis,” said the European Central Bank (ECB) Governing Council member Madis Muller on Wednesday.
“This will minimize the risk of undesirable side effects of an accommodative policy being kept in place for longer than necessary.”
“Ultra-low rates have been around for longer than initially expected, so need to study the impact this may have on the financial sector, changes in the real economy.”
The shared currency is unperturbed by the above comments, with EUR/USD keeping its range intact around 1.1780, having bounce-off the critical support at 1.1758. All eyes remain on the ECB policy decision due on Thursday for the next direction in the prices.
“A timely exit from temporary emergency measures as the economy improves is just as important as decisive policy action during the crisis,” said the European Central Bank (ECB) Governing Council member Madis Muller on Wednesday...READ MORE
Here is what you need to know on Wednesday, September 9:
The market mood remains damp amid the sell-off in tech stocks, Brexit issues, the US fiscal impasse, and AstraZeneca's halt of its coronavirus vaccine trial. The dollar and yen are gaining ground while stocks and oil are on the back foot.
Vaccine worries: AstraZeneca paused its Phase 3 COVID-19 vaccine trial after one person participating in the experiment fell ill with inflammation in the spinal cord. The immunization project is considered one of the most advanced among eight that are in the final testing phase. The news exacerbated the falls in stocks and kept the safe-haven dollar and yen bid. Pharma firms involved in developing vaccines pledged not to seek emergency approval before vaccines proved to be safe.
Tech sell-off: Elon Musk's Tesla stood out in the ongoing reversal in technology stocks, with NASDAQ flirting with correction territory.
Gold has been stabilizing around $1,930, shaking off its correlation with equity markets.
US fiscal stimulus: Congressional leaders are reportedly hardening their stances, with Republicans suggesting a modest $500-700 million bill – lower than beforehand. House Speaker Nancy Pelosi said the idea is "an insult to Americans' intelligence." The stalemate is adding pressure on markets.
Brexit: A government minister has admitted that new Brexit legislation would break international law, causing worries on both sides of the Channel. France said that a deal remains unattainable if Britain opposes a level playing field.
GBP/USD is trading below 1.30, also due to rising UK coronavirus cases. Prime Minister Boris Johnson is considering slapping a night-time curfew on several cities.
The Bank of Canada is set to leave its interest rate unchanged at 0.25% while reiterating its commitment to keeping policy accommodative. The BOC is unlikely to change its guidance regarding asset purchases.
EUR/USD is trading below 1.18 ahead of the European Central Bank's meeting on Thursday. The ECB is set to leave its policy unchanged and may comment on the exchange rate and the Federal Reserve's dovish shift. Remarks on the current economic situation – which has become more uncertain as cases continue rising – are also of high interest.
Oil prices remain on the back foot, with WTI changing hands at below $37. The general risk-off mood and less buying from China are weighing on the black gold.
Cryptocurrencies continue struggling with Bitcoin trading near $10,000, Ethereum under $350, and XRP under $0.24.
The market mood remains damp amid the sell-off in tech stocks, Brexit issues, the US fiscal impasse, and AstraZeneca's halt of its coronavirus vaccine trial. The dollar and yen are gaining ground while stocks and oil are on the back foot...READ MORE
The ounce troy of the precious metal is suffering another bout of dollar strength and is gradually grinding lower to the vicinity of the $1,900 mark on turnaround Tuesday.
In fact, the greenback is posting decent gains above the 93.00 mark when tracked by the US Dollar Index (DXY), extending the rebound from last week’s +2-year lows in the 91.80/75 band.
However, the omnipresent US-China trade effervescence coupled with rising cautiousness ahead of the ECB event (Thursday) and Brexit uncertainty could keep further pullbacks in Gold somewhat limited for the time being.
The speculative community, in the meantime, pushed net longs in the yellow metal to multi-week peaks during the week ended on September 1 and according to the CFTC Positioning Report.
The ounce troy of the precious metal is suffering another bout of dollar strength and is gradually grinding lower to the vicinity of the $1,900 mark on turnaround Tuesday.In fact, the greenback is posting decent ...READ MORE
Bitcoin (BTC) attempted a recovery to the local resistance area of $10,500; however, the upside momentum proved to be unsustainable so far. At the time of writing, BTC/USD is changing hands at $10,242, down from the intraday high registered at $10,442. The first digital asset lost over 1% of its value on a day-to-day basis and since the beginning of Tuesday. The market capitalization settled at 57.4%
Bitcoin bulls are ready to strike back, or what?
According to the statistical data provided by the analytical service CryptoQuant, BTC reserves on the top cryptocurrency exchanges have been decreasing significantly amid the growing value of stablecoins. The tilt to the stablecoins is often regarded as a bullish signal for Bitcoin, as traders usually move their stablecoins to the exchanges to purchase other cryptocurrency assets.
BTC/USD: The technical picture
Meanwhile. from the technical point of view, BTC/USD is still locked in a tight range, limited by $10,000-$9,800 on the downside and $10,500 on the upside. A sustainable move in either direction will help to create a strong momentum. The critical support comes at $9,000, with the daily SMA200 located on the approach to that level. If the price resumes the decline after the current consolidation period, this barrier will slow down the bears and create a pre-condition for a new bullish wave.
On the other hand, a move above $10,500 will bring the broken upside trend line at $11,000 and the daily SMA50 back into focus. Once it is out of the way, BTC/USD will return to the previous consolidation range, while the bulls will get a chance to retest $12,000.
To conclude: The BTC exchange reserves data implies that the coin may be ready for a strong bullish rally; however, in the short run, it is still vulnerable to further losses towards the lower boundary of the current channel. From a technical perspective, we will need a sustainable move above $11,000 to confirm the bullish trend.
Bitcoin (BTC) attempted a recovery to the local resistance area of $10,500; however, the upside momentum proved to be unsustainable so far. At the time of writing, BTC/USD is changing hands at $10,242, down from the...READ MORE
Here is what you need to know on Tuesday, September 8:
The US dollar held onto the recent upside, as investors remained bearish on the euro amid dovish ECB expectations while no-deal Brexit fears battered the British currency. Meanwhile, rising US election risks and US-China tensions underpinned the haven demand for the greenback.
The New York Times reported that the US is considering banning some or all products made with cotton from China’s Xinjiang province. On Monday, US mulled imposing controls on China’s state-owned firm, escalating the Sino-American tech war.
The Asian equities were a mixed bag, ditching the higher close on the European indices. The main laggard remained the Chinese stocks amid renewed US-Sino tensions. Japan’s Nikkei 225 index gained despite an annualized 28.1% GDP contraction in the April-June quarter.
Brexit: GBP/USD hit fresh two-week lows just above 1.3100, as the sell-off extended on growing Hard-Brexit fears. All eyes remain on the eighth round of Brexit negotiations, starting later on Tuesday.
No-deal Brexit fears intensified following the revelation that the UK is planning legislation that would override critical parts of the withdrawal agreement. The European Union (EU) warned UK of a no-trade deal if it tried to alter the divorce deal. Also, UK Prime Minister (PM) Boris Johnson announcing October 15 as the deadline to reach the deal weighed heavily on the pound.
EUR/USD battled 1.1800, as the common-currency remained on the offers amid expectations of verbal intervention by the ECB on Thursday. In the meantime, the traders will look forward to the German Trade Balance, Eurozone GDP and Employment data.
USD/JPY was side-lined around 106.00 amid falling Treasury yields and Japan’s economic contraction. AUD/USD also traded in a familiar range around 0.7275, shrugging-off mixed Australian NAB Survey and US-China tussle.
USD/CAD extended the recovery beyond 1.3100, as WTI tumbled nearly 2%. The US oil consolidated near two-month lows below $39 amid slowing Chinese oil imports and Saudi’s deepest monthly price cuts in five months for Asia.
Gold traded on the back foot around $1930, with strong bearish momentum indicated by the technical chart.
Cryptocurrencies’ downward trend continued, with Bitcoin holding above the $10,200 mark.
The US dollar held onto the recent upside, as investors remained bearish on the euro amid dovish ECB expectations while no-deal Brexit fears battered the British currency. Meanwhile, rising US election risks and...READ MORE
EUR/USD is attempting a side-lined theme in the mid-1.1800s at the beginning of the week, managing to regain traction following last week’s lows in the 1.1780 region. The ECB event on Thursday could be key for the pair’s direction, FXStreet’s Pablo Piovano reports.
“The upcoming ECB event on Thursday appears to be crucial for the pair’s direction in the near/medium-term, as the central bank is expected to shed further details on the progress of the economic recovery in the region as well as its outlook for the next months while investors will also closely follow any mention of potential stimulus measures.”
“EUR/USD faces initial contention in the mid-1.1700s ahead of the more relevant 1.1700 neighbourhood. The latter is also reinforced by a Fibo level (of the 2017-2018 rally).”
“The daily RSI did not confirm the new top beyond 1.20, opening the door for some near-term weakness. On the upside, the immediate hurdle still emerges at the recent peak near 1.2010.”
EUR/USD is attempting a side-lined theme in the mid-1.1800s at the beginning of the week, managing to regain traction following last week’s lows in the 1.1780 region. The ECB event on Thursday could be key for the pair’s direction, FXStreet’s Pablo Piovano reports.READ MORE
The recovery in Gold (XAU/USD) from Friday’s sell-off lost legs, as sellers returned on Monday amid resurgent demand for the US dollar across the board. Stronger US unemployment rate and wage growth data continue to lend support to the dollar bulls. Meanwhile, the sell-off in GBP/USD due to rising Brexit concerns, add to the buoyant tone around the greenback.
Looking ahead, the dollar could likely hold its upbeat momentum amid light trading and tepid risk tone, which may keep the XAU sellers hopeful. Let’s take a look at how the yellow metal is positioned on the charts.
Gold: Key resistances and supports
The tool shows that gold faced rejection just below the critical barrier at $1946, which is the convergence of the Fibonacci 38.2% one-month and SMA10 one-day.
Only a sustained break above the latter will save the day for the bulls, opening doors for a test of the next strong cap at $1950, where the previous day high, pivot point one-day R1 and SMA5 one-day coincide.
To the downside, immediate support is aligned at $1929, the confluence of the Fibonacci 61.8% one-day and Bollinger Band 15-minutes Lower.
The next powerful cushion awaits at $1916, which could challenge the bears’ commitment. That level is the intersection of the previous day low and pivot point one-day S1.
Meanwhile, acceptance below $1913, the Fibonacci 23.6% one-month, will expose the $1900 mark.
The recovery in Gold (XAU/USD) from Friday’s sell-off lost legs, as sellers returned on Monday amid resurgent demand for the US dollar across the board...READ MORE
Here is what you need to know on Monday, September 7:
The US dollar steadied amid holiday-thinned market condition on Monday, as the dust settled over US Nonfarm Payroll (NFP) aftermath. The greenback saw good two-way businesses on Friday, initially rallying hard on upbeat US jobless rate and wage growth data. Although, the dollar turned south and reversed gains heading into the weekly closing, as the US stocks recovered.
The Asian equities traded mostly mixed as the sluggish close on Wall Street and US fiscal stand-off offset the optimism over the jump in Chinese trade surplus and exports data. The Chinese stocks also remained weighed down by the sell-off in Semiconductor Manufacturing International Corporation (SMIC) stocks following reports that the US is considering imposing controls on China’s state-owned firm, which escalated the Sino-American tech war.
Brexit: Concerns over no-deal flared-up over the weekend and hurt the pound, as GBP/USD tumbled towards 1.3200. UK Prime Minister (PM) Boris Johnson set out October 15 as the deadline to reach the Brexit deal or it will ‘move on’.
According to a Financial Times report, the UK is planning legislation that will override key parts of the Brexit withdrawal agreement while the European Union (EU) stands firm on its demand on fishing rights, immigration and state aid.
EUR/USD traded on the back foot below 1.1850, as investors remained cautious amid growing coronavirus cases in Europe and ahead of Thursday’s ECB monetary policy decision. Immediate focus now remains on the German Industrial Production and Eurozone Sentix Investor Confidence.
USD/JPY held steady above 106.00 while AUD/USD’s bounce remained capped below 0.7300 despite the upbeat Chinese trade data.
USD/CAD advanced towards 1.3100, underpinned by the sell-off in WTI prices. The US oil fell over 1.50% to fresh two-month lows just above $38.50. Saudi Arabia’s oil price cut combined with falling Chinese oil imports knocked-off the black gold.
Gold licked its wounds and kept the range below $1950.
Cryptocurrencies kicked-off the week on a negative note, with Bitcoin defending the $10K mark.
The US dollar steadied amid holiday-thinned market condition on Monday, as the dust settled over US Nonfarm Payroll (NFP) aftermath. The greenback saw good two-way businesses on Friday, initially rallying hard on...READ MORE
Far From Uneventful
The upcoming week is a little light on the data front but don’t expect it to be uneventful. Donald Trump is closing the gap on Joe Biden two months before the election and the race is hotting up. Meanwhile, the tech sell-off has gripped the markets, putting sharp focus on the sector next week. If that doesn’t do it for you, the ECB meets on Thursday, as speculation mounts about more stimulus this year.
Key Economic Events
Saturday, Sept. 5
-Italian think tank the European House continues its forum in Cernobbio. French Finance Minister Bruno Le Maire, EU Brexit negotiator Michel Barnier, and German Deputy Finance Minister Joerg Kukies are expected to speak
Sunday, September 6th
-The European House continues its forum in Cernobbio, northern Italy.
Monday, September 7th
-US and Canada celebrate Labor Day. Markets are closed.
– Another face-to-face Brexit discussion between the U.K. and EU occurs in London. The odds are growing for a no-deal split at the end of the Brexit transition period.
Tuesday, September 8th
Wednesday, September 9th
-US China Economic and Security Review Commission holds an online public hearing to evaluate key developments in China’s economy, military capabilities, and U.S. relations during 2020.
-The Bank of Canada is expected to keep its overnight rate target unchanged at 0.25%. Governor Tiff Macklem will hold a press conference.
Thursday, September 10th
-The ECB will keep monetary policy unchanged, but they could signal more stimulus could be warranted later in the year. Close attention will fall on the new forecasts for growth and inflation, which will provide insight on how optimistic the ECB is with the economic recovery.
Friday, September 11th
-US consumer prices are expected to push higher for a third consecutive month. The so-called core CPI is expected to come back down to earth after last month’s 0.6% which was the largest gain since 1991.
-European Union finance ministers gather for a two-day meeting.
-The ECB’s Jens Weidmann speaks on a panel at a Bundesbank conference in Frankfurt.
The US economic outlook continues to improve after another solid labor report and steady flow of positive vaccine developments. The focus in the US however remains on the stock market selloff and if investors are starting to position for a choppy period going forward. Positioning for a post-pandemic and presidential election could be starting to price in a rough road for big tech.
The upcoming round of economic data should see US consumer prices rise for a third consecutive month, but be nowhere near to creating worry at the Fed.
President Trump still has a lot of ground to make up over the next two months. Now that the conventions are over, Biden still seems to have a favorable lead, but it is shrinking. In mid-August, Biden had a comfortable 12-percentage point lead against President Trump in the USA Today/Suffolk University Poll, but that has fallen down to 7-percentage points. The first Presidential debate is not until September 29th, so the focus will fall on the several upcoming campaigning events.
It’s been a week of stimulus as far as the EU is concerned. The “France Relaunch” stimulus from Emmanuel Macron – totalling €100 billion, around 4% of GDP – aims to deliver a full economic recovery ahead of the 2022 election. Meanwhile, Germany has backed plans for more extraordinary deficit spending next year, having already extended its employment subsidies to the end of 2021. All of this at a time when the EU has agreed a historic recovery fund alongside its seven year budget. There’s no shortage of stimulus in Europe.
The ECB meeting should provide further clarity on the prospects for further easing before the end of the year. The economic recovery has slowed, Covid cases have been rising and annual inflation went negative last month. We may not get further stimulus next week but traders will be hanging on Lagarde’s every word, not to mention the new economic projections.
Still no progress on the more contentious issues, most notably level playing field and fishing rights, but more talks scheduled to take place next week. None of this will come as great surprise with October being touted as the deadline. We’ve seen it all before. This is going to the wire, expect more frustration after the next round of talks.
The focus for UK officials this week will be Brexit talks as the country tries to avoid adding no deal to the list of problems for business. The PMIs this week were encouraging, as is the BoE’s position that it stands prepared to load more stimulus and has plenty of firepower to do so. Low tier data next week is unlikely to make a considerable difference.
All quiet on the trade front with the US. Heavy data week with Balance of Trade the highlight on Tuesday. Continued recovery in export component expected. If US equity sell-off persists, it will weigh on China equities this week.
Security law worries have been ignored by stock markets which are concentrating on upcoming IPOs such as Ant Financial, proving that money talks.
No significant data.
Covid-19 continues to wreak havoc on the domestic economy, heightening fears about growth as the stability of the banking system. India will shortly become the no 2 infected country with no end in sight. A protracted US equity sell-off could exacerbate concerns and threaten fragile recovery by the INR and India stock markets.
India Industrial Production for July expected to contract by another 15%, heighlighting Covid’s impact on the economy. WPI released on the 14th September could raise the very real fears that India is facing stagflation.
The New Zealand covid-19 outbreak appears to be coming under control, lifting the currency and equities. An extended Auckland lockdown will weigh on data in the coming weeks though. The RBNZ is considering negative rates and further signs of deterioration will raise expectations for further easing. Vulnerable to poor China data on Monday.
Trade relations with China continue to worsen with Barley imports banned as yet another “probe” is launched. Fallout transitory as long as coal, copper and iron ore are left alone. Strong negative if those are targeted.
Data is second tier this week with a recovery in job ads expected to continue, boosting sentiment.
As a pro-cyclical market, a sustained equity sell-off and/or poor China data on Monday could negatively impact Australian markets.
Heavy data week with Japan Q2 GDP, Machinery Orders and Tankan Index. All are expected to show Japan remains in recession as export facing industry struggles with demand. USD/JPY mid-range awaiting next move, Japan equities firm despite US weakness.
Abe’s successor will be announced on September 14th. Little market impact in the meantime as it is expected that the pillars of Abenomics will remain mostly intact.
Oil staged a bit of a recovery after tumbling in the middle of the week only to tumble again after the jobs report. Once again, we’re facing a market that was struggling to maintain upside momentum and a few headlines provided the catalyst for some profit taking. The consolidation could have continued for longer but once a couple of technical levels fell, it’s just accelerated from there. WTI has since found some support just above $40 but $39 is arguably more significant support. It may now find some resistance around $42.
Gold is coming under pressure again after the dollar jumped in the aftermath of the jobs report, piling further misery on the yellow metal. The US PMI report on Tuesday ruined its attempt to break $2,000 again, with the dollar also rising on the back of that report. Gold now finds itself back around the lower end of its $1,900-2,000 range and support is looking vulnerable.
The upcoming week is a little light on the data front but don’t expect it to be uneventful. Donald Trump is closing the gap on Joe Biden two months before the election and the race is hotting up. Meanwhile, the...READ MORE