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The US-China trade talks gained momentum but failed to further boost the risk sentiment in Asia, as differences over the tariffs rollback still prevailed between both trade teams and kept the investors unnerved. In a knee-jerk reaction to the trade headlines, the US dollar clinched two-week highs against the yen at 109.19 but lack follow-through and slipped back below the 109 handle.

Meanwhile, the Chinese proxies, the Antipodeans, also showed limited enthusiasm for the latest progress on the trade front. The Aussie’s recovery is still capped below 0.6800 while the Kiwi kept  its range trade intact above 0.6400, both reporting small gains so far. Among other related markets, the Asian equities traded mostly mixed, with the Chinese stocks the main laggard. The US equity futures and Treasury yields pared back gains that lent some support to gold prices. Oil prices traded subdued, with the bias leaning to the downside, and therefore, somewhat weighed on the resource-linked Loonie.

Both the EUR/USD pair and GBP/USD traded little changed, awaiting fresh trading impulse from the European session ahead.

Main Topics in Asia

New Zealand retail sales: (QoQ) (Q3) actual: 1.6% vs 0.2% previous (NZD positive (spikes 20 pips))

China ensuring rare earth dominance crucial in trade war – Global Times

Pelosi: We are within range of a substantially improved USMCA trade agreement

German minister and US envoy have clash over Huawei’s possible participation in Germany’s 5G network – SCMP

RBA Deputy Governor Debelle: Sees steady wage growth over next couple of years

Fed’s Powell: Fed will respond accordingly

US Treasury yield curve flattens for nine straight days

China’s CommerceMin: China’s Liu, USTR Lighthizer and US Treasury Sec. Mnuchin held a trade call

US-China second phase trade deal is less likely – The Standard

China’s Finance Ministry: Dollar sovereign bond issuance will help improve yield curve

China, US may have discussed agri purchases, face-to-face meeting in the call – Global Times

‘Broad trade consensus reached; differences remain on tariffs’ – Global Times

Key Focus Ahead

There is nothing of relevance in the EUR calendar, in terms of the economic data releases,   and therefore the speeches from the European Central Bank’s (ECB) policymakers will headline alongside the US-China trade headlines and the UK political developments. ECB’s De Guindos, Mersch and Lane are scheduled to speak around 0815-0830 GMT. Also, in focus will remain the speech by the Reserve Bank of Australia’s (RBA) Governor Lowe at 0905 GMT, as he due to deliver a speech titled “Unconventional Monetary Policy: Some Lessons from Overseas” at the Annual Australian Business Economists Dinner, in Sydney. At 0930 GMT, the UK BBA Mortgage Approvals data will drop in.

The NA calendar sees a flurry of US economic data alongside the Fedspeak. The US will report the goods trade balance at 1330 GMT, followed by the S&P/Case-Shiller Home Price Indices (YoY) (Sep) at 1400 GMT. Meanwhile, the US New Homes Sales and Conference Board (CB) Consumer Confidence data will be published at 1500 GMT among other minority reports. Fed Official Brainard will speak at 1800 GMT while traders will also watch out for the Reserve Bank of New Zealand (RBNZ) Financial Stability Report and American Petroleum Institute’s (API) Crude Stocks data due at 2000 GMT and 2130 GMT respectively.

EUR/USD may rise as Fed’s Powell signaled rates are unlikely to rise anytime soon

Fed’s Powell signaled that rates will likely hold steady.  Markets may offer US dollar, helping EUR/USD end the four-day losing streak.  Weak Eurozone data and trade issues may cap upside in EUR/USD.

GBP/USD takes clues from trade news, Fed’s Powell amid languishing UK politics

GBP/USD fails to hold onto recovery gains amid trade optimism, upbeat comments from Fed’s Powell. The UK’s Tories remain on the top of the poll, though with lesser margin. US economic data, trade/political headlines will be the key drivers to watch.

Gold technical analysis: Off lows, bull RSI divergence on 1H

Gold’s hourly chart is reporting a bullish indicator divergence.  A bounce to $1,457-$1,460 could be in the offing.  

US dollar: Risks skewed to the downside in 2020 – Goldman Sachs

The Goldman Sachs Research Team published its outlook for currencies in 2020 late Monday, with the key highlights found below.