FUNDAMENTAL OUTLOOK
China’s Foreign Ministry continued to deny on Tuesday that a phone call with Washington had taken place over the weekend, which US President Donald Trump claimed as Beijing’s willingness to talk.
“I have not heard of this situation regarding the two calls that the U.S. mentioned in the weekend,” a Foreign Ministry spokesman, Geng Shuang said at a press conference.
“Regretfully, the US has further increased the tax rate on China’s exports to the US This extreme pressure is purely harmful to both sides and not constructive at all,” he added.
US crude stockpiles drastically dropped last week as the imports fell. The stockpiles were down by 11.1 million barrels, versus the expectations for a 2 million barrel fall according to data released on Tuesday by the American Petroleum Institute (API). The previous figures was -3.500 barrels. If the API numbers are confirmed by the US government’s weekly crude stock report on Wednesday’s it will be the largest weekly draw in nine weeks.
US Treasury bond yield curve inverted again, and further on Tuesday as the 10-year note yield plummeted to the lowest it has last seen in 2007. The inversion led to a panicky sell-off on the US stock markets, and raised interest in safe-haven assets. Bond markets appear to be highly concerned about the economic outlook as the protracted Sino-US trade war goes on.
Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said on Tuesday that a weakening in the Aussia was supportive of the economy and further drops would be beneficial. Debelle had earlier stated that it was possible interest rates could be pulled down to almost zero and the central bank might go for unconventional stimulus measures to achieve its objectives.
Iran’s Foreign Minister Mohammad Javad Zarif said said on Wednesday that his country was not seeking to ramp up tensions. Speaking to reporters before a meeting with the Japanese Prime Minister Shinzo Abe in the city of Yokohama, Zarif insisted Iran should be able to exercise and enjoy “its rights” under international law. Iran’s President on Tuesday rejected any talks with the US until the sanctions are lifted.
EURUSD
The pressure on the common currency is building up as global trade uncertainties and disappointing GDP data from the Eurozone’s powerhouse Germany drive away investors. Although the Wednesday-released GfK German Consumer Climate for September came at 9.7 versus the forecast 9.6 and the previous 9.7. Trading on the verge of the lower straight band, the euro continues to bleed against the US dollar. If it breaks below the lower band now set at 1.1060, we might see a further fall for 1.1030, near the recently-tested 27-month low. With no major data in sight until Thursday’s Germany employment change figures, the downward bias is likely to go on. But, a retracement upwards will see the price 1.1140, if it breaks 1.1100 in the first place. Still above, we will watch 1.1165.
Support: 1.1060- 1.1030
Resistance: 1.1140- 1.1165
GBPUSD
The UK pound continues to make modest gains after PM Boris Johnson’s more successful-than-anticipated trip to Europe last week, over the weekend and Monday. The relief thanks to more moderate comments by him and Germany’s Merkel goes on for the pound, but the long-term trajectory remains downward given the heightened risks of a no-deal Brexit. Opposition leader Jeremy Corbyn will be gathering pro-remain politicians to draw a roadmap on how to prevent that outcome which he said would leave Britain at the mercy of the US. Hovering above the upper band of the descending channel, the price once again is making an attempt directed at the 1.2285 at the earlier-tested 50 percent Fibonacci retracement level. If it persists there, then 1.2300 will be possible. With little finance data on the calendar, investors will be tuning to London and Brussels for clues. In the event, a drawdown begins, 1.2220 near the upper band and later 1.2200 will be followed. Further below stand 1.2180.
Support: 1.2285- 1.2300
Resistance: 1.2220- 1.2200- 1.2180
USDJPY
The Japanese yen trades confidently against its peers, including the US dollar as investors look for safe-haven assets amidst increasing risks as exacerbated the yet another inversion in the US Treasury bond yield curve. Although the trade crisis between South Korea and Japan went on on Wednesday, with Seoul summoning the Japanese ambassador to protest the removal of its fast-track export partner status, the yen preserved its gains. Moving inside the straight channel in red bands, the yen appears to be making attempts to break 105.60 that has proven resilient so far on the 4-hourly chart. If that level is broken, then we will see the pair moving for 105.30 and later 105.00 near the lower band. Targets for an upward movement can be designated as 106.00, near the recent two closing highs and 106.40.
Support: 105.60- 105.30- 105.00
Resistance: 106.00- 106.40
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 were up on Tuesday after the US API data that showed a fall of 11.1 million barrels, versus the expectations for a 2 million barrel drop. The brent price continued to rise above the upper-moving lower band of the triangle. Wednesday’s US government crude oil inventories are to be closely watched for a confirmation with the forecast at -2.112M and the previous number at 2.700M. Oil started to gain this week when fears over economic growth were slightly calmed down as the US and China appeared willing to talk again. Early European Wednesday session showed brent aiming for 67.00 level. If broken, we will be watching 67.40, which then will put 68.00 near the upper bands within reach. In the event of a draw down 66.00 and later 65.50 near the lower band of the triangle will be watched.
Support: 66.00 -65.50
Resistance: 67.00- 67.40- 68.00
DAX
The Dax 30 index is struggling amidst negative data that has been flowing from Germany. The German index’s weekly rise goes on but with a limitation on Wednesday as the price saw a slump towards 11 660. The downward opening was in line with the losses in American and Asian stocks as the US-China trade war continues to threaten the international trade war and rekindle fears of a global recession, signs of which have already been observed in China and Germany. The GfK German Consumer Climate for September showed the consumer mood to be positive at 9.7 versus the forecast 9.6. With the price moving near the lower section of the falling channel shown in blue, dax is resisting the bear pressure. But a further fall could take it down to 11 600. If that line is crossed, 11 540 near the lower band will be watched. In the event confident investors take on the index, we will see the price moving up to 11 720, the day high opening and later 11 780.
Support: 11 600- 11 540
Resistance: 11 720-11 780
ECONOMIC CALENDAR
Looking for more information which will help you trade better?
