FUNDAMENTAL OUTLOOK
US President Donald Trump’s trade adviser Peter Navarro denied on Monday reports that the White House was deliberating whether to delist Chinese firms from US stock exchanges. Navarro called the report first published by Bloomberg “fake news.” US-listed Chinese stocks Alibaba Group and JD Com shares reversed gains into losses after the story.
Chinese Foreign Ministry warned the US that any ‘decoupling’ of the two countries’ economies would cause instability in international markets.
UK’s Prime Minister Boris Johnson will submit his final Brexit plan to European Union leaders as early as Tuesday, the Telegraph newspaper reported. Johnson hailed his plan that envisions the creation of an all-Ireland economic zone without checks at the border between the Republic and the North as a solution. However the plan risks the creation of checks between the EU and Ireland as well as the NI and UK. Another plan that was revealed called for “customs clearance centers” on both sides of the border.
Ireland’s deputy prime minister Simon Coveney dismissed Johnson’s plan as a “non-starter”, and urged “serious proposal” from London.
Japan’s Finance Minister Taro Aso told the media on Tuesday that the economy was “clearly recovering.” Aso was being asked about sales tax that was raised to 10 percent from 8 percent on Tuesday, after years of delay.
The Reserve Bank of Australia (RBA) slashed on Tuesday its interest rate by 25 basis points to a record low of 0.75% in a widely-expected decision to counter a slowdown in economy amid external trade risks.
RBA Governor Philip Lowe said in a statement that the decision was partly made to respond the labor market’s needs.
“The Board took the decision to lower interest rates further today to support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target,” Lowe said.
EURUSD
Disappointing data from German and a rather strong US dollar keep weighing on the common currency as the pair price seeks new supports at a 28 month-low. The outgoing ECB President Draghi’s comments to FT that the central bank was ready to use even more tools to support the frailing Eurozone economy added to the sell-off pressure on the Euro. 1.0870 and 1.0850 will be crucial for support. In case the latter is breached, we will follow 1.0820. For a recovery, 1.0930 and then 1.0950 will be watched.
Support: 1.0930- 1.0950
Resistance: 1.0870- 1.0850- 1.0820
GBPUSD
The British pound keep coming back under pressure due to the uncertainty surrounding the Brexit process. A latest proposal regarding the English border in Ireland by PM Johnson has already been rejected by the Dublin government before it gets submitted to the EU. The long-term trajectory for the sterling remains downward as long as no deal is reached. As the pound trades well below the lower band of the ascending channel, we might see a climb-back to 1.2340 and later 1.2380. Further above we will watch 1.2400. However, if developments push the pair down, then the recently-seen 1.2270 and later 1.2250 and 1.2200 can be target that will bring us closer to the formerly-followed descending channel.
Support: 1.2270 -1.2250 -1.2200
Resistance: 1.2340- 1.2380- 1.2400
USDJPY
Investors fled from the safe haven Japanese yen after the country’s manufacturing activity shrank at its fastest pace in the past seven months. The final Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) for September dropped to a seasonally-adjusted 48.9 from the previous month’s 49.3. As the dollar index gained even more strength, the pair’s price rose, hitting the 78.6 Fibonacci retracement. The price is now aiming for 108.50 whose precinct was last month. 108.70 and 109.00 are closely-watched upward targets whence the most recent fall represented by the current Fibonacci retracement began. In the event, the yen reverses its losses, 108.00 and later 107.60 will be followed. 107.45 at 61.8 Fibo remains important.
Support: 108.00 -107.60- 107.45
Resistance: 108.50 -108.70 -109.00
GOLD
Precious metal prices rose earlier after yet another deep inversion in the US Treasury note yield curve and revived fears of an imminent recession due to the Sino-US trade war and disappointing Chinese and German data. The upward long-term trajectory in gold is valid as the price remains close to its recently-seen 6-year high. Although it has come to an almost neutral or near-negative performance on the weekly chart, the increase in gold prices is set to continue amid the uncertainties as investors seek refuge. 1544 and 1550 are nearby upward targets as the price moves up, with the historic high of 1555 acting as another resistance line. In the event of further easing between Beijing and Washington, we might see a drawback to 1532 and later 1524 to be followed by 1520.
Support: 1532- 1524-1520
Resistance: 1544 -1550 -1555
BRENT
Oil prices rose after reports that OPEC’s production dropped to 28.9 million bpd, its lowest in eight years in September due to the drone attacks last month on Saudi Aramco facilities. But the general tendency remains to be one corrective downward to the spike that was experienced in the immediate aftermath of the attacks that caused panic in the markets. 67.50 and later 67.20 at the upper band of the formerly-formed falling wedge will be followed. 67.00 will be important for investors as they await the next round of Sino-US talks this month. In the event, supply concerns continue, 68.30 and later 68.50 near the falling trendline will be watched.
Support: 67.50- 67.20 -67.00
Resistance: 68.30- 68.50
DAX
European stocks are waking up to the slightly-flared up tensions between the US and China although White House described reports that it was preparing to de-list Chinese firms from American stocks as ‘fake news.’ However, the Dax index is going down despite the US dismissal and Tuesday’s German manufacturing PMI that came at 41.7 better than the expected 41.4 but lower than the previous figure of 43.5. As the index heads down 12 400 and later 12 370 will be followed. 12 350 should give solid support further below. In the event of a rise, 12 480 and then 12 500 will be watched.
Support: 12 400 -12 370- 12 350
Resistance: 12 480 -12 500
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