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The US Dollar held steady through the Asian session on Tuesday as investors awaited the outcome from the highly anticipated US-China trade negotiations later this week. The overnight positive remarks by White House economic adviser Larry Kudlow helped ease some anxiety led by earlier reports that Chinese officials were increasingly reluctant to agree to a broad trade deal pursued by the US President Donald Trump.
Kudlow said that the United States was open to looking at China’s proposals and that delisting of Chinese companies was not on the table. Kudlow further added that the US and Chinese trade negotiators could make progress. The positive market reaction, reinforced by some follow-through pickup in the US Treasury bond yields, weighed on the Japanese Yen’s perceived safe-haven status and also provided a goodish lift to perceive riskier currencies – like the Aussie and the Kiwi.
Meanwhile, the British Pound remained depressed amid persistent uncertainties surrounding Britain’s exit from the European Union, especially after the EU rejected the UK PM Boris Johnson’s new Brexit proposal, and was further weighed down by the disappointing release of BRC like-for-like sales data – dropping -1.7% YoY in September as compared to -0.5% fall in the previous month. Adding to this, news that the UK PM Johnson is preparing for Brexit talks to collapse might further collaborate towards denting the already weaker sentiment surrounding the Sterling.

Main Topics in Asia

New Zealand reports $7.5 billion fiscal surplus for the year ended June 2019
Japan Economic Minister Nishimura: There are worries among farmers from US-Japan trade deal – RTRS
Britain’s Boris Johnson preparing for Brexit talks to collapse: Spectator
China service sector growth hits 7-month low – Caixin
Japan’s Abe: Hope BOJ to conduct appropriate policy to achieve inflation targets
Japan’s Abe: Fundamentals supporting domestic demand are firm
Japan’s cash earnings still very weak – ING
Australian business conditions and confidence unmoved by stimulus – ANZ

Key Focus Ahead

Despite some action, the G10 currencies remained well within a familiar trading range as investors still seemed reluctant to place any aggressive bets, rather preferred to wait on the sideline for a fresh catalyst. Tuesday’s economic docket features the second-tier release of German industrial production data. This will be followed by speeches by the Bank of England (BoE) Chief Economist Andy Haldane and External MPC Member Silvana Tenreyro. Later during the early North-American session, the release of the US Producer Price Index (PPI) might influence the USD price dynamics and further collaborated towards producing some short-term trading opportunities.
EUR/USD snaps longest daily winning streak in 3.5-months
The currency pair faced rejection at the 21-day moving average for the third straight day on Monday. Hence, the average, currently located at 1.0992 is the level to beat for the bulls. A daily close above that level is needed to revive the corrective bounce from recent lows near 1.0880.
GBP/USD remains vulnerable near 1.2300 handle amid persistent Brexit uncertainties
The pair did witness some intraday bounce on Monday, albeit lacked any strong follow-through and quickly ran into some fresh supply near the 1.2335 region – an important pivotal point marked by 200-period EMA on the 4-hourly chart. Given that the bloc’s officials see the UK PM Boris Johnson’s new Brexit plan as insufficient, uncertainties surrounding Britain’s exit from the European Union acted as one of the key factors exerting some pressure on the British Pound.
USD/JPY: Traders getting set for a roller-coaster week ahead
USD/JPY made decent gains, rising from 106.80 to a high of 107.34 scored today in Asia. The main theme surrounding the Yen comes as the week will unfold key trade talks and various calendar data events for the US – indeed, it should be a key week for USD/JPY traders seeking direction. We will have the likes of US Consumer Price Index, more comments from Federal Reserve Powell, the Federal Open Market Committee minutes and trade talks.
Gold remains depressed below $1500 mark, multi-day lows
The precious metal failed to capitalize on last week’s solid rebound from two-month lows and came under some renewed selling pressure on the first day of a new trading week. A goodish pickup in the US Treasury bond yields provided a modest lift to the US Dollar, which eventually turned out to be one of the key factors exerting pressure on the dollar-denominated commodity – Gold.