Daily Market Outlook, October 11, 2019
Main Market Themes
Stock Indices finished Thursday’s session with modest climb, buoyed by trade optimism after Chinese Vice Premier Liu He met with top US officials and President Trump announced via twitter his plan to meet He today.
Positive headlines surrounding the current talk alongside White House’s earlier approval of special licenses for certain American firms to continue dealing with blacklisted Chinese tech giants Huawei, raised expectations that both sides could at least reach a partial deal this week. The Dow, S&P 500 and NASDAQ rose around 0.6%, led by gains in nearly all sectors. Retreating risk aversion led bonds to sell off, leaving yields to pick up 8-9bps along the curve. Oil benchmarks rallied by 1.3-1.8%. Traders are expected to be kept on their toes today, watching out for trade development as we head into the weekend.
GBP surged 1.9% to 1.2443, the highest level in two weeks after a meeting between UK PM Boris Johnson and Irish PM Leo Varadkar went well and both signaled a “pathway” to an agreement in the coming weeks and would be sufficient to allow negotiations to resume in Brussels.
Minutes of the September European Central Bank (ECB) showed that while all policymakers agreed on need for further easing, they were divided on the delivery. A number of members opposed the return of quantitative easing (QE) as it should be an instrument of last resort and that it may not be efficient given already low yields in the euro area. Some policymakers were ready to support a larger 20 bps rate cut in place of QE.
Kaplan (non-voter) in an open essay posited an “open mind” on rate cuts but warned further cuts should be limited and modest, whereas Kashkari (non-voter) noted that “downside risks are increasing and monetary policy is currently around neutral to potentially slightly contractionary, hence I’m going to be supportive of another 25bp rate cut”. However, Mester (non-voter) said her preferred strategy is to take action only if there is material deterioration in the outlook and not merely on heightened risks and she expects to avoid a more serious downturn.
USD and the other haven currencies (JPY in particular) were cut down on the back of a shift in sentiments towards risk-on, after positives were drawn from both the Sino-US and Brexit fronts. Cyclicals, led by the AUD, outperformed.
Today’s Options Expiries for 10AM New York Cut
- EURUSD: 1.1070
- AUDUSD: 0.6870, 0.6865
Technical & Trade Views
EURUSD (Intraday bias: Bullish above 1.0940, targeting 1.1045)
EURUSD From a technical and trading perspective as suggested we cleared 1.0970 and have renewed bullish sentiments offers & stops over 1.10 now look vulnerable, on the day we look for 1.0940 to provide support, a failure below 1.0920 would concern the bullish bias and open another run to test bids at 1.09. I am still running weekly & daily long positions with decent profits and now risk free. EURUSD...UPDATE 1.1045 target all but achieved. As 1.10 prior resistance now acts as support look for consolidation to form a platform for bulls to make a run at 1.11 over the coming sessions. Only a failure below 1.0960 would concern the bullish bias.
GBPUSD (Intraday bias: Bullish above 1.2360 targeting 1.26)
GBPUSD From a technical and trading perspective 1.2350 stops taken out as we spiked 1.24 in standard sterling style trade we duly retreated to test bids at 1.23 as these continue to support this area should provide the platform to test my target, however, a failure below 1.2285 would negate upside objectives and open a retest of 1.22 bids. GBPUSD...UPDATE positive news on the wires sess GBP surge as 1.24 acts as support expect the short squeeze to continue to target stops above the prior swing high at 1.2580
USDJPY (intraday bias: Bullish above 107.50 targeting 108.50)
USDJPY From a technical and trading perspective prices look poised to test bids below 106.50a failure below here will open a 106.10 test, look for 107.35 to caps any upside attempts, through 107.60 would delay downside objectives.USDJPY...UPDATE the move through 107.60 opens a test of offers and stops above 108, I entered long positions yesterday (see Trade of The Day) through 107.50 range break and I am now looking for a move through 108.50 to targeting stops above 109.
AUDUSD (Intraday bias:Bullish above .6720 target .6810)
AUDUSD From a technical and trading perspective the move back through .6750 has renewed bullish aspirations, however expect heavy going as the market tries to chew through thick offers towards .6775, however, as .6740 supports look for another impulsive move to gun stops ahead of .6800 challenge. AUDUSD...UPDATE no change in view, .6760 taken out, offers and stops above .6800 remains the upside objective,on the day only a failure below .6750 would concern the bullish bias.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!