Main Market Themes
The Dow Jones, S&P 500 and NASDAQ fell by 0.5-0.8% on Friday to end a tumultuous week on a negative note amidst rising geopolitical tension and central bank actions. US treasuries yields fell 6-7bps along the curve, benchmark 10Y UST yield finished 6bps lower at 1.72% as bonds rallied after the Chinese delegation news broke alongside NY Fed’s repo operation to curb funding stress.
Oil prices barely changed on Friday, WTI settled at $58.09/barrel (-0.1%) and Brent crude at $64.28/barrel (-0.2%).
The USD, JPY and CHF outperformed against their peers on Friday amid some background nervousness towards Sino-US trade talks. Fed speakers continued to display a noticeable dispersion of views from Clarida, Bullard, Rosengren, and Kaplan.
Slipping UST yields and higher gold, together with mixed global equities, suggest a slightly cautious tone amongst traders.
On the CFTC front, large non-commercial accounts increased their net long dollar bias in aggregate in the latest week but leveraged accounts went in the opposite direction and reduced their long dollar bias instead. On this front, note that EURUSD may remain burdened by the weight of significant leveraged EUR shorts. Meanwhile, asset manager accounts also reduced their short dollar bias in the latest week.
In the UK all eyes on the Supreme Court ruling on the legality of Prime Minister Johnsons suspension of parliament, currently a verdict is expected Tuesday.
The calendar is heavy with central bank appearances this week, with ECB’s Draghi (1300 GMT today, Thu), RBA’s Lowe (Tue) and BOJ’s Kuroda (Thu) headlining the line-up. Expect also a wave of Fed speakers today, starting from Williams (1350 GMT).
A less than urgently dovish Fed may continue to keep the USD afloat at the onset of the week but the cyclicals (AUD) may continue to hold out in the hopes of friendlier Sino-US trade talks headlines.
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, a sustained failure below 1.10 opens 1.0965 as intraday support ahead of 1.0930. A move back through 1.1050 is needed to suggest downside risk has been eliminated and reset focus on offers above 1.11. Note there are EUR6bn of 1.1000 strikes due this week; large ones on September 26
GBPUSD (Intraday bias: Bearish below 1.2480 targeting 1.2310)
GBPUSD From a technical and trading perspective I now see the potential for a pullback to test bids towards 1.2385, where I will be watching for intraday bullish reversal patterns to set long positions targeting a test of 1.2650 a failure below 1.23 would suggest a more meaningful correction is underway to retest support at 1.22.
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 below 107. Note decent option strikes roll off this week; strikes from 107.00 to 109.00
AUDUSD (Intraday bias: Bullish above .6760 targeting .7000)
AUDUSD From a technical and trading perspective the anticipated correction from the .6900 resistance zone has played out and extended to .6760 as this level supports .6840 becomes the immediate upside hurdle, however, a failure below .6760 would concern the bullish view and expose stops below .6700
Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.