Main Market Themes

  • China’s RRR cuts. The commodity FX complex were given a boost on Friday following the wider than expected RRR cuts (50bps universal cut as well as targeted 100bps cut) by the PBOC (3rd time this year) Structurally, the RRR cuts by China on Friday may only have provided the necessary but not sufficient conditions for a sustained recovery in investor sentiment. The damage on the global economy has already been wrought by the escalation of Sino-US trade tensions since May and markets will now have to clear the next hurdle of the schedule face-to-face trade talks in October. 
  • US August NFP numbers came in soft to mixed, jobs in August fell back to 130,000, which was lower than the expected 160,000. The unemployment rate remained at 3.7%, and the annual wage growth was 3.2%, which was better than expected.
  • Fed chair Powell meanwhile remained sufficiently (but not unduly) dovish in his remarks despite acknowledging that that there remained “a range of views” within the FOMC. Elsewhere, note also continued explicit pressure from Trump on Friday via his Twitter account.
  • Watch the ECB this week, focus will turn to the ECB meeting on Thursday, especially with Draghi’s accompanying press conference to be closely scrutinised. According to the overnight index swap (OIS), the European Central Bank will cut interest rates on Thursday, with an interest rate of 10 and 20 basis points, respectively, 70% and 30%.
  • Today the UK government is going to attempt a last chance for parliament to vote for an election before it is suspended. It is highly unlikely that we get a different result to last week.

Technical & Trade Views

EURUSD (Intraday bias: bullish above 1.10)

EURUSD traded in narrow range overnight surrounded by strikes maturing today 1.1000 for EUR1.8bn; 1.1025 for EUR730mio; and 1.1050 for EUR1bn at the New York cut (1500hrs BST) From a technical and trading perspective last weeks move higher on the intraday charts demonstrated impulsive qualities as such today I am bullish above the weekly pivot 1.1010 with a stop just below 1.0970 targeting a move to test the monthly R1 at 1.1160 (as highlighted by the blue forecast candles on the chart)

GBPUSD (Intraday bias: Support sought at 1.22)

GBPUSD drifted lower overnight as profit taking on last week's elevation was prompted by weekend revelations that  Boris Johnson had to take another hit as Amber Rudd quit the cabinet citing a lack of effort being made to strike a deal with the EU while the vast majority of focus and resources are being aimed at dealing with a hard, no-deal, Brexit. From a technical and trading perspective headline risk weighs with the potential for the pair to retest support sub 1.22 watch for bullish reversal patterns around 1.2185 to set a base for the next leg of the corrective recovery (as highlighted by the blue forecast candles on the chart)

USDJPY (intraday bias: bullish above 106.60)

USDJPY penned in overnight, note it is half-year end in the region. There is $1.3bn of 106.50 strikes maturing today at the New York cut (1500hrs BST). From a technical and trading perspective I am looking for support to develop around the weekly pivot at 106.60 as this level holds i am looking for a retest of last weeks highs above 107.20 and then the weekly R1 around 107.50 (as highlighted by the blue forecast candles on the chart)

AUDUSD (Intraday bias: bullish above 0.68000)

AUDUSD is starting the week with a buoyant toned supported by the China RRR cut, last weeks intraday price pattern has impulsive qualities suggesting pullback should be bought for another leg of corrective upside, on the day I am looking for the pair to trade with a bid tone, any pullbacks towards the .6800 level will be buying opportunities as the pair should find support setting a base for the next leg higher to target offers above 0.6900

Please note that this material is provided for informational purposes only and should not be considered as investment advice. The views discussed in the above article are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.