Markets Trade “Risk Off” on US-China Tensions, GBP the Main G10 Loser

US-CHINA TRUCE HOPES FADE, POUND SLIDES AS BREXIT DEAL SEEMS UNLIKELY

The dollar traded higher or unchanged against most of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained against GBP, NOK, SEK and CAD in that order, while it was found nearly unchanged versus EUR, AUD and NZD. The greenback lost some ground only against CHF and JPY.

AUD/JPY — TECHNICAL OUTLOOK

From around mid-September, AUD/JPY drifted lower, trading below a short-term downside resistance line taken from the high of September 13th. That said, from the first day of October, the pair is struggling to close below the 71.80 support zone. We will keep a close eye on that area and wait for its break, before examining lower areas. For now, we will stay cautiously bearish.

EUR/GBP — TECHNICAL OUTLOOK

Yesterday, after breaking above its key resistance barrier, at 0.8937, EUR/GBP moved sharply to the upside, but got held near the psychological 0.9000 zone. From there, the pair retraced back down a bit, but this move could be seen as a temporary correction before another leg of buying. We can see that at the same time, the pair is trading above its medium-term downside resistance line, drawn from the high of August 12th, and above its short-term upside line, which is taken from the low of September 20th. Given everything what was mentioned above, we will stay somewhat positive, at least over the short run.

AS FOR TODAY’S EVENTS

We get the minutes from the September FOMC meeting, when the Committee decided to cut interest rates by 25bps. The new “dot plot” pointed to no more cuts this year and the next, one hike in 2021 and another one in 2022. That said, despite the 2019 median dot suggesting that there are no more rate reductions on the table, the Committee was largely divided, with only 5 members supporting that view. Seven still believed that another quarter-point reduction may be appropriate, while the remaining 5 argued that the last cut was not needed. So, having all these in mind, we don’t expect the minutes to paint a different picture. We just expect them to confirm the disagreement with regards to the future path of interest rates.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
JFD

JFD

JFD is a leading Group of Companies offering financial and investment services and activities.