Asian Stocks Talking Points:
- Asian shares cautiously higher as US and North Korea summit took place in Singapore
- Signs of peace but no answers on denuclearization may have kept stocks from more gains
- The markets still await more details to come. AUD/USD is wedged between key levels
Find out what retail traders’ Australian Dollar buy and sell decisions say about the coming price trend!
Asian shares were mostly higher by Tuesday afternoon trade, though they swung throughout the session as Donald Trump’s meeting with North Korean Leader Kim Jong Un took place. Heading into the Singapore summit, the markets appeared to have taken bets for a denuclearization outcome of sorts. The anti-risk Japanese Yen fell as Nikkei 225 futures rose.
At this point, some of those optimistic bets may have unwound as North Korea’s Kim did not answer questions on denuclearization. However, he did say that the event is a ‘good prelude’ for peace. Meanwhile, Mr. Trump noted that they will have a ‘terrific’ relationship and that he has no doubt about it. Prospects of more peace down the road may have what kept shares afloat, but a lack of details on the nukes probably kept them from reaching their full potential.
As such, South Korea’s KOSPI was down about 0.15%, though at one point was up more than 0.30%. Japanese shares were higher with the Nikkei 225 up about 0.33%. China’s Shanghai Composite rose more aggressively at roughly +0.46%. Australia’s ASX 200 was slightly higher at +0.10%.
On the currency side of things, the US Dollar also saw increased demand ahead of the summit and it rose against its major counterparts. However, as some of those optimistic bets pulled back, the greenback followed suit and was only cautiously higher. The sentiment-linked Australian and New Zealand Dollars appreciated.
From here, signs of denuclearization can boost sentiment as it lowers the chance of conflicts around the Korean peninsula. During the discussions, the US president said that they are heading for a signing and will reveal what is being agreed to. In addition to that, the White House has announced that Trump would deliver a post conference around 4pm local Singapore time which translates to 8:00 am GMT.
Beyond the summit, attention quickly starts turning to the economic calendar which is loaded with event risk this week. Later today, we will get UK average weekly earnings. On Monday, worse-than-expected local manufacturing output send the British Pound lower. In general, UK data has been tending to underperform relative to economist’s expectations as of late. More of the same can further depreciate Sterling.
AUD/USD Technical Analysis: Between Key Support and Resistance
On a daily chart, AUD/USD remains wedged in-between key support and resistance. The former is defined by 0.7591 which is a combination of highs set in late-May and support in early June. The latter is a mix of the descending trend line from February and 0.7648. From here, a break above resistance exposes the rising trend line from January 2016. On the other hand, a break below 0.7591 leaves the ascending support channel from early May as the next target.
AUD/USD Trading Resources:
— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
Dollar, Euro and Pound Trading Over the Coming Days is Going to Be Fraught
- The severe tumble in risk trends last week wasn’t threatening market stability through the open session of this new week
- DXY has offered little clarity on direction as primary motivation is itself unclear, meanwhile the deficit hit a 6-year high
- Euro and Pound are seeing the quiet before their respective Italian and Brexit storms, be mindful of your trade intent with each
What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 4Q 2018? Download forecasts for these assets and more with technical and fundamental insight from the DailyFX Trading Guides page.
Risk Trends Steady to Start the Week, the Threats Remain Numerous
Like a life raft encircled by sharks, the risk-leaning benchmarks opened this week with an air of stability while the fundamental threats to the system remain distinctly unresolved. Following last week’s painful collapse in US indices – a move that motivated risk aversion far and wide – Monday’s steadfast conditions were welcomed by harried bulls. The balance was not simply isolated to US equities. European and Asian shares markets registered small movements, the emerging markets offered a measured gap lower without hitting new lows and the Yen-based carry trade eased up on its retreat. Yet, despite the implications such a correlation across diverse markets represents, there is more loaded speculative potential packed into the next move from the S&P 500, Dow and Nasdaq. These indices are still running a considerable premium to nearly every other high-profile ‘risk’ metric even after the deeper rout. The technical picture accurately reflects the circumstances moving forward. All three are hovering just above major trendline support which could readily signal a medium-term reversal in trend if cleared – in concert, the move would get on far more radars. Far more important is the sheer number of possible catalysts that can tip us back into selling pressure – or cue a notable rebound. Anticipation of the US Treasury’s call on Chinese polices keeps trade wars in focus (see the history of a century of trade wars here). Yields are at the mercy of risk trends and US Treasury yields specifically at the command of China. Growth forecasts were downgraded this past week for an otherwise ‘mundane’ threat. Earnings season hits its first ‘FAANG’ update (Netflix) Tuesday after the bell. Then there are the regional threats, which we discus below.
SPX Daily Chart
Dollar Is a Fundamental Stalemate with Too Many Charges to Keep Tabs On
When trading FX, it is difficult to avoid the US Dollar. However, given the state of its fundamental predicament, that may be an effort worth making. Whether we reference the trade-weighted DXY Dollar Index or an equally-weighted measure, there is a distinct lack of bearing on the benchmark. The picture is appropriately reflect via EURUSD, the most liquid currency bar none. There is a multi-year head-and-shoulders pattern that the pair tentative broke in August only to reverse course before conviction could take. What eventually resulted was an inverse variation of the same pattern where the break above 1.1725 again fell apart. Now trading around 1.1600, the Greenback has shown little intent to champion either bullish or bearish interests for the time being. That is not likely due to a lack of meaningful fundamental charge but instead it is more likely a side effect of an overabundance of meaningful themes tugging at the currency. For risk trends, there is not enough intensity to raise the focus on the currency’s safe haven status, but even its carry position has yet to be provoked this week. One fundamental signal that was prodded this past session but still abstract for most is the currency’s position as the unquestioned reserve leader. This United States deficit for 2018 was projected to $779 billion which equates to a 3.9 percent ratio to GDP. That is the largest dip into lending for the government since 2012 and furthers the concern that the country pushing the financing tolerance of the ratings agencies. Until we see one of these key themes take command of the currency’s bearings, it will prove difficult to trace its course.
DXY Daily Chart
Euro and Pound Tension Will Only Build into the Wednesday-Thursday EU Summit
As the Dollar flounders fundamentally, its largest counterparts are honing in on very specific fundamental themes. Yet, where there performance is riding on a single track, the outcome and timing of these uncertainties are problematically open-ended. Form the Euro, we were reminded that the currency’s future is under pressure. Following the growing discord between the Italian government and their EU/Eurozone counterparts this past weeks, the Italian Deputy Prime Minister Salvini remarked that the country doesn’t feel bound by the EU’s deficit rules – making a finer point to previous remarks that the country could increase spending if they don’t meet a generous GDP forecast and their belief that the European Central Bank (ECB) would bail them out should financial conditions grow strained. Prime Minister Conte’s remarks today and the two-day EU Summit Wednesday and Thursday will prove crucial. These particular events will very likely be more market critical than the Eurozone and Italian trade reports or the region’s investor sentiment survey from ZEW. The British Pound will also have a lot invested in the two-day meeting of the European leaders. This is a crucial ‘crunch’ event for the UK and EU to hash out a clear path for the divorce known as ‘Brexit’ (learn about the different possible Brexit outcomes in this special report). If this summit ends without resolution, the Pound is likely to tumble. Just as readily, a positive outcome will trigger a rally. Yet, after the collapse of talks between chief negotiators over the weekend and Prime Minister May’s remarks in Parliament Monday, the Cabinet meeting ahead will more likely set this event for a crash landing.
GBP Index Daily Chart
New Zealand Dollar Jumps after CPI Beat, Reminds of the Virtues of Discounted Majors
As convoluted as the backdrop seems for the likes of the Dollar, Euro and Pound; there are still options for the studious FX traders. The Canadian Dollar was given a serious charge this past session when the third quarter business sale survey from the Bank of Canada (BoC) showed an significant improvement. The general sentiment figure and lending survey were decidedly less encouraging, but these were reading taken before the breakthrough on the stalled NAFTA negotiations. Now the focus for the Loonie will more likely fall to BoC intent, so the next major update comes from Friday’s inflation update. Meanwhile, the New Zealand Dollar was prompted to a rally of its own with the release of the third quarter CPI (consumer price index) update. The 1.9 percent clip is still a ways from the upper threshold on the Reserve Bank of New Zealand’s (RBNZ) tolerance band for price pressures, but it nevertheless makes the next move decidedly more hawkish rather than dovish. Given the deep discount on the Kiwi these past months and the lack of response from the currency to last week’s risk flush, there is naturally more response to the positive news. I would expect the same for the Australian Dollar moving forward, but there the key event risk comes with the local employment report and third quarter business sentiment survey which will hit the wires at the same time. We discuss all of this and more in today’s Trading Video.
AUD/NZD Daily Chart
If you want to download my Manic-Crisis calendar, you can find the updated file here.
Written by John Kicklighter, Chief Currency Strategist for DailyFX.com
Weekly Short Positions Increase 14% Sparking Bullish Bias
Weekly Net-Long Positions Increase 17%
GBPUSD: Retail trader data shows 57.7% of traders are net-long with the ratio of traders long to short at 1.37 to 1. In fact, traders have remained net-long since Sep 20 when GBPUSD traded near 1.31492; price has remained unchanged since then. The number of traders net-long is 0.7% lower than yesterday and 19.9% lower from last week, while the number of traders net-short is 10.4% higher than yesterday and 14.9% higher from last week.
Having trouble with your strategy? Here’s the #1 mistake that traders make.
GBPUSD Sentiment Suggest That Price Could Rise
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse higher despite the fact traders remain net-long.
— Written by Jake Schoenleb, DailyFX Research
Euro Reversal Eyes Initial Resistance Hurdle
Euro reversed off confluence support last week with the advance now approaching the first major resistance hurdles. Here are the updated targets and invalidation levels that matter on the EUR/USD charts heading into the start of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
EUR/USD Daily Price Chart
Technical Outlook: Earlier this month in my EUR/USD Weekly Technical Perspective we highlighted a key support zone at in Euro at 1.1436/97 (low-week reversal close and the 61.8% retracement of the August advance). Price registered a low at 1.1432 on October 9th with the subsequent rebound faltering just ahead of a key resistance confluence at 1.1617/27 – a region defined by the monthly open & opening-range highs, the 50% retracement of the late-September decline and the 100-day moving average. A breach above this level targets 1.1669 (breakout-zone for the Euro). Initial daily support rests at 1.1529 backed by the monthly low-day close at 1.1491.
New to Forex Trading? Get started with this Free Beginners Guide
EUR/USD 240min Price Chart
Notes:A closer look at near-term price action shows Euro trading within the confines of an ascending pitchfork formation extending off the October lows. Note that the upper parallel converges on the 1.1617/27 resistance zone and further highlights the technical significance of this region. Initial resistance rests with the median-line (currently 1.1550s) backed by 1.1521/29 with near-term bullish invalidation now raised to 1.1497-1.15.
Why does the average trader lose? Avoid these Mistakes in your trading
Bottom line: EUR/USD is approaching near-term resistance targets which could see prices pullback a bit. From a trading standpoint, look for possible price exhaustion on a rally into 1.1617/27 – the trade remains constructive while above 1.15 with a breach above 1.1669 needed to fuel the next leg higher in price. The October opening-range is set – for now, I’ll favor fading weakness while within this formation. Keep in mind the EU-UK summit is on tap this week as well and may fuel increased volatility in the Euro & GBP crosses.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
EUR/USD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long EUR/USD – the ratio stands at +1.12 (52.8% of traders are long) – extremely weak bearishreading
- Traders have remained net-long since October 1st; price has moved 0.2% lower since then
- Long positions are7.8% lower than yesterday and 13.5% lower from last week
- Short positions are 5.9% higher than yesterday and 0.3% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week andthe recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in EUR/USD retail positioning are impacting trend- Learn more about sentiment!
Relevant EUR/USD Economic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at email@example.com
Latest News7 days ago
JP Morgan is tops in Institutional Investor’s 2018 stock research ranking
Latest News6 days ago
Mnuchin warns China against weakening its currency
Latest News7 days ago
Stocks making big moves after hours Tesla, Edwards Lifesciences & more
Latest News4 days ago
Wells Fargo earnings Q3 2018 beat expectations
Latest News3 days ago
Stock starts trading on NYSE
Forex6 days ago
Bitcoin, Ethereum, Ripple: Beware of Tight Ranges
Latest News4 days ago
Stephen Roach warns of inflation risk, Federal Reserve’s glacial pace
Latest News5 days ago
Stock futures point to drop on Thursday as October stock-market rout continues