- Forex today was not a pretty sight with stock markets in a sea of red blood and the yen picked up the safe haven bid as did gold.
The dollar was initially bid but suffered a blow on the longer term sentiment where it is clear that higher rates are going to be problematic for US growth going forwards as are trade wars, with no end on sight there yet.
Equities on Wall Street and Europe suffered on earnings whereby growth may be peaking against an unsettled global backdrop and that fiscal stimulus will wane continued to weigh on sentiment, as analysts at ANZ Bank New Zealnd acknowledged, adding:
“Weak European PMIS and US housing data didn’t help. Fixed income benefited. The DAX closed down 0.7% and the FTSE 100 was up 0.1% as it benefited from sterling weakness. US equities were weaker, with the S&P 500 off 1.5% at the time of writing (its sixth day of losses), and the Nasdaq down 2.6%. The yield on the US 10-year note eased 5bp to 3.12%. Oil recovered some of its recent losses with WTI rising 1.1% to USD67.18/bbl. Gold was little changed (+0.1%) at USD1232/oz.”
Currency action:
EUR/USD has been knocked for six and treading in bearish territory where upside attempts have failed over the course of the summer period, and the final quarter looks pretty grim for bulls. EUR/USD is now below the August trend line support that met the previous row of lows for the month of October with the prior low coming in at 1.1433 on the 18th Oct. EUR/USD scored a low of 1.1379 on Wednesday London trade just ahead of the US PMI numbers that beat expectations and prior readings by some margin, reminding traders of the stark contrast to the recent data performances in the eurozone – The German PMIs were the weakest in more than 3-years. EUR/USD closed NY at 1.1398 and remains ripe for some offers into the ECB meeting tipped to be bearish for the pair. Cable was also under the cosh – oppressed still by Brexit angst and also hit by an awful slate of Euro PMI data with the EZ composite in at 52.7 (vs 53.9 exp). However, PM May got a show of loyalty at parliaments 1922 meeting and bookies have shortened their odds of leadership challenge before year-end to 12/5 (2/1). This gave the pound some relief although it ended NY at 1.2885 from a high of 1.2984 in early European trade. The cross was capped in its tracks this week by the EZ data and was rolling over from 0.8850 and moved back below the 200-DMA resistance level around 0.8830 and tested below the 21-D SMA as well at 0.8821, closing the day at 0.8846. USD/JPY was a mixed bag with the dollar bid across the G10’s bar the yen for the most part that has picked up the ‘safe-haven’ bid with eyes below the 112 handle as investors continue to fret over the effects of higher rates and move their money away from stocks. EUR/JPY was also adding its cents worth to the fray between bulls and bears, giving the yen the edge as the cross slides on the back of the big EZ Markit PMI misses. The de-risking is set to continue and that should favour both the dollar and the yen, so the chances are a test of the daily cloud support down at 111.50 where offers may be lifted on a first test. AUD/USD continued to bleed as soured risk hits high beta currencies. The pair fell from the 0.7105’s down to 0.7057 and closed NY at 0.7064. Bears eye a test of the 2018 low at 0.7041 that guards 0.7000 as the last defence for the 2016 lows in the 0.68 handle.
Key notes from US session:
- USD/JPY: bulls need to regain 21-D SMA or risk slippage to cloud base support at 111.45
- Wall Street falls sharply as technology suffers heavy losses
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