Main Market Themes

US stocks ended on a mixed note overnight as markets continued to digest the Fed’s interest rate outlook while awaiting any meaningful development in US-China trade negotiation. The Dow slipped by 0.2%, the S&P 500 was unchanged and NASDAQ picked up a mere 0.1%. Treasury yields fell across the curve by 1-2bps. Benchmark 10Y UST yield finished only 1bps lower at 1.79%. 

Oil prices gained as Iranian Foreign Minister’s comment raised geopolitical tensions in the Middle East. Brent crude rose 1.2% to $64.40/barrel while WTI was flattish at $58.13/barrel. Thursday was packed with central bank actions. 

The BOJ and BOE as well as the SNB Bank hold their respective benchmark interest rates unchanged as widely expected.

European Commission President Juncker believes that the UK and the EU will reach an agreement before the end of October to avoid a no deal Brexit, he will try to prevent the UK from entering the EU without agreement, and said that as long as the British Prime Minister Johnson proposed a viable alternative, willing to give up the Irish border backstop. In addition, Johnson will meet with Irish Prime Minister Varadkar next week to discuss the Brexit Agreement.

Expect market caution to continue to lurk just under the surface. Watch for potential Sino-US headlines as we head into the weekend, with 2 second tier Chinese and US officials meeting in Washington. Elsewhere, Dollar funding tightness concerns may keep traders slightly cautious, with the NY Fed continuing to inject liquidity on Thursday and also scheduled to repeat its repo operations on Friday.

Technical & Trade Views

EURUSD (Intraday bias: Bullish as 1.10 supports, 1.1150 targeted)

EURUSD From a technical and trading perspective EURUSD has potentially posted a major double bottom at the yearly S1 pivot. Price action is setting the stage for a more meaningful recovery to the upside, however, yesterdays breach of 1.11035 concerns this view. A sustained failure below 1.10 opens 1.0965 as intraday support ahead of last week’s lows at 1.0930. A move back through 1.1050 is needed to suggest downside risk has been eliminated and reset focus on offers above 1.11. Note today’s option strikes – put option at 1.1000 worth EUR2.6bn, at 1.1050 for EUR1.15bn, 1.1100 for EUR1.9bn. EURUSD…UPDATE The Euro continues to find support above 1.10 and is bid again this morning a move through 1.1080 would confirm the bullish bias exposing stops above 1.1115 which should fuel a further drive to 1.1150 target. Watching the weekly close for a second bullish confirmation candle to add conviction to the bullish bias

GBPUSD (Intraday bias: Bullish above 1.25 targeting 1.26/1.2650)

GBPUSD From a technical and trading perspective anticipated test of 1.2450 extended to 1.25, I now see the potential for a pullback to test bids towards 1.2385, where I will be watching for intraday bullish reversal patterns to set long positions targeting a test of 1.2650 a failure below 1.23 would concern this view and suggest a more meaningful correction is underway to retest support at 1.22.  GBPUSD…UPDATE prices looks poised to extend to my 1.26 target, I will be squaring long positions as we test 1.26 watching for intraday reversal patterns to set shorts playing for a more meaningful correction back to 1.23 as highlighted in the chart. Trailing stops to lock in profits 

USDJPY (intraday bias: Bullish above 107.50 targeting 109)

USDJPY From a technical and trading perspective 1.08 objective achieved, as 107.50 contains the correction there is scope for the current grind higher to test offers above 109 where I will be watching for momentum and sentiment divergence to complete the current sequence and present an opportunity to initiate short exposure targeting a move back through 108 and a retest of bids at 107.50. Note strikes at 108.00 worth $1.11bn, $1bn at 107.50 and $1.2bn at 107.25 strikes roll off at the New York cut today. USDJPY…UPDATE 109 test looks to be in play, however, note divergence developing on the move towards 108.50 which suggests we may struggle to reach the 109 target, however, I maintain my plan looking to sell at or above 109. A breach of 107.50 would suggest we see an early test of 107 bids

AUDUSD (Intraday bias: Bullish above .6800 targeting .7000)

AUDUSD From a technical and trading perspective offers just below .6900 have capped on the initial test, setting a short term top and correction back to test bids towards .6800. Monitoring price action towards the .6800 level to buy the dip for a second leg of upside to test offers towards .7000 AUDUSD…Update .anticipated .6800 test in progress intraday reversal patterns play out long positions in play targeting a drive to .7000 my equidistant swing objective, however, a failure below .6760 would concern the bullish view and expose stops below .6700

Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.

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