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US Dollar, S&P 500 Brace for Powell Comments as Easing Bets Spike

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Eurozone Economy, US Dollar, Euro Outlook

  • Traders will be closely watching Powell for key comments
  • Equity markets cross fingers that Fed shifts more dovish
  • US-China trade relations remain headline risk for the week

Learn how to use political-risk analysis in your trading strategy!

The US Dollar and local equity markets will be closely listening to Fed Chairman Jerome Powell as he speaks at the NABE conference in Denver. Traders will be scrutinizing his commentary after last week’s dismal data dump and worsening US-China trade war relations. The economic conflict continues to be a major headwind to businesses and has negatively impacted consumer and companies sentiment.

Early into Asia’s Tuesday trading session, Washington blacklisted eight Chinese companies on the basis of violating human rights violations. This comes shortly after sources had said Chinese Vice Premier Lie He’s visit to Washington from October 10 to 11 will not include discussions on intellectual property rights. Considering this is a major issue on the trade agenda, this may be setting up the talks for a standstill or worse.

US President Donald Trump reiterated that a half-baked deal is “not one we prefer at all”. Volatility in financial markets may be relatively muted until updates are given on the state of US-China trade talks. This is because of the sheer magnitude a truce or deterioration could have on global growth prospects and monetary policy from central banks all over the world.

Market Analysis of the Day: Global Growth Prospects Present Gloomy Outlook

Chart showing Manufacturing PMI Data

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— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter



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EUR/GBP May Rise if Brexit Hopes Continue to Fade

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British Pound Outlook, Brexit, GBP/USD Technical Analysis – Talking Points

  • British Pound may reverse recent gains if Brexit perils undermine confidence
  • UK members of Parliament will be voting on Boris Johnson’s new Brexit plan
  • Will DUP derail Johnson’s plan, and if so, will there be yet another extension?

Learn how to use political-risk analysis in your trading strategy!

The Euro may edge higher against the British Pound if hopes for an orderly Brexit continue to dissolve. On October 17, UK Prime Minister Boris Johnson and European Commission President Jean-Claude Junker jointly announced that a Brexit deal had been reached. Sterling rallied on the news, though its upside movement was curtailed by news that the Irish Democratic Unionist Party (DUP) would not support his plan.

Securing their support is essential if Mr. Johnson wants to pass a deal through the House of Commons. If he fails to do so, it could severely derail plans for an orderly Brexit which would likely see the British Pound reverse a significant portion of its recent gains. However, EU Council President Donald Tusk has not ruled out the possibility of an extension if lawmakers failed to agree on a deal on Saturday.

In Parliament there are currently 287 voting conservative lawmakers which Mr. Johnson will need if his proposal is to survive. He may also have to lean on over 20 former Tory MEPs who switched over to become independents. However, that may not be enough votes which may compel the PM to ask for help across the political aisle.

Market Analysis of the Day: Will the British Pound Reverse its Recent Gains?

Chart showing EUR/GBP

GBP Index chart created using TradingView

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— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter



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Australian Dollar Firm After China GDP Miss But Trend Aims Lower

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CHINA, GDP, TRADE WAR, AUSTRALIAN DOLLAR – TALKING POINTS:

  • 3Q Chinese GDP registers narrowly worse than expected at 6.0% y/y
  • Industrial production data, US trade talks may have offset the headline
  • Australian Dollar little-changed but overall trend still pointing lower

Where will markets end 2019? See our Q4 forecasts for currencies, commodities and stock indexes!

The Australian Dollar found little of interest in mildly disappointing Chinese GDP data. The figures put the on-year growth rate at 6 percent, a hair lower than the 6.1 percent expected by economists. Nevertheless, this marks the slowest pace of expansion in at least 27 years.

Upbeat industrial production readings might have helped offset a soggy headline figure. The rate of on-year growth unexpectedly jumped to a three-month high of 5.8 percent. Early signs of stabilization in retail sales figures may have helped as well.

The report’s limited implications for larger macro themes dominating investors’ attention may likewise explain the tepid response. Extrapolating a view on future Chinese growth seems nearly impossible without greater clarity on trade negotiations with the US, making today’s release appear somewhat moot.

Australian Dollar vs US Dollar price chart - 1 minute

1-minute AUD/USD chart created with TradingView

Assessing the broader landscape, choppy AUD/USD consolidation since early August leaves firmly intact a well-defined downtrend established from late December 2018. Prevailing monetary policy trends suggest it is likely to continue, with longer-term charts setting the stage for deep losses in the months ahead.

Australian Dollar Firm After China GDP Miss But Trend Aims Lower

Daily AUD/USD chart created with TradingView

AUD/USD TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter



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USD/JPY Rate Faces Bearish Reversal Pattern Amid Brexit Deal Hopes

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Asia Pacific Market Open Talking Points

Find out what the #1 mistake that traders make is and how you can fix it!

AUD/USD, NZD/USD Climb as Japanese Yen and US Dollar Sink

The sentiment-linked Australian Dollar and similarly-behaving New Zealand Dollar soared against their major counterparts on Thursday. This was at the expense of the anti-risk Japanese Yen and haven-linked US Dollar. A rosy mood in stock markets, fueled by hopes of a Brexit deal, could have been the source of optimism from investors as the S&P 500 closed 0.28 percent to the upside.

During European trading hours, European Commission President Jean-Claude Juncker and UK Prime Minister Boris Johnson announced that a Brexit deal has been reached. However, optimism receded after officials from the Democratic Unionist Party (DUP) saying that they would not support Johnson’s agreement. Their support is crucial for Mr Johnson to pass his deal in Parliament perhaps on Saturday.

Still, the British Pound and Euro aimed nervously higher despite giving up some losses. Disappointing economic data out of the United States also likely fueled their gains against the US Dollar. Local industrial production unexpectedly declined 0.4 percent m/m in September versus -0.2% anticipated. US front-end government bond yields traded lower as markets kept their hopes up for further Fed easing.

Friday’s Asia Pacific Trading Session

Ahead, the Australian Dollar will be closely watching incoming third quarter Chinese GDP data after rosy local jobs data offered AUD/USD a boost. Data out of China has been tending to underperform relative to economists’ expectations, opening the door to a continuation of the trend. As a China-liquid proxy, the Aussie could reverse recent gains should weakness in growth from a close trading partner spread slowdown fears.

Join me later today at 1:45 GMT for LIVE coverage of China GDP where I will be going over the reaction in the Australian Dollar!

Meanwhile, the Japanese Yen will likely look past a set of local CPI data due to its limited implications for near-term BoJ policy action. Rather, it may focus more on China GDP and the mood in regional stock exchanges. S&P 500 futures are little changed with a slight downside bias heading into Friday’s APAC session. A bittersweet mood from investors may boost the Yen.

Japanese Yen Technical Analysis

The USD/JPY could be in the process of carving out a rising wedge candlestick formation. This is typically a reversal pattern and if so, may down the road open the door to downtrend resumption – as outlined in my Q4 USD/JPY forecast. As such, the latest test of the ceiling of the Rising Wedge may pave the way for a test of the floor which goes back to the end of August – red area on the chart below.

Chart of the Day – USD/JPY

USD/JPY Rate Faces Bearish Reversal Pattern Amid Brexit Deal Hopes

Chart Created Using TradingView

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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter



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