In our Investment Bank Outlook each week, we bring you a selection of perspectives from leading investment banks to outline the key issues and directional views for the week ahead. These excerpts, taken from research notes, will cover issues such as key market themes, economic releases, as well as any major trends and levels to watch. Please note, this material, which does not reflect the opinions of Tickmill, is provided for educational purposes only and should not be taken as an investment recommendation
USD/JPY – BEARISH BIAS – (106.00-109.00)
USD/JPY has been stuck in a narrow range, and next week is also unlikely to feature any significant triggers. A number of key US indicators are slated for release, but for now policy stance is being watched more closely than indicators. In Japan, the September Tankan release on October 1 will be watched, especially for any signs that could lead to further easing. We will be watching not only the September Tankan, but also the BoJ branch managers’ meeting and comments by both Governor Kuroda as well as other Monetary Policy Board members after that.
EUR/USD – BEARISH BIAS – (1.0750-1.1100)
The euro has regained downward momentum against the US dollar over the past week after breaking back below the 1.1000-level. We expect downward momentum to remain in place in the week ahead. It could accelerate further if key support at 1.0926 is broken decisively. Building evidence of economic weakness in the euro-zone is beginning to weigh more on the euro again. The ECB has already set out their stall by announcing a comprehensive package of easing measures including open-ended QE. The burden still falls on the ECB in the near-term to support growth in the euro-zone. It is encouraging record low euro-zone yields and a weak euro. We don’t see that dynamic changing soon. In contrast, the US economy has recently shown some signs of improvement. The housing market has picked up in August and inflation has been stronger than expected in recent months. It is not clear cut that the Fed will cut rates again this year. It is creating a more favourable environment for a stronger US dollar.
USD/CNY – NEUTRAL BIAS – (7.0800-7.1400)
It’s Golden Week next week and CNY stops trading after Monday. We’re, almost by definition, usually neutral during this week. Though we broke above our prior upper bound with bids for USD at quarter end, it’s possible authorities may do a little window dressing on the last day of trading before holidays (they seem to want to do the same with rates), judging by the pattern of fixes that have been continuously way below forecasts. CFETS is still at 91-mid and comfortable. USD/CNH may retain a bid (most of USD/Asia seems to be) but we’ll have to wait to see if this influence can carry over to the resumption of onshore trading.
Trump lashes out at China again in UN speech
“They want to make a deal very badly… It could happen sooner than you think”. The comment came from US President Donald Trump on Wednesday and got a positive spin in some media. However, looking at what he said in the same session made it look less positive: “You know they want to make a deal and they should want to make a deal. The question is, do we want to make a deal?” The day before he lashed out at China in a speech in the UN. He proclaimed he would not accept a “bad deal” and in blunt terms stated that “not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale.” Trump also said the US was watching the situation in Hong Kong carefully.China rebuked the speech through state media and foreign minister Wang Yi said in a speech in New York, that “negotiation cannot take place under threat at the expense of China’s legitimate right to development”. Wang also said “seeking hegemony is not in our DNA” and that China has “no intention to play the Game of Thrones” on the world stage. China strongly condemns what they see as US meddling in domestic affairs in Hong Kong. Referring to this issue foreign ministry spokesman Geng Shuang said at a press conference that “any move made by Washington to undermine China's interests will receive a forceful fight back from Beijing.” On a more positive note, this week China has resumed buying soybeans from the US on a limited scale and the US exempted 400 goods from tariffs.
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 video are those of our analysts and are not shared by Tickmill. Trading in the financial markets is very risky.