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Gold prices fail to portray the recent risk-aversion wave as they remain below near-term resistance-line while taking rounds to $1,513 on early Monday.
  • Gold struggles to justify recent trade/political tension concerning the US, China and the Middle East.
  • The Bullion takes a U-turn from near-term falling resistance-line in search of a fresh direction.

Gold prices fail to portray the recent risk-aversion wave as they remain below near-term resistance-line while taking rounds to $1,513 on early Monday.

Renewed geopolitical tension between Saudi Arabia and Yemen has been a major driving force for markets’ immediate risk sentiment off-late. Following a threat from Houthi rebels, Saudi Arabia has also flashed signals of war if an attack takes place whereas the US deployed additional forces in the Middle East as a measure being “defensive in nature’.

On the other hand, Chinese delegates’ early leave from the US, without visiting the US farms, got a negative signal relating to the recently conducted trade negotiations in Washington. However, the US and Chinese media have been trying to cover the issue in order to (likely) avoid the bad start of the talks in October.

Also favoring the risk-off could be the continuation of an easy monetary policy wave from the global central bankers amid a lack of positive headline statistics and on-going trade uncertainty.

While risk-off sentiment dragged the equities and the US Treasury yields down, the Japanese Yen (JPY) and Gold have to bear the burden of the US Dollar’s (USD) sturdiness. It should also be noted that Autumnal Equinox Day holiday in Japan and a lack of fresh signal during the early Asian session also restricts the safe-haven’s upside.

Looking forward, traders could keep an eye over the preliminary activity numbers from the Eurozone and the US while also following the trade/political headlines for further direction.

Technical Analysis

Unless breaking a short-term descending resistance-line, at $1,517, prices are less likely to aim for September 04 low near $1,534 and the monthly top close to $1,557. As a result, $1,500 and $1,480 remain in the sellers’ watch-list for now.

USD/JPY has started out in Asia for the week a touch higher as sentiment for trade talks remains on track, if not a little delicate following Friday's
  • USD/JPY has started out in Asia for the week a touch higher.
  • USD/JPY pair has settled a handful of pips above a critical Fibonacci support at 107.45.

USD/JPY has started out in Asia for the week a touch higher as sentiment for trade talks remains on track, if not a little delicate following Friday's comments from US President Trump who has signalled a lack of a sense of urgency to secure a deal before the US Presidential elections in the Autumn of 2020. USD/JPY is currently trading at 107.74, + up 0.20% having travelled from a low of 107.60 to a high of 107.75. 

Last Friday, USD/JPY was falling from 108.00 to 107.53 before reasserting itself on weekend news that came in the assurance from Chinese officials that trade talks will continue in October, despite the abrupt departure of the negotiation team from the US on Friday.

Fed chat taking the spot light

Elsewhere, we had Fedspeak that came from Bullard (dove) and Rosengren (hawk) who, as analysts at Wetapc explained, "released rationales for their dissents at last week’s FOMC meeting. Vice-Chair Clarida ploughed the middle ground in line with the FOMC’s statement and clarified their concerns via the provision of insurance in the latest cut, the sound resilience of the US economy, but the weakness of the global environment. Countering Rosengren’s concerns, Clarida stated that there were no signs of elevated financial instability."

As for US yields, the 2-year treasury yields dropped from 1.75% to 1.68%, while the 10-year yield slid from 1.79% to 1.72%. "Markets are pricing 26bp of easing by year-end, and a terminal rate of 1.22% (Fed funds rate currently 1.88%)," analysts at Westpac noted. 

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet notes that the USD/JPY pair has settled a handful of pips above a critical Fibonacci support at 107.45, the 61.8% retracement of its August decline:

"The pair has been developing above the level for two consecutive weeks, with approaches to it attracting buying interest. That said, a break below the level will likely imply further slides ahead. In the daily chart, the pair is now below a bearish 100 DMA but still holding above a bullish 20 SMA, while technical indicators continued retreating from overbought readings, maintaining their downward slopes but above their midlines. In the 4 hours chart, however, the bearish potential is stronger, as technical indicators head firmly south well into negative ground, while the 20 SMA began turning lower above the current level."

The People's Bank of China (PBOC) has set the Yuan reference rate at 7.0734 vs Friday's fix of 7.0730.

The People's Bank of China (PBOC) has set the Yuan reference rate at 7.0734 vs Friday's fix of 7.0730.

In its latest report, published early Monday in Asia, the ING anticipates the Indian government?s latest measures to have a little impact.

In its latest report, published early Monday in Asia, the ING anticipates the Indian government’s latest measures to have a little impact on their forecasts of a weaker Indian Rupee (INR) fueling the USD/INR pair towards 73.50 level by the end of 2019.

Key quotes

“In a surprise move last Friday, Finance Minister, Nirmala Sitharaman, announced a significant tax reduction for domestic companies. The move is estimated to cost about $20 billion to the government in lost revenue.”

“Aggressive stimulus adds to the economy’s long-term plight by further delaying fiscal consolidation. Certainly, the immediate implication will be a blowout of the fiscal deficit well above the government’s 3.3% of GDP projection for the current fiscal year.”

“There is no clarity about how the government will be financing this wider deficit. The $24 billion payouts from the RBI's coffer won’t be enough, nor can the government continue to rely on such monetization of the deficit.”

“The Reserve Bank of India’s (RBI) aggressive monetary easing with a total 110 basis point (bp) policy rate cuts implemented in four policy meetings so far this year has failed to arrest the growth slowdown.”

“Whether this helps to kick-start the economy is still to be seen. For now, the negative consequences of derailed fiscal consolidation on India's external creditworthiness keeps a weakening pressure on local financial assets.”

“We retain our end-2019 USD/INR forecast at 73.50 (spot 70.95).”

The Sun has reported that the US President Trump and UK PM Boris Johnson have agreed to make a trade deal at 'lightning speed' by July of next year an
  • US President Trump and UK PM Boris Johnson have agreed to make a trade deal at 'lightning speed'.
  • The President and the PM could publicly commit to the highly ambitious timeline as early as Tuesday (September 22) when they meet in New York.

The Sun has reported that the US President Trump and UK PM Boris Johnson have agreed to make a trade deal at 'lightning speed' by July of next year and before the US Presidential elections. Trump and Johnson are to meet this Thursday to discuss...

"BORIS Johnson and Donald Trump have agreed to strike a UK-US trade deal in lightning quick time by July next year. The President and the PM could publicly commit to the highly ambitious timeline as early as Tuesday (September 22) when they meet in New York, " The Sun reported:

"Boris was initially sceptical about Mr Trump’s aim to have a deal tied up in just nine months time.

But he has been persuaded to aim for it because of the high risk that the US presidential election in November poses.

American politicians will be distracted by the campaign for the White House as well as Congress by the Autumn, and a new president may not share Mr Trump’s enthusiasm for a deal.

It has also emerged that the deal the two leaders are aiming for will be the biggest free trade agreement that the US has ever done with another country.

While the deal could be signed next summer, its implementation will have to wait until Brexit’s transition period finishes in December 2020.

'A GREAT WIN FOR US'

But it will still come as a major boost to Britain’s Brexit hopes.

A senior Government source told The Sun: “The political will is there now on both sides to do the deal by July.

"It's a great win for us, and Trump is also really keen to shout about it in the States.

“There is also a recognition on both sides of the Atlantic that is must be done by then because the US election cycle starts soon afterwards.”

The British and American leaders will hold talks about the trade deal in the margins of the UN General Assembly meeting on Tuesday.

'GUNG-HO'

The two men had planned on also setting out a full road map for the deal’s negotiation on Tuesday, but that has now been delayed for details to be ironed out – probably until when the President is next in London in December for the NATO summit.

Though negotiations can’t formally begin until the UK has left the EU, officials have been holding scoping talks for months.

The US’s biggest priority is to see a major reduction in the UK’s tariffs on steel imports, as well as a reduction or end to the digital tax on tech giants.

London’s biggest ask is for access to the giant American market for financial services.

International Trade Secretary Liz Truss, who will also be in New York this week to meet her opposite number, US trade boss Robert Lighthizer, has already insisted the UK cannot compromise on food standards or access to the NHS.

Boris revealed Trump’s July 2020 target last month at the G7 summit in Biarritz, calling the President “gung-ho” about its speed.

 

GBP/JPY is currently sidelined near 134.30. The pair created a Doji candle on Thursday, signaling indecision or bullish exhaustion after a rally from
  • GBP/JPY is looking south, according to the candlestick arrangement on the daily chart. 
  • The pair could test a key Fibonacci retracement of 133.61 in Europe/US session. 

GBP/JPY is currently sidelined near 134.30. 

The pair created a Doji candle on Thursday, signaling indecision or bullish exhaustion after a rally from 126.67 to levels above 135.50. More importantly, on Friday, the pair closed below the Doji's low of 134.27, confirming a bullish-to-bearish trend change. 

The reversal looks strong as the pair fell 0.89% on Friday, engulfing the price action seen in the preceding two days. 

Hence, support at 133.61 (23.6% Fib R of 126.67/135.75) could be put to test in the European/American session. 

A close above Friday's high of 135.75 is needed to revive the bullish view. 

Daily chart

Trend: Bearish

Pivot points

 

USD/IDR revisits one-week-old range support as it trades near 14,055 during the early Asian session on Monday.
  • USD/IDR nears a week-long range’s support.
  • 4H 200MA limits immediate upside.
  • RSI portrays normal condition, indicating the range-trading to continue.

USD/IDR revisits one-week-old range support as it trades near 14,055 during the early Asian session on Monday.

50-bar moving average on the four-hour chart (4H 50MA) and 23.6% Fibonacci retracement level of August-September declines has been restricting the pair’s downside since September 16, which together with normal condition of 14-bar relative strength index (RSI) indicate brighter chances of a pullback towards 38.2% Fibonacci retracement level of 14,150.

However, 200-bar moving average on the four-hour chart (4H 200MA), around 14,170 now, could restrict pair’s further recovery, if not then 50% and 61.8% Fibonacci retracement levels, near 14,232 and 14,315 respectively, could offer intermediate halts to the quote’s rally to late-August high around 14,340/50.

On the downside, pair’s declines below 14,050/48 support-confluence could please sellers with 13,990 and recent low close to 13,880.

USD/IDR 4-hour chart

Trend: sideways

 

The People's Bank of China is expected to set the Yuan midpoint at 7.0828 against the dollar according to a Reuters estimate. The PBoC is in viewpoint
  • PBoC expected to set the Yuan midpoint at 7.0828.
  • China cut its new one-year benchmark lending rate for the second month in a row on Friday.

The People's Bank of China is expected to set the Yuan midpoint at 7.0828 against the dollar according to a Reuters estimate. 

The PBoC is in viewpoint at the moment, following China cutting its new one-year benchmark lending rate for the second month in a row on Friday, a step by the central bank to try to wrestle down borrowing costs and support the economy as the Sino-U.S. trade war drags on.

Chinese delegates cut a meeting short last week and US President Trump was also speaking up and signalling to markets that there is little sense of urgency in the US administration either which sent a risk-off tone verberating through financial and commodity markets on Friday. FX is on tenterhooks and currencies such as the Aussie will take the brunt of weakness in the Yuan and trade talk traction. 

 

Early on Monday morning in Asia, the Westpac confirms its previous estimation of a 25 basis points (bps) cash rate cut from the Reserve Bank of Australia.

Early on Monday morning in Asia, the Westpac confirms its previous estimation of a 25 basis points (bps) cash rate cut from the Reserve Bank of Australia (RBA). The bank cites the latest monetary policy meeting minutes favoring their forecasts.

Key quotes

“Bank will cut the cash rate by 25 basis points on October 1 and again by 25 basis points on February 4, 2020.”

“That call updated our previous call on May 24 when we were the only forecaster (Bloomberg Survey on that day) to argue that the cash rate would fall below 1%.”

“The most important development was the release of the September RBA Board minutes.”

“The minutes of the Reserve Bank Board’s September meeting contain similar themes to the August minutes but indicate that the Board acknowledges that it is getting closer to its next move on policy.”

“In these minutes there is no reference to previous actions. Arguably reference to previous actions is a clear sign that the Board is content to observe developments whereas not referring to previous actions there is less emphasis on the need to wait.”

A bearish signal from the 12-bar MACD indicator portrays the GBP/USD pair?s weakness as it seesaws around near-term key support-line.
  • GBP/USD stays on the back foot while nearing the four-day-old rising trend-line.
  • Bearish MACD favors a decline to 200-hour EMA.

A bearish signal from the 12-bar moving average convergence and divergence (MACD) indicator portrays the GBP/USD pair’s weakness as it seesaws around near-term key support-line while taking rounds to 1.2470 during early Monday.

The pair nears a four-day-old rising trend-line level of 1.2470 with a bearish MACD signal favoring further declines to 200-hour exponential moving average (EMA) level of 1.2434.

However, 61.8% Fibonacci retracement of pair’s run-up since September 09, at 1.2367, could limit further south-run, if not then 1.2280 and 1.2230 could gain bears’ attention.

Meanwhile, 1.2500, 1.2520 and recent high surrounding 1.2585 could please buyers unless the pair portrays decisive trading below near-term key support-line.

GBP/USD hourly chart

Trend: pullback expected

 

Goldman Sachs analysts expect the USD/JPY pair to drop to 103 in the next three months. Currently, the pair is trading at 107.68, down 1.82% on a year

Goldman Sachs analysts expect the USD/JPY pair to drop to 103 in the next three months. Currently, the pair is trading at 107.68, down 1.82% on a year-to-date basis. 

Key points

  • Geopolitical risks make Yen the best G10 long.
  • The Bank of Japan is likely to extend forward guidance in October.
  • The BOJ hsas limited options to fight JPY's ascent. 
The price of gold is soft in the open this week as trade talk noise continued to dominate. Gold has fallen from a high of 1516.69 to a low of 1511.89
  • The 4-hour 200 moving average at 1,510 which continues to hold.
  • Bears can target a 50% mean reversion of the late June swing lows to recent highs.

The price of gold is soft in the open this week as trade talk noise continued to dominate. Gold has fallen from a high of 1516.69 to a low of 1511.89 and is currently trading -0.18% on the session so far, falling back towards the prior trendline resistance. 

The recent resistance was pierced on Friday with a higher high in the 1,500s and closing above the 4-hour 200 moving average at 1,510 which continues to hold in Asia today. On a continuation to the upside, bulls will target the 1550 level which guards territories towards 1,590 as the 127.2% Fibo target area. Bears can target a 50% mean reversion of the late June swing lows to recent highs around 1470 could be on the cards which guards the 19 July swing highs at 1,452.93. 

 

 


 

GBP/NZD is going to be a busy pair this week and the recent price action suggests further upside to come, especially should Brexit sentiment continues
  • GBP/NZD is going to be a busy pair this week
  • RBNZ in focus and Boris Johnson heads to New York today for three days of talks with world leaders on Brexit and Iran.

GBP/NZD is going to be a busy pair this week and the recent price action suggests further upside to come, especially should Brexit sentiment continues to support the Pound and the Reserve Bank of New Zealand, to the contrary, continue to weigh on the outlook for the Kiwi. 

GBP/NZD has started out the week following 10 consecutive day's of positive closes, including Friday's bearish pin bar which could be a spanner in the works on a technical basis for the near-term, encouraging longs to take profits ahead of the RBNZ this week. Indeed, the primary focus for this week will be Wednesday’s RBNZ OCR Review. "Market pricing for RBNZ is for 7bp of easing on 25 September, with a terminal rate of 0.57%," according to analysts at Westpac:

 "While we don’t expect a move next week, we still think that the RBNZ is inclined towards further easing. We expect another cut at the November Monetary Policy Statement, taking the OCR to a new low of 0.75%. Our view is that by that point, the cumulative stimulus from lower interest rates and increasing government spending will be enough to shore up the economy, get unemployment falling again, and set inflation on a path towards 2%."

The Supreme Court is expected to deliver its decision this week

Meanwhile, Boris Johnson heads to New York today for three days of talks with world leaders on Brexit and Iran which is likely to derail a UK Supreme Court ruling on the prime minister’s decision to suspend parliament. However, headlines will likely flow considering Johnson is to meet leaders at the UN General Assembly including German chancellor Angela Merkel, French President Emmanuel Macron and US President Donald Trump. The Supreme Court, on the other hand, is expected to deliver its decision this week on whether Mr Johnson behaved lawfully in suspending parliament for five weeks.

GBP/NZD levels

 

Despite witnessing a pullback towards filling the early-day gap-up, geopolitical tension in the Middle East keeps favoring WTI buyers.
  • WTI began the week on the strong foot amid Saudi-Iran tension.
  • The lack of fresh clues dragged the oil benchmark to fill in the week-start gap-up.
  • Key activity numbers, trade/political headlines will be in the spotlight.

Despite witnessing a pullback towards filling the early-day gap-up, geopolitical tension in the Middle East keeps favoring WTI buyers as the black gold trades near $59.00 during the Asian session on Monday.

The Oil benchmark flashed a week-start gap-up reacting to the recent news that Yemeni rebels have warned of another attack on Saudi Arabia. Also, the reaction from the US and Saudi Arabia in the form of an increased military presence in the Middle East and a warning of war respectively offered additional support to the oil bulls. Furthermore, the Wall Street Journal’s expectations that it will take months rather than few weeks, as conveyed by the Saudis earlier last-week, to return to the full production also backed the bulls.

Read: Tensions in Middle East are on the rise, Oil prices a major focus

Keeping prices in check is the doubts surrounding the US-China trade deal as the recent visit of the Chinese delegates to the US had mixed reactions after the diplomats hastily left and refrained from visiting the US farms despite promising earlier.

It should also be noted that some of the media releases from the US and China have started taming the trade-war risk while few others are busy cheering the French efforts to broker the US-Iran peace backed by the French Foreign Minister’s latest comments.

However, fresh developments have neither being spotted at the geopolitical front nor at the US-China trade level, which could have pushed the buyers towards a profit-booking wave. Though, overall risk remains to the upside with the expected decline in global oil output due to the Saudi attack and a tensed condition in the region.

Moving on, key Purchasing managers’ index (PMI) numbers from the EU and the US for September month will be in the spotlight for fresh direction.

Technical Analysis

200-day exponential moving average (EMA) level of $57.90 seems crucial support to watch as it holds the gate to further declines towards six-week-old rising trend-line around $54.50. Alternatively, $60.00 round-figure, July high surrounding $61.00 and recent tops near $63.15 can keep the advances under check.

With the key preliminary purchasing manager indices (PMI) from the Commonwealth Bank flashing mixed signals, AUD/JPY remains on the back foot.
  • AUD/JPY stays under near-term key resistance-confluence after Aussie PMI data.
  • September month activity numbers from Commonwealth Bank flashes mixed results.
  • Bearish MACD favors pair’s further declines.

With the key preliminary purchasing manager indices (PMI) from the Commonwealth Bank flashing mixed signals, AUD/JPY remains on the back foot while taking rounds to 72.87 during the early Asian session on Monday.

While the headline Manufacturing PMI slipped below 50.9 forecast to 49.4, Services PMI crossed 45.3 expectations with 52.5 level whereas Composite PMI rose above 49.3 prior to 51.9.

The 200-bar exponential moving average (EMA) and a three-day-old falling trend-line together constitute 73.15/20 as a near-term key resistance-confluence. Also exerting the downside pressure is the bearish signal from 12-bar moving average convergence and divergence (MACD) indicator.

With this, the quote is likely declining towards 72.70 and 50% Fibonacci retracement of August-September upside, around 72.20. However, August 29 high near 71.80 and September month bottom close to 71.15/10 could restrict the pair’s additional south-run.

Alternatively, pair’s run-up beyond 73.20 enables it to question mid-month low surrounding 73.80 while seeking to visit 74.00 round-figure and a monthly high around 74.50.

AUD/JPY 4-hour chart

Trend: bearish

 

Australia Commonwealth Bank Composite PMI: 51.9 (September) vs 49.3
Australia Commonwealth Bank Manufacturing PMI came in at 49.4 below forecasts (50.9) in September
Australia Commonwealth Bank Services PMI registered at 52.5 above expectations (45.3) in September
Despite recent U-turn in the US-China trade saga, the AUD/USD pair remains under pressure around two-week low as it trades near 0.6770.
  • AUD/USD portrays risk-aversion amid trade/political tension.
  • Catalysts concerning the US-China trade relations flash mixed signals, Saudi Arabia warns Iran of a war if it attacks the nation.
  • Australia’s activity numbers grab immediate market attention.

Despite recent U-turn in the US-China trade saga, the AUD/USD pair remains under pressure around two-week low as it trades near 0.6770 during the early Asian session on Monday.

AUD/USD, which is generally considered as a barometer of market’s risk sentiment, recently dropped to early-month lows after the US-China trade relations recently tweaked following the Chinese delegate’s cancellation of the US farm visit and early exit to the dragon nation, coupled with the US President Donald Trump’s pressure for a full deal.

Adding to the risk aversion wave was the Yemeni rebel warning that Iran is preparing for another attack on Saudi Arabia. In response, the Saudi Arabian Foreign Minister warned Iran of risking a war while the US deployed additional forces in the Middle East terming it as a “defensive in nature”.

There has been some noticeable change in both the trade/political headlines off-late as the Wall Street Journal quotes Houthi leader turning down claims of any such warnings of an attack on Saudi Arabia while the New York Times and China’s Xinhua trying to tame the trade-war fears.

Recently released quarterly statement from the Australian Council Of Financial Regulators says that the major banks have seen slower growth relative to other lenders.

With this, equities, bond yields, and the Aussie pair are under pressure while safe-havens like the Japanese Yen (JPY) and Gold benefit from the risk-off mood.

Investors will now keep an eye over September month readings of Commonwealth Bank’s Manufacturing, Services and Composite Purchasing Managers’ Indices (PMIs). Forecasts suggest the headlines Manufacturing PMI to remain unchanged at 50.9 with its Services counterpart likely weakening to 45.3 from 49.1 earlier. It should be noted that the Composite PMI registered 49.3 mark earlier.

Following that, the US is also up for releasing preliminary activity numbers for September wherein a likely improvement in the Markit Services PMI will confront the market consensus of a below-50 level of Composite PMI.

Technical Analysis

While 0.6740 and 0.6700 can be considered as immediate downside support ahead of anticipating further south-run towards yearly bottom surrounding 0.6675, an upside clearance of 21-day exponential moving average (EMA) level of 0.6810 could trigger fresh recovery in the direction to 0.6850 that nears multiple lows marked in the second week of the month.

In recent reports, there has been an increased divergence in views amongst the NZIER Monetary Policy Shadow Board on what the OCR should be at the OCR
  • Increased divergence in views amongst the NZIER Monetary Policy Shadow Board on what the OCR.
  • Shadow Board members were sceptical about whether a further lowering of interest rates would boost activity and headline inflation.

In recent reports, there has been an increased divergence in views amongst the NZIER Monetary Policy Shadow Board on what the OCR should be at the OCR Review this Wednesday.

"This widening in the range of views follows the Reserve Bank’s surprise decision to cut the OCR by 50 basis points at its August meeting. Although Shadow Board members generally called for keeping the OCR on hold, some saw a higher OCR as appropriate. The views were taken before the release of June quarter GDP.

The Reserve Bank surprised markets with a greater-than-expected OCR cut, and left the door open to further easing. A deterioration in the global growth outlook appears to be their main concern, with the extensive easing by other central banks a primary influence given the effects on the exchange rate.

However, many Shadow Board members were sceptical about whether a further lowering of interest rates would boost activity and headline inflation. Some highlighted the financial stability risks with having monetary policy set too low, particularly with the effects on asset price inflation.” said Christina Leung, Principal Economist at NZIER."

  • NZD/USD seesaws around 4-year low as trade/political tensions prevail
Trade talks were a theme at the end of the week which weighed on the price of US stocks as reports that the Chinese delegation abruptly ended the talk
  • Risk-off currencies relieved on the trade talk clarifications.
  • Chinese trip was cancelled out of concern that it would turn into a media circus.

Trade talks were a theme at the end of the week which weighed on the price of US stocks as reports that the Chinese delegation abruptly ended the talk on Friday concerned investors. The benchmarks closed in the red for the first weekly decline in a month and the Dow Jones Industrial Average lost 160.60 points, or 0.59%, at 26,934.19, while the S&P 500 index dropped 14.89 points, or 0.5%, to 2,991.90. The Nasdaq Composite Index lost  65.20 points to reach 8,117.67, a decline of 0.8%.

At the same time, U.S. President Trump threw cold water on expectations of a sense of urgency from the US administration with respect to finding a solution to the trade dispute. “We’re looking for a complete deal. I’m not looking for a partial deal,” Trump said, rejecting suggestions that he needed an agreement for his reelection campaign. “I don’t think I need it before the election. I think people know that we’re doing a great job,” the president added when speaking at a joint news conference Friday with Australian Prime Minister Scott Morrison.

Trade talks going ahead as planned

The Chinese delegation cancelled trips to Montana and Nebraska starting this weekend and into next week for discussions with the farming communities there. However, in more recent reports about the circumstances,  "instead, the trip was cancelled out of concern that it would turn into a media circus and give the misimpression that China was trying to meddle in American domestic politics" according to the New York Times. Indeed, markets are in a state of flux over the trade talks but they should take comfort that talks are still planned to continue throughout October as scheduled. At a glance, the FX space is showing signs of relief with AUD/CHF and AUD/JPY rising in the open. 

NZD/USD portrays the recently renewed trade-war risk the best way as it seesaws near the four-year bottom while taking rounds to 0.6265.
  • NZD/USD nosedived to late-2015 lows amid US-China trade pessimism, overall USD strength.
  • Chinese delegation’s early exit from the US, Trump’s comments triggered risk-off amid geopolitical tension surrounding the Middle East.
  • The light economic calendar keeps the market focus on trade/political headlines.

NZD/USD portrays the recently renewed trade-war risk the best way as it seesaws near the four-year bottom while taking rounds to 0.6265 during early Monday morning in Asia.

The Kiwi pair slumped to multi-year low on Friday after the Chinese delegation canceled their visit to the US farms following the US President Donald Trump’s comments that he wants a full deal with China. Though, China’s Xinhua recently termed the trade talks in Washington as “constructive”.

Also exerting the downside pressure is the US Dollar’s (USD) across the board strength on the back of the risk-aversion wave that gets a boost from the Middle East. The Saudi-Iran tussle seems to have worsened after Yemeni rebels warned of another attack and the US deployed additional forces in the region. Saudi Arabian Foreign Minister conveys that Iran’s launch of an attack would risk war.

While there is nothing major on the economic calendar that could lure investors, trade/political headlines will be the key to follow for fresh direction ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting, up for Wednesday.

It should, however, be noted that the US activity numbers for September can entertain short-term traders.

Technical Analysis

In a contrast to the oversold signal by 14-day relative strength index (RSI), which favors the pair’s pullback towards 0.6300 and 10-day SMA level of 0.6330, a sustained trading below the latest low surrounding 0.6250 risks further south-run towards a falling trend-line connecting lows of May and early-September, around 0.6225.

The price of a barrel of Oil is in focus and is a major driver in the FX space when it comes to the value of the Canadian dollar which has found deman
  • Oil is a key focus following weekend headlines. 
  • Spot prices, today, could be set to spike with the 59 handle in focus guarding the 60 handle and the April highs on the wide.

The price of a barrel of Oil is in focus and is a major driver in the FX space when it comes to the value of the Canadian dollar which has found demand on the Saudi Aramco news of late.

The price of oil is one to watch today following the WSJ reporting that it may take "up to eight-months", rather than 10 weeks company executives had previously promised, to fully restore operations at Aramco damaged Abqaiq facility. This means that the crude oil shortfall will last far longer than originally expected and is likely to be a supporting factor for the Canadian dollar as well as risk-off markets today, especially when coupled with the uncertainties surrounding trade negotiations and recent comments from Trump who seems in no hurry to resolve the dispute before next year's Presidential elections. 

Rising tensions in the Middle East

There have also been reports in the WSJ this weekend that 'Houthi militants in Yemen have warned foreign diplomats that Iran is preparing a follow-up strike to the missile and drone attack that crippled Saudi Arabia’s oil industry a week ago, people familiar with the matter said," the article read. 

  • Saudi ForeignMin: If attack launched from Iran, it would be an act of war - CNN

  • Yemeni rebels warn Iran plans another strike soon - WSJ

Meanwhile, Aramco is very busy seeking prices for the restorations following the attacks from contractors, including General Electric seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom. There is speculation that it could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, a Saudi official said.

WTI and CAD implications

As for futures, West Texas Intermediate crude for October delivery lost 4 cents on Friday, or 0.07%, to finish at $58.09 a barrel on the New York Mercantile Exchange. The contract logged a 5.9% weekly advance, which was the biggest for the U.S. benchmark since the week ended June 21. Spot prices, today, could be set to spike with the 59 handle in focus guarding the 60 handle and the April highs on the wide up at 66.58 will be a key target.

  • USD/CAD stays below 200-day SMA amid Saudi-Iran tussle, mixed trade headlines

 

With the weekend trade/political headlines infuriating the global risk watchers, the USD/CAD pair remains below the key simple moving average.
  • USD/CAD struggles to justify oil-backed CAD strength and recent USD demand.
  • Yemeni rebels warn Iran plans another strike soon, Saudi ForeignMin says it would be an act of war if launched.
  • US-China trade sentiment worsened after Chinese delegations left the US early.

With the weekend trade/political headlines infuriating the global risk watchers, the USD/CAD pair remains below the key simple moving average (SMA) while taking rounds to 1.3260 at the start of Monday’s Asian trading session.

In a reaction to the recent Saudi-led alliance’s military strikes, Yemeni rebels have warned that Iran plans to launch another attack on Saudi Arabian oil and gas facilities. With this, geopolitical tensions concerning the Saudi-Iran tussle have aggravated and the US deployed military forces in the Middle East terming it as a “defensive measure”. On the other hand, Saudi Arabian Foreign Minister Adel al-Jubeir said, as per the CNN, that Iran’s attack, if launched, would risk the possibility of military action.

However, the Wall Street Journal reported that Mohammed Abdul Salam, the Houthi spokesman, denied Saturday that the group had delivered any warning to foreign diplomats about potential Iranian attacks. Further, the French Foreign Minister prepares for peace between the US and Iran while also pushing the Middle East nation to de-escalate the regional tension.

Elsewhere, Chinese delegations’ early exit from the US, coupled with a cancellation of the farm visit, was seen an initial sign of worsening relations between the US-China after the US President Donald Trump said he wants a full deal from China. Though, Chinese media recently conveyed the talks in Washington were ‘constructive’ without giving details of the same.

While geopolitical tension flashes positive signals for the Canadian Dollar (CAD), due to its reliance on Oil, trade pessimism and recently sluggish data from Canada keeps the Loonie under check.

Investors will now watch over July month Wholesale Sales from Canada and the US Manufacturing, Services and Composite Purchasing Managers’ Indices (PMIs) for September for fresh impulse. Though, this wouldn’t reduce the importance of the trade/political headlines.

Technical Analysis

The 200-day SMA continues to exert downside pressure on the prices but 100-day SMA level of 1.3250 stops bears from targeting multiple supports around 1.3180. On the upside, daily closing above 1.3310 becomes necessary to please buyers targeting a fresh monthly high above 1.3385.

Here is what you need to know on Monday, September 23rd: Risk aversion took over the market Friday on escalating trade tensions, and would likely pers

Here is what you need to know on Monday, September 23rd:

  • Risk aversion took over the market Friday on escalating trade tensions, and would likely persist Monday, following news indicating that the Pentagon will deploy US forces to the Middle East, which will be “defensive in nature,” a result of the Iranian attack on Saudi Arabian oil facilities.
  • During the weekend, the Saudi Foreign Minister said that if the attack was launched from Iran, it would be considered an act of war. Meanwhile, Houthi rebels in Yemen have warned foreign diplomats that Iran is preparing a follow-up strike to the missile and drone attack on Saudi Arabian oil and gas facilities.
  • The run to safety and the lack of progress on the Irish backstop weighed on the Pound.
  • Safe-haven assets were the best performers, with gold and yen poised to extend their advances.
  • Cryptos maintain the bearish tone, could turn north on persistent risk aversion.
While speaking at Labour?s annual conference on Sunday, the UK opposition Labour Party leader Jeremy Corbyn said: ?I am leading the party, I am proud

While speaking at Labour’s annual conference on Sunday, the UK opposition Labour Party leader Jeremy Corbyn said: “I am leading the party, I am proud to lead the party, I am proud of the democracy of the party and of course I will go along with whatever decision the party comes to.”

He said in response to the question asked whether the Labour Party would campaign to remain in the EU or to leave with a deal, BBC News reports.

The Cable witnessed a volatile Friday session, having reversed sharply from 11-week highs near 1.2580 to finish the week near the lower levels of 1.2470 amid trade pessimism-led risk sell-off, as markets ignored the upbeat comments from the European Union (EU) Chief Brexit negotiator Barnier.

  • EU's Barnier: Determined to try and reach an agreement with UK
In an interview with CNN late-Saturday, Saud Arabian Minister of State for Foreign Affairs Adel al-Jubeir, ?We hold Iran responsible because the missi

In an interview with CNN late-Saturday, Saud Arabian Minister of State for Foreign Affairs Adel al-Jubeir, “We hold Iran responsible because the missiles and the drones that were fired at Saudi Arabia...were Iranian-built and Iranian-delivered.”

Additional Quotes:

“But to launch an attack from your territory, if that is the case, puts us in a different category... this would be considered an act of war.”

“If they continue along this path, then they risk the possibility of military action.”

“But nobody wants war. Everybody wants to resolve this peacefully and the end result has to be an end to Iran’s aggressive policies.”

“Appeasement with Iran does not work. For example, trying to set up a parallel financial payment system is appeasement. Trying to give them a line of credit is appeasement. It just emboldens them.”

“The Iranians have to know that there will be consequences to their actions.”

Meanwhile, the Wall Street Journal (WSJ) reported on Saturday that Yemeni rebels warned Iran plans another strike soon.

Oil prices could find fresh support from the weekend’s reports that could flare up Mid-East tensions and threatens oil supplies.

The Wall Street Journal (WSJ) quotes people familiar with the matter on Sunday, Houthi rebels in Yemen have warned foreign diplomats that Iran is prep

The Wall Street Journal (WSJ) quotes people familiar with the matter on Sunday, Houthi rebels in Yemen have warned foreign diplomats that Iran is preparing a follow-up strike to the missile and drone attack on Saudi Arabian oil and gas facilities a week ago that knocked-off 5% of the global oil supplies.

The sources confirm that the last attack was forced by Iran and are said to have passed the information to the Saudi and the US about the warnings.

Should there be another attack, it could flare-up the tensions between the US and Iran and propel oil prices through the roof once again. Both crude benchmarks settled the week nearly 6% higher, with WTI flat at  the close above the 58 handle while Brent finished near 64.60 region.

China?s state news agency, Xinhua, reported on Saturday that both the US and Chinese trade teams had ?constructive? discussions in Washington, as cite

China’s state news agency, Xinhua, reported on Saturday that both the US and Chinese trade teams had “constructive” discussions in Washington, as cited by Reuters.

Xinhua added that the US and China agreed to keep communicating on related issues, and discussed the details of the next round of trade talks in October. However, no details of the discussions were provided by the Chinese news outlet.

This comes despite the overnight reports that China’s agriculture delegation canceled the US farm visit to Montana and they returned to China sooner than expected.

The above headlines sent the risk sentiment tumbling in the US last session, knocking-off the stocks in tandem with the Treasury yields. USD/JPY lost nearly 40-pips to close the week near four-day lows of 107.53.

  • US Pres. Trump: Agricultural purchases will not be enough, we want a complete deal
  • EUR/USD ends the week in the lower part of its range but struggle to generate any meaningful breakdown.
  • The level to beat for bears is the 1.1000 handle. 
 
 

EUR/USD daily chart

 
The common currency, on the daily chart, is trading in a bear trend below its main daily simple moving averages (DSMAs). The Euro ends the week stuck in a two-week trading range as investors are waiting for the next catalysts. There will be a plethora of news announcements next week, including the Gross Domestic Product in the United States. Therefore, there is potential for volatility and the current range may get broken.

EUR/USD four-hour chart

 
EUR/USD is trading below its primary SMAs, suggesting a bearish bias in the medium term. The Euro has been ranging for most of the week. However, bears will probably try to break the 1.1000 handle to potentially reach 1.0965 and 1.0930 support level near the 2019 low, according to the Technical Confluences Indicator. 
 
  
  

EUR/USD 30-minute chart

 
Bears will try to keep the market contained below 1.1023 resistance. However, if the bulls push through it, 1.1045 can come into play, but this is likely a weak resistance which will be easily be overcome opening the way to 1.1074 resistance, according to the Technical Confluences Indicator.

Additional key levels

 

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