Trade hopes support the USD

USD had some marked gains against the JPY yesterday as hopes about the trade relationships of US and China got a boost. According to media, US President Trump stated that a possible trade agreement seems to be ahead of schedule, without providing any specifics about the timing though. The US also stated that it was studying whether to extent tariff suspension due to end on December. Analysts tend to note that various announcements so far, seem to point towards significant progress in the relationships of the two countries. Please bear in mind that China’s demand for a ceasing of US tariffs, remains without answer until now and that lets us keep a back door open, as negotiations could fall apart once again, as they did in the past. The market’s attention though seems to slowly move away from the US-Sino relationships as the FOMC’s interest rate decision nears. We could see the market slowly starting to position its self in expectance of a third rate cut and some volatility could be present for the USD, while further improvement of the US-Sino relationships could provide support for the Aussie. AUD/USD rose on Monday aiming for the 0.6860 (R1) resistance line. We maintain a bullish outlook for the pair, however would like to see more higher troughs and peeks for the upward trendline to solidify. Should the pair find fresh buying orders along its path, we could see it breaking the 0.6860 (R1) resistance line, aiming for higher grounds. Should the pair come under the selling interest of the market, we could see it aiming, if not breaking the 0.6800 (S1) support line, aiming for new lows. …while the UK Parliament defeats Johnson, again…

…while the UK Parliament defeats Johnson, again…

The UK Parliament defeated Johnsons bid for early elections yesterday, providing further instability in the UK political scene. It should be noted that the failed bid for early elections was the third of Boris Johnson. The UK Prime Minister is expected to continue pushing for new elections, as UK Parliament’s math does not seem to provide support for his Brexit deal. The main obstacle for a snap election, seems to be the super majority required of 2/3 in the UK Parliament, to actually trigger it. On the other hand, the UK Government may try to circumvent the law, by suggesting a one-line bill and change the election date, requiring a simple majority. However, the opposition seem to fear that the government may try to take advantage of the political vacuum and try to reintroduce its deal with the EU. Also, the risk exists that the UK Parliament may try to set amendments by conditioning the early elections, which Johnson may not exactly like. The pound remained rather unimpressed, by the political developments yesterday, yet deepening political chaos could weaken it. Cable aimed for the 1.2885 (R1) resistance line at some point yesterday, yet remained below the prementioned resistance line, following the downward trendline incepted since the 21st of the month. For our bearish outlook for the pair to change in favor of a sideways motion initially, we would require a clear breaking of the prementioned downward trendline. Should the bears maintain control over the pair’s direction, we could see aiming if not breaking the 1.2760 (S1) support line, while if the bulls take over, we could see the pair breaking the prementioned upward trendline, the 1.2885 (R1) resistance line and aim for the 1.3015 (R2) resistance level.

Other economic highlights today and early tomorrow

In today’s European session, we get UK’s HPI rate for October. In the American session, we get from the US the consumer sentiment indicator for October, the pending home sales growth rate for September and the API weekly crude oil inventories figure. In tomorrow’s Asian session, we get Japan’s retail sales growth rate for September and Australia’s CPI rate for Q3, which could provide considerable volatility for the Aussie.

AUD/USD 4 Hour